dad and uncle and trusts

[njshore66]

My former father-in-law set up UTMA trusts for his grandchildren, with the intention that the money be used for their education. When he died 2 years ago, his will also included a provision for separate educational trusts for each grandchild. The money from the will, if not used within a certain time frame, reverts to the other heirs, ie, my ex-husband and his brothers. They insist that their father forgot about the UTMA accounts, and didn't really mean to leave additional money to his grandchildren.

My daughter is 20. Her uncle is guardian of the UTMA account, and her father is trustee of the money she was left in the will. Her father has refused to pay anything from the trust, insisting that she exhaust her UTMA funds before he will pay anything out.

Now they have cooked up a scheme whereby they want my daughter to agree to allow her uncle to control her UTMA after she turns 21. If she does this, her father will pay some educational expenses from the trust.

It is obvious that there is a conflict of interest here, as they stand to benefit if my daughter doesn't get to spend the money from the will.

Any advice? The situation is complicated by the fact that the will was done in Alabama, and my daughter lives in Washington.

[Dandy Don]

Does your daughter intend to go to college?

How much money is in each asset (from the will, and in the UTMA)?

There is not necessarily a conflict of interest here, just a technicality that the other side might choose to work in their favor, but you can take steps to prevent that. Father's stipulation that the UTMA funds be spent first is within his discretion as trustee, but it is not a necessary legal requirement that must be satisfied before the money can be spent. He could be challenged on that if required.

It's possible that the money she may need for college may require BOTH accounts.

You need to be talking to an expert who is familiar with the UTMA account rules and regulations (you can probably find a certified financial planner or any local bank may be able to provide a referral to such an expert) to find out if there is any way your daughter could get access to the money if it is not used for college or whether there are other options that would be to her advantage besides giving her uncle permission to control this account.

DANDY DON IN OKLAHOMA (tiekh@yahoo.com)