14 year old posting for mother

[sailoholicf]

Alright it probably seems strange for a kid to be posting here but i have a good reason. We use to be above average money-wise but my parents got a divorce 2 years ago for reasons I choose not to know and now we lost it all and are severely in debt. I live with my mom and I have overheard bits and pieces. So here it is:

• We are $300,000+ in debt from attorney fees (divorce related)
  
• Me and my sister have a trust set up, and my cousin (a lawyer) is the trustee. We were going to file for Ch. 7 but the bankruptcy lawyer my mother talked to said the trust would be at risk.
  
• We can only use the trust to buy a house that we live in.

So heres the question, do any of you know from experience or previous knowledge if the trust would truly be at risk? My mom dose not want to gamble the trust because it is money for me and my sister.

I would talk directly to my cousin (the trustee) but everything i say is used as ammunition. If I were to talk to her about that my dad would report that my mom told me to say that for her personal gain. That is why I am forced to ask strangers instead of those close because it could mean me moving to Oklahoma with my dad.

I'm sorry if this post is rather long I just thought you should know the background. The credit companies call around 10 times a day and it has recently been getting worse. If anyone at all could point me in the right direction it would be greatly appreciated!

Sincerely,
desperate

[millerc507]

Who set up the trust, your father or mother? Is your mom able to access the funds?

[buchanj]

jeez bullet points, paragraphs. You must do great in school. 14? I dont think you would have a say until your 18. 300000 in att fees? If your mom can afford that for a divorce, she prolly can come up with 4000$ for a decent bk lawyer.

[danaf]

14? Your mother should be posting, not you. But I would say that your mom should consult several attorney's, not just 1. It could be the one she spoke to didn't know what they were doing, and believe me, their are plenty of incompetant lawyers out there. Off the top of my head, a trust set up in the children's name....I don't see how a trustee could touch that. But I am no expert. Others will chime in soon enough (and hopefully not with rude responses like the last poster). Good luck!

[FreshLikeADaisy]

Sail, it's hard to say without knowing the details of the trust: trusts can be very simple or incredibly complex, and there are all kinds of trusts that have different rules. I know that doesn't help you in itself -- sorry -- but it seems to me that if you could get a copy of the trust you could find someone to help you understand its provisions, even an atty consult if you can afford it. Without the details of the trust, you're literally driving blind. So is any bankruptcy atty your mother consults with: how can he possibly say with any certainty whether the trust is at risk without seeing the provisions of the actual trust? I don't think he can, and because they are so complex it would be unwise for him to guess, which is why your mother wasn't able to give you much of an answer. Like you, unless he sees the trust document itself, there is no way of knowing.

I know when you hear the creditors calling ten times a day it seems like a bankruptcy issue, but whenever there's a trust involved it almost invariably becomes a trust issue, bankruptcy or not.

However, I'm going to speak frankly and tell you the very first thought I had when I was reading your post: your family has by no means told you the whole story, and is unlikely to do so if there is that much warfare going on. Even the bits and pieces you have overheard may not be reliable. $300k is an incredibly high amount in legal fees unless there was a great deal of money involved, and it sounds like they're still fighting. I really think there's a lot more to it than you have guessed, just my gut feeling. Again, you're driving blind. You probably already know this, my apologies if you've already figured this out.

But here are some things that you can try. First, stop answering the phone: there is nothing to be gained by talking to the creditors unless there is money to pay them, and it sounds like there isn't. You can safely let those calls roll to voicemail and delete them.

The second thing is that the trust itself -- even though your cousin is a/the trustee -- may very well be administered by a trust company, which is kind of like a bank just for trusts. If you are listed as a beneficiary you may very well have the right to a copy of the trust document, and be able to obtain it from the trust company yourself without going through your cousin. Check that out by looking at any and all paperwork your mother has in regard to the trust, as well as any checks or check copies that may have been issued. Personally, you can be assured that when people fight, people lie, and I would not *assume* I knew anything about that trust until and unless I saw it for myself.

The third thing is that, if you have the cash, you could get a consult with an atty all on your own and no one in your family need ever know you went, if you have a way of getting there on your own. An average bankruptcy atty consult is free the first visit, but a trust attorney might run you a few hundred dollars, depending on the area. I think you'd be much better off presenting a copy of the trust to a trust attorney if you can, because he specializes in trusts. But in your situation, you could even find a family attorney (much cheaper!) to start with and let him explain to you what your options are and how to proceed.

You sound like a bright kid, and so I would recommend that you do some basic research on trusts and the various kinds. Wikipedia has a great article on trusts the last time I looked, and there are other resources on the web as well. I would like for you to at least get a sense of what you're dealing with when the word "trust" is uttered in a legal context, because it is a very detailed and complex issue. Once you've read about the different kind of trusts, you should be able to get an idea from your mother exactly what kind of trust it is, which will help you a great deal as you proceed. But be very careful to listen, learn, and not speak of it for now, because in your situation I can only see that creating resentment among the various members of the family that are fighting. You're the very last person they want getting involved in the legal details, from the sound of things, so if you're going to take this on then do yourself a favor and keep your silence about it.

