Trust Distribution

[beneficiary1]

What is the name of your state (only U.S. law)? MD

I am not sure whether this question belongs here or in Probate and Personal Representatives, but I will try here first.

I am preparing a letter to request that monies currently held in trust, to which I am entitled, be distributed to me.

The money is currently in stocks and I am unclear as to how it would be distributed. Would the current account need to be transferred to my name or are stocks generally sold and distributed with a check written to me?

Thank you in advance for any assistance you can provide.

 

[anteater]

I am not sure whether this question belongs here or in Probate and Personal Representatives, but I will try here first.

This one is good enough.

Is this a smooth or an adversarial relationship with the trustee?

Unless there is something in the trust document, I would think that the trustee could make the distribution in whatever manner you request.

If I were the trustee and had the discretion, I would simply transfer ownership of the account to you. Much simpler and allows you to decide whether you want to retain or dispose of the stocks. Besides, it avoids transaction costs and possible capital gains taxes.

 

[Kiawah]

Be careful what you ask for......

Don't know your financial situation, but if not done right, the trust and/or you may have to pay capital gain taxes, as Anteater indicated. Also, depending on your tax bracket and the tax bracket of the trust, you may find it better to keep the assets in the trust.

You don't indicate who is managing the trust, but you also need to look at the fee cost structure. If a relative managing it with no cost fee, then may want to keep it. If on the other hand the trust is getting hit with trust management fees of a couple percent each year, you may want to have it distributed unless they clearly are making superior returns for the trust.

Just be careful, there are a number of things to consider before requesting a distribution. It may be nothing if the amount you are talking about is small, but if the trust has a lot in it, how this is handled could vary how much is lost to taxes, management fees, or overall long term returns.

 

[beneficiary1]

This one is good enough.

Is this a smooth or an adversarial relationship with the trustee?

Unless there is something in the trust document, I would think that the trustee could make the distribution in whatever manner you request.

If I were the trustee and had the discretion, I would simply transfer ownership of the account to you. Much simpler and allows you to decide whether you want to retain or dispose of the stocks. Besides, it avoids transaction costs and possible capital gains taxes.

Adversarial.

The trust document only states "As each child reaches that age equal shares of the corpus of the estate shall be surrendered to each child, or issue if the child does not survive.

I would actually prefer the ownership of my share of the account. My sibling has not yet reached the age of distribution. Is it possible to divide the account to enable me to assume my half?

 

[beneficiary1]

Be careful what you ask for......

Don't know your financial situation, but if not done right, the trust and/or you may have to pay capital gain taxes, as Anteater indicated. Also, depending on your tax bracket and the tax bracket of the trust, you may find it better to keep the assets in the trust.

You don't indicate who is managing the trust, but you also need to look at the fee cost structure. If a relative managing it with no cost fee, then may want to keep it. If on the other hand the trust is getting hit with trust management fees of a couple percent each year, you may want to have it distributed unless they clearly are making superior returns for the trust.

Just be careful, there are a number of things to consider before requesting a distribution. It may be nothing if the amount you are talking about is small, but if the trust has a lot in it, how this is handled could vary how much is lost to taxes, management fees, or overall long term returns.

A relative is managing the trust, however, the relative and attorneys have refused to provide copies of statements and tax forms for at least 3 years. The last statement showed an amount totaling around $150,000. In the past the stocks have been greatly mismanaged and "churned" so I am not sure what the amount is now. I would prefer to remove it from their control. I would prefer to take ownership of my part and attempt to regain any losses over the coming years through better management but I am unsure if I am able due to my sibling not yet being of the age of distribution.

 

[Kiawah]

Adversarial

That's not an adversarial relationship, you're just asking to execute what the trust says to do. It doesn't say 'may' (giving discretion or decision making), it says 'shall'. It also says......as 'each' child reaches that age, not when 'both' children reach that age. Figure out what the stocks are, what their cost basis is, and work with a financial planner to figure out the best tax approach. If you want your half of the assets, they should transfer the stocks directly into your stock account, or an account that is set up for this transfer.

 

[beneficiary1]

That's not an adversarial relationship, you're just asking to execute what the trust says to do. It doesn't say 'may', it says 'shall'. It also says......as 'each' child reaches that age.

