Educational Trust

[Jesca3001]

What is the name of your state? Mississippi

My grandmother left my brother and I a trust fund to pay for our college tuitions and any other educational expenses. We recieve Statements from the investment firm that handles our trust every month, as does the trustee, our uncle. over the past year, the activity detail of the statement states that Several checks were made totaling around $17k. when asked about this, my uncle said that the money was for taxes. this would appear reasonable if the money was only taken out late last winter or this spring. however, money has been withdrawn every few months last year. at that rate of taxation (over 25%) there would be nothing left in the account within a few years. after much prodding, the financial consultant who handles the account admitted that my uncle has sued for control over the account, and that money had been withdrawn, which he has no knowledge of the reason it was taken out.
Any Advice??

 

[Dandy Don]

Have you received a copy of the trus--is it an offical trust or just a trust fund that was set up from the trust fund or approximately what was the beginning balance when it was first set up?

Have you or your brother received any money from this trust yet?

Is this uncle the official trustee of the trust fund or is it someone else, perhaps the investment firm that is handling it?

Why would your uncle be suing for control if he didn't already have joint control as a trustee?

If it is an actual trust, you may want to consult with a local trust attorney to find out whether Mississippi law permits a trust beneficiary to request a copy of the trust and an accounting statement for each year of the trust by sending a certified letter to the trustee requesting said information.

Until you get more exact information as to who exactly withdrew the money (the uncle or the investment firm), you can't really figure out what happened. It is possible that the amount of money in the fund may have required certain state or federal income tax payments to be made on a periodic basis if perhaps the trustee hadn't been making the tax payments, but it is also possible that the investment firm might be doing an improper/illegal tactic called "churning"--making frequent investments in risky ventures just so they could charge an activity fee to earn more money from themselves. If you hire the services of a trust attorney, maybe he/she can also consult with a CPA or tax accountant or auditor to help you figure out exactly what is going on here and steps you can take to correct the situation to your advantage.

If uncle has told you that this money was supposedly for taxes, then ask him to provide supporting documentation to back up his claim. If the investment firm has tax returns for this fund in their file or is having them prepared by an accountant, you need to find out from your attorney if you can request copies of these too to help figure out what is going on.

Also, if you have not looked at your grandmother's probate file that contained her last will and testament and other financial information about how her estate was handled, you should do so, as it could be most revealing, and it may even have some information in there about her intentions for setting up the trust fund or its value and who should be administering it.

DANDY DON IN OKLAHOMA ([email protected])

 

[Jesca3001]

We recieved a copy of the will when my grandmother died, along with papers pertaining to the trust, what it was to be used for, what would happen if we do not use it by the time we reach 35,etc.

The Fund started out at about $48k when we first learned that she had set it up. it is now about $74k.

We have not recived any money at all from the trust because neither of us has enrolled in college. we are expecting $300 for my brother for books he had to buy, but even after a month of waiting, he still has not sent it
.
The stockbroker who handled my grandmothers investments was a good friend of hers, so he had some control over the distribution of money from the account, i believe he was listed in the will as a joint trustee of the account, which is why my uncle sued for complete control over the money.

This is not the first time we have gotten into a row with my uncle and the investment advisor over money being withdrawn. about 2 years ago, there were suspicious withdrawals made from the account, and when pressed about it, both claimed the money was for taxes. the amount of income this account is generating would add up to about $30k per year if not for the amount of money being taken out, but i find it hard to believe that taxes would amount to almost 50% of the total income.

as soon as i can make it, i will go to the courthouse and look at the documents pertaining to her estate.

*edit*
I cannot contact uncle to ask for documents supporting him paying taxes because my father wants to see what he will do next. "give him enough rope and he'll hang himself"
it is getting frustrating, to say the least, so this is why i am doing as much research on this as possible until then. thanks.

 

[Dandy Don]

Yes, you may have "papers relating to the trust" but I need to know if you have a copy of the trust specifically--it is that document that tells you everything you need to know about the trust.

Since the fund has increased in value, you really don't have much to worry about except getting to the bottom of why the withdrawals were made.

For what reason did your brother request $300 for books--is he still in high school? If the instructions of the trust do not permit any reason for withdrawals besides college tuition, then the trustee does not have to approve that request.

The only way you can get answers about the withdrawals is to hire your own trust attorney. He can get answers because he would have legal authority to do so, and the broker and your uncle could not brush him off as easily as they do you. Your attorney could tell you whether you have the right as a trust beneficiary to request an official accounting statement for each year of the trust, and could pin them down for exact details as to what the withdrawals are used for. It is also possible that the withdrawals might be legal and proper since a trustee does have some leeway in spending monies if the trust account increases in value.

Your attorney could keep track of your uncle's lawsuit to gain control of the trust or could perhaps argue on your behalf if your attorney does not think it would be a good idea for him to get control, although I do think it would be better for one person to have control ( so that one person could make all decisions) unless the trust does not permit that.

If you could afford to hire the attorney now to get to the bottom of this, that would be the wisest thing to do, since if the uncle or the broker is stealing unauthorized money from this account, it is better to find out now so they can make restitution instead of waiting many years down the road to figure out what happened. If uncle says he is using the money to pay taxes, then your attorney can ask him to provide a copy of the tax return or any documents from the IRS if they are requesting payment.

What year will you and your brother be old enough to claim this money to go to college?

DANDY DON IN OKLAHOMA ([email protected])

 

[Jesca3001]

he requested $300 for MSCA courses (microsoft system Administrator) my uncle said that he would send it, but a month has passed and nothing. the fund is for education (highschool, college and above) and whenever we take courses or enroll for college is when we can withdraw the money, there is no specified age at which we can withdraw.
we are going to a trust attorney ASAP. thanks dandy don

 

[Dandy Don]

Another reason you need an attorney is to help get the trust interpreted properly. The phrase educational expenses if it appears right after the college tuition might be interepreted as being only expenses for college or as you are intepreting it expenses for this Microsoft course (a very smart move to be taking these courses as it will help him get a very good job). Start thinking of other ways to get this money (a loan from a relative, scholarship applications, financial aid from the goverment or from the school offering the course, etc.).

Again, I ask, in what year approximately do you and your brother expect to be needing this money for college?

 

[Jesca3001]

2005 for me, 2006-2007 for my brother...

 

[Jesca3001]

*update*
After seeing a trust lawyer, who gave us a lot of information which told us nothing we called the financial advisor (who is also funds manager of the account) who said that "No Investments have been made" (and my uncle said the money was for taxes AND investments, tsk tsk) we are currently in the process of ordering back statements from the account, finding out exactly how much taxes were paid, and speaking to a financial forensics expert (someone reffered by the lawyer).thanks to Dandy Don, and anyone who bothered to look at my post.
but one last question....
*If* it is proven that my uncle took money out to benefit himself, is that considered grand larceny given the amount taken out? (17k) if so, is it likely that he would go to prison for such an offense, or are probation and fines called for?

 

[Dandy Don]

As far as which specific charges would be filed, you would need to discuss that with the district attorney's office or the criminal attorney you would hire to handle it for you, as this is not specifically a probate question.