Trusts

[Ex Is Nuts]

What is the name of your state? Oklahoma

First of all, I hope this is the appropriate forum for this questoin. I didn't see anything that suited it better.

Suppose you are the president of a small corporation. Suppose in 1995, you set up a trust in your own name, and a bank account in that trust name at "ACME" bank. Then, three years later, you take out a loan for your small corporation, also at "ACME" bank. You sign a personal guarantee to ensure the loan will be repaid.

Two years after taking out this loan for the corporation, the economy is struggling, and the corporation is struggling, but not bankrupt by any means. Because of all of this though, "ACME" bank gets the jitters, and decides to declare you in "default" (without your knowledge) of the loan, although you've made EVERY payment on time as agreed. Three hours later they send you a certified letter via courier letting you know they have declared you in default, and to pay off the loan, they have taken the money out of the funds that are in the bank in the trust account.

Now then, assuming the trust itself WAS NOT listed as a guarantor of the loan, would this be legal? My understanding is that trusts are "separate entities" and that a bank could not do something like this. Is that correct? If so, what would one do to remedy the situation? What would be your legal rights?

 

[vrzirn]

Let us suppose, somehow, a red flag went up. Begin by reading all the small print in your loan application.

 

[Ex Is Nuts]

Well, thank you, but I've read the contract from one end to the other, in detail. I don't disagree with the idea that per say, if I had enough money in "ACME" bank to repay the loan, whether it be in CD's, a savings account, or whatever, that they would and could have the right to dip in to those accounts in a "default" situation. However, dipping in to a trust is a different issue, is it not? Per my understanding, it is a different entity, just as when someone starts a corporation it is a separate entity. Therefore, if the trust is not listed as a gaurantor on the note, which it IS NOT, then how in tarnation can they "dip" in to it and take funds? It would be no different if I didn't pay my home loan and therefore "ACME" foreclosed on the note and dipped in to the corporate account to pay off the note, would it not??????? (Assuming of course that the corporation had not been used as collateral, and that it was not a guarantor on the note). In such a case, they woudl literally be taking money from an "entity" that had nothing to do with the home loan!

Think of it a different way... suppose your name is John Doe, and you come up with an ailment of some sort. In turn, your friends make a trust named "The John Doe Trust" (and naturally it was set up the legal and proper way... through a lawyer etc etc). Assume then that for whatever reason "ACME" bank declares your home mortgage in default, and as a result, breaks in to the trust and takes the money that has been set up for you for your ailment. You, nor no one else listed the trust as a guarantor and/or as collateral of the home loan, so how does "ACME" bank then dip in to the trust's funds to repay a loan YOU had for a home?

Perhaps I am wrong, but again, I have always understood a trust to be a separate "entity". Therefore, if someone sues you, or you get forclosed upon, or whatever, the trust itself is not at risk, UNLESS you have signed it over as a guarantor, or as collateral. Neither of which were done in the case I am speaking about.

SO now then, perhaps another shot at an answer to my question?

 

[Ex Is Nuts]

Did a little surfing on the net, and found this...

***What is a Trust?

Think of a trust as a holding pen, a place where you put your assets before they are released to the people or organizations that you designate to eventually receive them. A trust is a legal entity and so are you. Because you and the trust are separate legal entities, anything you transfer from you to the trust becomes property of the trust. The trust then holds the property for your benefit, or for the benefit of those whom you designate.****


Ok, so that makes my point exactly! If any money within the trust is the property of the trust, then how can "ACME" touch it????????????????? It is a LEGAL SEPARATE ENTITY!!!!! So again, what would one do in the case I originally stated?????

 

[HomeGuru]

What is the name of your state? Oklahoma

First of all, I hope this is the appropriate forum for this questoin. I didn't see anything that suited it better.

Suppose you are the president of a small corporation. Suppose in 1995, you set up a trust in your own name, and a bank account in that trust name at "ACME" bank. Then, three years later, you take out a loan for your small corporation, also at "ACME" bank. You sign a personal guarantee to ensure the loan will be repaid.

Two years after taking out this loan for the corporation, the economy is struggling, and the corporation is struggling, but not bankrupt by any means. Because of all of this though, "ACME" bank gets the jitters, and decides to declare you in "default" (without your knowledge) of the loan, although you've made EVERY payment on time as agreed. Three hours later they send you a certified letter via courier letting you know they have declared you in default, and to pay off the loan, they have taken the money out of the funds that are in the bank in the trust account.

