Complicated Trust/Tax Issue

[emcken]

I live in South Carolina
The trust is in Pennsylvania
The old trustee lives in Georgia


When my grandfather died he left me the sum of 50,000 to be put in a trust until I reached the age of 25. He appointed an trustee of this trust who did a horrible job of managing it, kept no records and decided to invest it in the stock market. The same trustee also stands to receive half of the money when I turn 25 if I have not used it all for education and or support (as stipulated by the will) Now I am getting notices from the IRS staying that I owe them 5000 in back taxes for unclaimed income. Apparently when she sold the stock to liquidate the trust when she was finally removed as the trustee, she used my Social security number instead of the tax id for the trust. I cant prove that I just didnt claim the income so I asked the current trustee to pay the taxes. He then tells me he cant because it doesnt expressly say so in the will. Can I sue her for mismanagement to get the irs their money? I am a single mom and cannot afford to have my wages garnished. They have already taken my 2007 taxes for 1000 dollars to pay for a portion then the following year up comes another 35,000 they say I ddint claim and as a result have to pay the taxes. I felt since the trust should have been taxed in the first place I shouldn't have to pay these taxes. When I explained this to the current trustee he told me it wasnt his responsibility. I've called the IRS I've called the trustee she refuses to answer or return my phone calls. Also 11,000 dollars seems to be missing fromt the trust and no one can tell me why.

 

[curb1]

You wouldn't owe taxes to the IRS unless there was a sizable gain from the sale of the stock. Have you received any distributions from the trust?

Exactly what is the nature of the claim by the IRS? Do you have a copy of the trust?

 

[Dandy Don]

How old are you now?
When did grandfather die and what state did he die in?

One thing you can do right now is to look in the yellow pages for a tax accountant who is also an enrolled agent. This is someone (who has previously been employed at the IRS) who knows all the rules and regulations and may be able to advise you about IRS policies/procedures (especially find out if there is a way to stop the improper wage garnishment).

Of course you do not owe this money. I would think you or your representative at some point in your response should be informing the IRS in writing that there was an error made by the trustee with the wrong tax ID.

You can't sue her for mismanagement (that is not the correct legal term, although it IS what she in fact did). It will probably be a breach of fiduciary lawsuit, but hold off for now on hiring an attorney unless you feel it would be to your advantage to do so. It is possible that this matter can be resolved without a lawsuit. If the IRS goes after the trustee and ask the trustee to produce the trust tax returns and other documentation, that should be enough for THEM to start investigating the trustee and asking the trustee for these taxes, and that should be enough to get you off the hook and get the IRS off YOUR back.

And you need to ask a Pennsylvania trust attorney if their state law allows a trust beneficiary to request and audit of the trust (an expense that might be able to be deducted from the trust). That might help you get evidence about the missing $11,000.