Trust shares

[FBN2007]

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

When a trust is worded that a separate trust be created for different shares for beneficiaries, is it necessary to obtain separate tax ids for each share or can the trustee just keep proper accounting of the various shares and allocate principal and income to the beneficiaries? If new tax ids are necessary then what does the trustee name the new trusts if it is not spelled out in the original trust? Also if part of the assets in the original trust is a brokerage account then does that account need to be closed and new accounts opened in the name of the new trusts for the different beneficiaries even if this might mean taking losses in the brokerage account due to the value of the mutual funds, stocks, and bonds that are in the account?

 

[tranquility]

A trust is a separate legal entity. One trust cannot hold other trusts without influencing and changing rights and duties of the other trust. You cannot just account for and create artificial barriers between inchoate rights and have them be legally enforceable/protected. You must create the trusts demanded by the original trust.

The naming of the successor trusts is not really relevant or legally significant. I don't see why a brokerage account would have to be sold, but the accounts holding the trust assets should be separate.

 

[TrustUser]

hi tq,

while making separate trusts is a more full-proof method - i did think that the trustee could keep paperwork that showed how the assets were being own within shares of just one trust ? (the idea of subtrusts ?)

trusts, and even wills sometimes instruct that trusts be made. but i have never actually seen the mechanics of how this is done.

in the case of TRUST JS, which has john smith as trustor and jim jones as trustee with A B and C as beneficiaries, do you know the actual mechanics of how each of the 3 separate trusts are created ?

who is the trustor ? unless instructed differently, jim jones would still be the trustee of A B and C trusts.

who prepares the documents ? who signs the documents ? and in what capacity does he sign them ?

we are assuming that john smith has died, so he cant do any of the signing !!

 

[tranquility]

No.

If you think about it a moment, you will see why.

Besides, are you not the one who feels there is a legal duty to follow a trust's terms? Does that apply all the time, or just when convenient?

 

[TrustUser]

nothing i said even remotely hints at me not following the instructions of the trust.

 

[FBN2007]

It would be nice if legal documents were written in English so that clients can understand them

 

[tranquility]

nothing i said even remotely hints at me not following the instructions of the trust.

"When a trust is worded that a separate trust be created for different shares for beneficiaries," what do you think that means?

 

[FBN2007]

"When a trust is worded that a separate trust be created for different shares for beneficiaries," what do you think that means?

So what would the new trust be named (the trust doesn't give instructions as to the name), If the original trust is named John Smith Family Trust and the beneficiaries are Son A and Son B.

 

[tranquility]

So what would the new trust be named (the trust doesn't give instructions as to the name), If the original trust is named John Smith Family Trust and the beneficiaries are Son A and Son B.

It makes no legal difference. Some like a good description while others prefer something more obtuse.

 

[TrustUser]

"When a trust is worded that a separate trust be created for different shares for beneficiaries," what do you think that means?

subtrusts are separate trusts.

let me put it another way - having subtrusts would seem to be fulfilling to the wishes of the grantor.

this is why i was asking you about the mechanics, but i guess you aren't familiar with that process, either.

but typically, when a trust directs the trustee to form separate trusts or shares, the terms of the trust stay exactly the same.

it is strictly just making new shares (i dont want to argue about the nitpicking of whether they are separate trusts or subtrusts).

so the language of the original trust would stay completely intact. if 3 trust documents were created for 3 brand new trusts, one would need to make sure that every word got transferred over.

which to me, is why it makes sense to keep 3 subtrusts within the original trust, cuz then there is nothing to reproduce correctly.

in any case, you know me well enough to know that THE INTENTIONS OF THE TRUST need to be met.

i think you would make your case much more concise if you stated EXACTLY what occurred in order to have these new "shares".

there have now been 2 people asking you these questions.

 

[tranquility]

subtrusts are separate trusts.

let me put it another way - having subtrusts would seem to be fulfilling to the wishes of the grantor.

this is why i was asking you about the mechanics, but i guess you aren't familiar with that process, either.

but typically, when a trust directs the trustee to form separate trusts or shares, the terms of the trust stay exactly the same.

it is strictly just making new shares (i dont want to argue about the nitpicking of whether they are separate trusts or subtrusts).

so the language of the original trust would stay completely intact. if 3 trust documents were created for 3 brand new trusts, one would need to make sure that every word got transferred over.

which to me, is why it makes sense to keep 3 subtrusts within the original trust, cuz then there is nothing to reproduce correctly.

in any case, you know me well enough to know that THE INTENTIONS OF THE TRUST need to be met.

i think you would make your case much more concise if you stated EXACTLY what occurred in order to have these new "shares".

there have now been 2 people asking you these questions.

So, you're going to be rude again? We've been through this before. I do this as my living and you do this as a hobby.

First principles. Why do you want three trusts rather than two? Why do you want to have the continued cost and effort of a controlling trust that oversees the testamentary trusts? You're still going to have to write them up and transfer assets to them in order to prevent liability and tax issues and simplify fiduciary responsibilities, so, what is the advantage of maintaining the funding trust?

 

[TrustUser]

rude again ?

i merely asked you to state exactly what is done.

seems simple enough.

another poster asked you the same thing.

 

[FBN2007]

rude again ?

i merely asked you to state exactly what is done.

seems simple enough.

another poster asked you the same thing.

In order to get an answer you will have to put up a $5000 retainer.

 

[TrustUser]

hi fbn,

the following is a long legal document for your perusal. as i suspected, separate shares can be treated as separate trusts, at least in some situations, without going thru the process of creating brand new trust documents, etc (or whatever tq wasn't willing to elaborate on). when dealing with attorneys who do this for a living, as opposed to someone who does it for a hobby, the attorney may not want to reveal things to you, and would prefer to call the hobbyist rude. whereas the hobbyist doesnt make a dime, and only cares to help the questioner.

i would suggest that you talk to someone in your state who has had experience in this. it is a common situation for a revocable trust to state that it wants separate shares for its beneficiaries. the actual mechanics of it may change, depending upon state. but you should have no problem in getting good solid advice for yourself.

and i am not suggesting that keeping the trust with just shares in it, is the best way. i would have been happy to consider an example from tq, had he given me one to consider.

best of luck. and if possible, i would be interested to see what the actual mechanics are of whatever you choose to do.

www.mcguirewoods.com/news-resources/.*****separate_share_rules.doc

A. Overview of Separate Share Rules.
1. There are three separate share rules to be aware of in administering trusts and estates.
a. The subchapter J rule.
b. The subchapter S rule.
c. The GST rule.
2. The subchapter J separate share rule found in section 663(c) requires that the separate and independent shares of different beneficiaries in the same estate or trust be treated as separate shares or trusts in determining the DNI allocable to the respective beneficiaries.
3. The subchapter S separate share rule found in section 1361(d)(3) provides that separate shares are treated as separate trusts for purposes of determining permitted S corporation shareholders.
4. The GST rule found in section 2654(b)(2) applies the same separate share concepts in identifying trusts for generation-skipping transfer tax purposes.

 

[TrustUser]

hi fbn,

this seems like a reasonable solution, to me - or at least something that i would look into for feasibility.

the original trust could name shares as trust indicated - such that each share is considered a separate trust, with whatever assets or portions of assets that are specifically assigned to it.

income for each share/trust would be reported using the social security number of the beneficiary of the share.