The reason I say adversarial is because I have not spoken to the manager of the trust in almost a decade. In one of our last conversations I was told " I don't care what your adviser says. Both of you (my sibling and I) must reach that age before the trust will be distributed". That is one of the reasons I want to word the letter very carefully. I feel as if I am in for a fight.

 

[anteater]

OK... You aren't the only beneficiary. You really are "beneficiary[#]1."

From what you state, it appears that the trustee has discretion on how the distribution is made. So, we're out of the legal question realm.

Certainly, you can request in what form the distribution to you is made. But, honestly, I would expect that you will see cash.


ADDED: I just saw some of the intervening posts. Maybe I should change that last sentence to read, "I would expect that you will see cash when you see it."

 

[beneficiary1]

OK... You aren't the only beneficiary. You really are "beneficiary[#]1."

From what you state, it appears that the trustee has discretion on how the distribution is made. So, we're out of the legal question realm.

Certainly, you can request in what form the distribution to you is made. But, honestly, I would expect that you will see cash.

Do you know if it is even possible to divide an investment account in two so I can assume half? The reason I am leaning toward that is because I am not sure what shape it is in. I would prefer to avoid transaction fees and taxes and would like the opportunity to try and get the total back to where it was before being mismanaged.

 

[anteater]

Do you know if it is even possible to divide an investment account in two so I can assume half? The reason I am leaning toward that is because I am not sure what shape it is in. I would prefer to avoid transaction fees and taxes and would like the opportunity to try and get the total back to where it was before being mismanaged.

Sure, it's possible.

And, if you could come to some sort of agreement with the trustee over how many shares of which stocks represents your portion of the trust, it might even work.

But, if I were the trustee, I would not even try. Too much chance that you or your sibling would end up feeling cheated. Let's say that there was agreement that your portion included 100 shares of Cisco, 200 shares of GE and so on. The day after two separate accounts are established, Cisco nosedives. Not sure that you would be too happy.

Much easier for the trustee to liquidate part or all of the portfolio, figure out what your share should be, and send you a check.

 

[beneficiary1]

Sure, it's possible.

And, if you could come to some sort of agreement with the trustee over how many shares of which stocks represents your portion of the trust, it might even work.

But, if I were the trustee, I would not even try. Too much chance that you or your sibling would end up feeling cheated. Let's say that there was agreement that your portion included 100 shares of Cisco, 200 shares of GE and so on. The day after two separate accounts are established, Cisco nosedives. Not sure that you would be too happy.

Much easier for the trustee to liquidate part or all of the portfolio, figure out what your share should be, and send you a check.

Is it feasible to divide it absolutely equally, for example:

The trust holds 100 shares of Cisco and 200 shares of GE.
A new account is created in my name holding 50 shares of Cisco and 100 shares of GE, leaving half the shares in the original trust? If one of the companies nosedives the loss would still be equal and would have happened even if they were in one account, correct?

I really appreciate your feed back here. I am trying my best to get my ducks in a row before making the request.

 

[Kiawah]

Ask to split the assets evenly, 50 shares of Cisco each.

Yes, administratively they should be able to do stock transfers. Works particularly easy if the accounts are at the same brokerage house. I do stock transfers each year

 

[anteater]

As I said before, yes, it is possible to do so.

Since the trust document does not seem to specify the form of any distributions, depends upon whether the trustee will do it.

 

[beneficiary1]

Would you recommend I open an investment account with that firm and provide account transfer information in the letter?

 

[curb1]

I think you should take cash if there are not capital gains problems. I would guess that there wouldn't be a problem considering the recent track record of stocks. This could be very easily determined.

Get an account set up with E*Trade, Scottrade, Charles Schwab or any other discount broker if you want a direct transfer of stock. It is a seamless transaction and your new broker will handle all aspects of the transaction. The only problem is that it takes a couple of months sometimes.

If you take cash then you could open any account that you would prefer. Hopefully, the stocks aren't with a full service broker that charges high commissions. If the stocks are with a discount broker you are talking less than $50 depending on the number of different stocks to sell.

If you take cash you could open the account with the discount broker and buy stocks the same day you receive the cash. The trades would only be from $7 to $15 for each stock depending also on which broker you choose.