Now then, assuming the trust itself WAS NOT listed as a guarantor of the loan, would this be legal? My understanding is that trusts are "separate entities" and that a bank could not do something like this. Is that correct? If so, what would one do to remedy the situation? What would be your legal rights?

**A: I am willing to bet my ACME roadrunner rocket launcher kit that the bank has the legal right to use the funds out of the trust account. A review of the trust documents would need to be completed to verify legal ownership and beneficiary. Also a review of the bank policies and loan documents would also need to be verified. I am sure that there is a lot more to this story compared to what has been provided at face value.

 

[Ex Is Nuts]

I greatly appreciate your reply Guru, although I wouldn't bet my rocket launcher on it... you just never know when that roadrunner might appear!

Well, I was hoping that there would be a clear distinction here... but evidentally it is not as "cut and dry" as I had hoped it might be.

So if you could forgive my ignorance here regarding trusts.... if it is a "separate and legal entity", I'm still at a loss to see how the bank could hold it "liable"? In my own mind, I see it as though: ABCDE Company has a loan... John Doe signed a personal guarantee for the loan. However, HomeGuru works for ABCDE Company, and has $20K in his bank account. Therfore, since HomeGuru works for ABCDE, let's just take the money out of HIS account even though he had NOTHING to do with the guarantee!!!

I realize it's not that simple..... and there's much more legal crap involved than that. But I'm really having a problem seeing whereas a trust could be held liable for a person's personal guarantee, unless they are the trustee and explicitly list the trust as collateral or as a guarantor. Otherwise, they have not tied the trust to this "personal guarantee", and it remains a separate entity, not liable for the debts of that person. That's my thinking anyway...

Obviously, I'm not arguing with you here.... just trying to get a better grasp of how this could be possible, when to me, it seems impossible. And I greatly appreciate your assistance in the matter....

 

[HomeGuru]

I greatly appreciate your reply Guru, although I wouldn't bet my rocket launcher on it... you just never know when that roadrunner might appear!

Well, I was hoping that there would be a clear distinction here... but evidentally it is not as "cut and dry" as I had hoped it might be.

So if you could forgive my ignorance here regarding trusts.... if it is a "separate and legal entity", I'm still at a loss to see how the bank could hold it "liable"? In my own mind, I see it as though: ABCDE Company has a loan... John Doe signed a personal guarantee for the loan. However, HomeGuru works for ABCDE Company, and has $20K in his bank account. Therfore, since HomeGuru works for ABCDE, let's just take the money out of HIS account even though he had NOTHING to do with the guarantee!!!

I realize it's not that simple..... and there's much more legal crap involved than that. But I'm really having a problem seeing whereas a trust could be held liable for a person's personal guarantee, unless they are the trustee and explicitly list the trust as collateral or as a guarantor. Otherwise, they have not tied the trust to this "personal guarantee", and it remains a separate entity, not liable for the debts of that person. That's my thinking anyway...

Obviously, I'm not arguing with you here.... just trying to get a better grasp of how this could be possible, when to me, it seems impossible. And I greatly appreciate your assistance in the matter....

**A: you are correct in that this issue is not cut and dried nor is it black and white. It is sort of a Michael Jackson. Being that you do not have the complete facts, you are just guessing here. You also have not established any relationship you legally have with the bank, therefore we must presume that the trust account is not yours. That being said, the bank is under no obligation to address your concerns even if you sent them a certified rrr letter demanding their explanation as to written evidence that they have the legal right to access funds in the trust account to pay for an unrelated loan.

 

[Ex Is Nuts]

***Being that you do not have the complete facts, you are just guessing here.***

What facts are you referring to? If there is something here you feel is missing, I can fill you in. I think I've pretty much stated the scenariop tho.



***You also have not established any relationship you legally have with the bank, therefore we must presume that the trust account is not yours.***

It is my mothers account, and I am having to try to take care of this for her.... I have all the documentation, etc etc. So whatever legal relationship you want to know about, I can fill you in on. As I have already said, I have studied the contract and all the agreements, and can find no way in which they can legally touch the trust funds.




***That being said, the bank is under no obligation to address your concerns even if you sent them a certified rrr letter demanding their explanation as to written evidence that they have the legal right to access funds in the trust account to pay for an unrelated loan.***

Actually, I accompanied her to the bank, and they refused to even speak to us. We followed that with a certified letter, signed by her, to which they also refuse to respond.

 

[HomeGuru]

Ok, then your next step would be for mother to sue.

 

[Ex Is Nuts]

So then I would assume this is not perfectly legal then aye? Well, cool! Thanks again for your help!