Personal Liens against property in Trust

[karenlee]

What is the name of your state? CA

I inherited my mother's house with my sisters. My children gathered the money to give the sister's their share and now I can put the house in my name. I want to establish a trust now and just transfer the house from mom's trust to mine. I need to be sure that the funds that each of my children gave me will be considered as a debt on the trust whenever I pass on. How can I accomplish this?What is the name of your state?

 

[tranquility]

Hold on there partner, why are you shortcutting so many steps? You can't do what you want. You need to follow all the steps to make it right. It's too bad you didn't plan beforehand as now you may have some problems to unwind.

When you say, "My children gathered the money to give the sister's their share and now I can put the house in my name.", what do you mean? What happened?

My best guess as to the way things happened is that the property was distributed. Children bought portions not owned by you or gave/loaned you money to buy portions. The property is now in your hands and will be titled to the trust. Since you want a lien, I'm assuming the money was loaned to you. File the lien, put the property in the trust and children pay imputed interest on the loan.

That's not what you want as you don't want to report the below-market loan. But, what are you doing then? If it's not a loan, then what? If everyone is on title, you don't have the loan problem but it will affect the liquidity of the property.

 

[karenlee]

Reply to questions about Liens

Thank you for your reply. My mother/father had a trust. It was distributed according to the terms of the trust with agreement of all sisters. We had an appraisal and I offered the sisters to pay them their share in cash. This trust of my parents is paid out and thus iwill be over when I transfer title of the house.

Now I want to create a new trust. Neither I nor my children want to put them as co-owners of the house. I just want to make it clear that their loans would be paid back first whenever the house is inherited by them.

And I think I am probably trying to protect their interests should such a thing as I am sued for instance because of a traffic accident or some such rare thing.

I do not understand the part about the lien and the imputed interest. Should I just forget about the "loan" aspect and word the will aspect of the trust that so and so is to get such and such amount etc to cover the different children in different ways?

 

[tranquility]

The type of trust you are putting the house into can be changed. Also, creditors can go after the house in the trust if a bad accident, or whatever, happens. There is no real protection to the kids.

If the money is a gift to you to buy the house, they need to file a gift tax return. If the money is a loan to you to buy the house, there will need to be certain tax treatment of this below-market loan and an item called imputed interest will need be calculated. Or, the money is to purchase portion of the house and the kids take title for that portion.

Any other treatment (Well, you could fumble around with partnerships or corps but the end result won't change.) is merely trying to obfuscate what happened. I ask again, What Happened?

 

[karenlee]

Trust and Liens against the house

Thank you for your information. It helps to be aware of all aspect of something before making decisions based on just assumptions. I am happy to say that I did work everything out and that burden is now relieved. Your response was very helpful.