I wish you well, and hope it all settles down for you soon. Good luck!!!

[Flamingo]

If your parents formed the trust with their money by putting the funds in that trust and are acting as custodians of those funds until you are of age to receive the money from the trust, they have access to those funds and those funds could be at risk. A lot depends on what kind of trust it is, the wording, etc. Since you are a minor it is all out of your hands and will be to be worked out by the adults involved. The other thing you can do (you sound very smart in picking all this up) is to actually confront one of your parents and ask them what is going on because you are not deaf and hear things and want to know more about the "trust" situation so you will understand and not have to assume anything.

Unfortunately, hard times happen to everyone and I am sorry you are going through this. Do you have any other family members you can confide in that may be of some help to you in investigating the trust situation or being of help to you going through all of this.

[sailoholicf]

I talked to my mother and she said it is a QRPT type trust, the funds in the trust are from the sale of the our old home.Also the attorney fees are from almost 3 years of unneeded and drawn out conflicts.

This is all I know for now but it is late and I have school in the morning. I will get back to you tomorrow with more info. And to buchanj, we CAN'T afford the attorney fees, that's why i'm here. Again thanks to everyone who has responded so quickly! The help is greatly appreciated!

[FreshLikeADaisy]

Well, you got me interested, Sail, so I did a little looking for you.

Basically, a Qualified Personal Residence Trust (QPRT) is something that people use when they want to avoid creditors or estate taxes. Basically, it's when you put the title of your house in the name of a trust, and then you retain the right to live in it but it actually belongs to someone else (the trust). There are variations on this, like what happens when the grantor (the person who gave the house to the trust) dies and when, or when the grantor's children are made beneficiaries, but that's the gist of it.

For the purposes of general understanding, I am assuming that your mother is *probably* a grantor along with your father, and that this trust was established while they were married, and that you are a beneficiary.

Here's the deal. The grantor (your mom and dad) put the house into this trust and then it was sold, and the cash went back into the trust. But by law, if the house is sold while it belongs to this trust, then the funds either have to be used for the purchase of a new home (you got that part already) or it has to be converted into an annuity for the benefit of the grantor, NOT the beneficiaries. In other words, the funds are put into an account that pays a set amount to the grantor over the lifetime of the trust, and anything left over when the trust ends goes to the beneficiary.

While people do tend to get stars in their eyes when the word trust is mentioned, with this kind of trust it is NOT money that is set aside for you and your sister, even though the house is sold and the cash is sitting in an account somewhere. As I said, the law basically requires that either the money be used for a new house, OR given back to the grantors over the life of the trust. The only time you, as a beneficiary, would potentially get cash out of this is a) when the trust expires, the grantors are still alive, and there's money left over after paying them for all those years, or b) the grantors die, and you receive whatever is held by the trust as a beneficiary.

The thing about this kind of trust is that the grantors, and NOT the beneficiaries, are the ones who primarily benefit from this arrangement, and so it may well be vulnerable to your mother's bankruptcy, IF your mother is a grantor, and I am guessing she is. She may also be the only grantor, or perhaps your father is the sole grantor and gave it up in the divorce, I don't know. In bankruptcy, even if you put something in a trust, it may be seized by the trustee depending on how long ago the trust was created and what kind of trust it is. These are all the complexities I was talking about!

But in the end, it seems that your assumptions may only be half right: the trust is vulnerable to a bankruptcy if your mother is a grantor, but the trust is NOT money set aside for you and your sister. If it is not used to buy a house, it has to be paid back to the grantor(s), not saved and held for the eventual benefit of you and your sister. Now, the grantors may save that money for you separately, but that's not a part of the trust. What they do with their yearly payments is up to them. It's kind of like I have a contract with you that says I give you $5 a year, and I do so, but what you do with that $5 isn't specified by our agreement. You could spend it or save it or make a Christmas ornament out of it, wouldn't matter. So I'm not saying your mother was misleading you, I'm only saying that it's not written into this kind of trust that you, the beneficiary, get anything out of it until or unless someone dies ot the trust expires. That may be her intent, personally, but it's not the purpose of this sort of trust.

Basically, that's it. There are still a lot of questions you need to answer before you know more, like when it was written, when it expires, who exactly are the grantors and the beneficiaries, what the provisions for the annuity are, etc. so you still need to see the document itself, but this should be enough for a start. Be careful how you proceed and how you approach this in conversation, as I said, because it's clear that there's misunderstandings about what this trust is all about. Don't make yourself a target of resentment because you went looking behind their backs, and let them figure out the details. As you've probably figured out, it's all up to the grantors in this kind of trust anyway.

Here's an article I found that is kind of wordy, but explains it very clearly. http://www.homesteadpropertyexemptio...m=28&topic=221

You can also google the words "qprt trust bankruptcy" (without the quotes) and look over the various articles that come up. You don't have to be a lawyer to understand them, they're actually pretty straightforward, and the QPRT is a common sort of trust so there's lots of info. Good luck to you!!!

[sailoholicf]

She isn't receiving a payment of the trust and does not have a copy of the trust. So from what your saying if she is one of the grantors then the trust would be at risk in a bankruptcy? Would it only be at risk for Ch.7 or for any chapter? Also, is their a way to locate documents? I remember hearing something where you could pull up court documents online. Thanks again for the help guys!

[Flamingo]

There is no way to find a copy of the Trust you are questioning online. If you are that curious about the Trust, ask one of your parents if you could see a copy. What you really need to do is sit down with one of your parents or a close aunt or uncle and ask some direct questions about what is going on and express your fears to them. As your parents, they should answer you straighforwardly about what is going on. If they do file bankruptcy and it does affect the trust, there is absolutely nothing you can do about it. Your parents need to take care of your fears. Things will get better as time moves on and the problems get resolved. Rigiht now it is a rough time for you and you have a zillion questions, many of which should be directed to your parents so they can see how this is all affecting you. Please have a good talk with your mother or a close family relative that you can talk to. You seem to want to take on problems here that only the adults in this situation can handle at this time.

[buchanj]

shannagins on her being 14. I called it.

[Flamingo]

shannagins on her being 14. I called it.

I had the same thought but you never know...

[FreshLikeADaisy]

She isn't receiving a payment of the trust and does not have a copy of the trust. So from what your saying if she is one of the grantors then the trust would be at risk in a bankruptcy? Would it only be at risk for Ch.7 or for any chapter? Also, is their a way to locate documents? I remember hearing something where you could pull up court documents online. Thanks again for the help guys!

Well, Sail, if she's not receiving payments from the trust (via an annuity) then she's either not a grantor, or something is unusual about the way the trust is written. In fact, you never know: it could be that this trust is what they've been fighting over.

By the same token, if she does not have a copy of the trust document, then either she's not a grantor or something unusual is going on, assuming she *wants* a copy. I know YOU want one but if she's a grantor it's her legal right to see anything connected to that trust. The trustee could be the Emperor of Darkness himself, and still could not legally withhold a copy of any QPRT trust related document from a grantor of that trust. This particular kind of trust is created for, and managed by, its grantors; in fact it's known as a "grantor-type" trust for that reason. Not every trust is, but the QPRT is. If your mom is a grantor, she has the keys to pretty much all information regarding her own QPRT.

I'm not sure about the 7 vs. 13, if only because I know next to nothing about Chapter 13 bankruptcies. I cannot *guarantee* that the trust is vulnerable if she declared Ch7, only that I found absolutely nothing to indicate that QPRT trusts are shielded in any way from bankruptcy. It does shield the grantor from creditor action, but the bankruptcy court has far more latitude in seizing assets than a creditor ever dreamed of. Basically, a creditor can put a lien on your house in response to unpaid debt; placing the house in a QPRT is one way to make sure they can't. But that has nothing to do with the rights of a trustee in a bankruptcy. Just because an asset is safe from creditors doesn't mean it's safe from a Ch7 trustee, as you've probably already guessed.

Regarding court documents online, some are, some aren't, but in this case it doesn't matter because a trust is not a court document. It's more of a privately held contract. As was mentioned earlier, you're not going to see this document anywhere online.

But what you CAN do is see if the deed records for the old house are online, because whoever legally owned the house prior to the execution of the QPRT is most likely the grantor(s) on the trust. In other words, if you and I own a house together and the deed is in both our names (joint tenancy) and we decide to put it in a QPRT trust to save on our income and estate taxes, then both of us as legal owners would have to "grant" the house to the trust, unless there's a quitclaim deed or some other unusual exception prior to the creation of the trust. Pay attention to the ownership: joint tenancy is legally quite different than, say, tenancy by the entirety. But in general, if you look up the deed history of that house (hopefully online, not all are) and Bob and Mary Smith were the legal owners, chances are *very* good that Bob and Mary Smith are the grantors of the QPRT trust the house was placed in.

Okay, kid. I've done enough of your homework. Good luck!!!

[sailoholicf]

I'll take a look and see if I can locate the original deed (paper or online). I'll have my mom request a copy of the trust as well. I honestly don't think she knows how to do this so if you know how it'd be appreciated. Yesterday she went to see another Attorney and he turned her away because her case was too complicated . She was referred to someone who is supposedly very good at what he does. Everyone has been a great help, especially you daisy! I'm hoping everything goes smoothly. Thanks again guys!