Advance of funds to trust

[DTS]

Can someone with knowledge on the subject confirm my belief on this:

Do all beneficiaries in a trust have to share in paying back an advance/loan to a trust even if one of them was the person (the fiduciary) who advanced the funds? Same with fiduciary fees?

Example: Gross estate $1,200,000, advance $100,000, fiduciary fees $21,000. Net distribution will be $1,079,000, four beneficiaries. Does the beneficiary who advanced the funds have to share in this repayment to himself, same with a qtr. of the fiduciary fees?

Thank you,

D

[DTS]

Answer

I contacted the fellow in charge of this trust a short while ago and had him read me any section that may address this. It does.

It states "the trust will be responsible, as a whole, for any fees or advances to the trust". I read this to mean that all four beneficiaries are responsible for repayment.

[JON]

Hard to understand

Did trust "advance" funds to the fiduciary/beneficiary??? Advance means it was given ahead of some future event. You were given an advance on your fee or trust distribution. When the final events happen of course the advance is offset to that individual's share. If the fiduciary advanced himself $100,000 for fees and distribution. You offset the $21,000 as fees and the remaining $79,000 is offset to any of "his" distributions. In fact if you did not do that I would think the other beneficiaries would have cause for action.

[DTS]

Jon

The advance was just to cover expenses of the trust, such as repairs fo rental property, etc. Nothing more and certainly no cause for legal action.

[Lion]

Advance or Loan?

Dennis, did your client take an advance from the trust? Or, did your client LOAN money to the trust to cover expenses while the trust had cash flow issues? Does he expect the trust to repay the loan as it pays its other bills, before it distributes the remainder to all the beneficiaries, including him? As reasonable as that sounds to me, I have no cite for you.

[DTS]

Lion

He loaned money to the trust.

[Lion]

Trust repay loan

Well, it seems logical to me that the trust would repay the loan, as well as pay its other bills, before distributing to the beneficiaries. But, taxes are not necessarily logical; they're just the law. And, yes, the trust repaying the loan means less to distribute to each bene, including your client. But, when he put money into the trust, the trust temporarily had more, so both your client and the trust are just getting back to where they were prior to the loan. I don't have any handy reference re trusts, so no definitive answer for you.

[Burke]

If money were loaned to the trust to fund it so that it could take care of certain expenses, and there were other estate beneficiaries besides the trust, then the trust must repay the money to the estate before final distributions can be made. Or the distribution to the trust must be reduced by the amount it was advanced. It doesn't really matter who the beneficiaries of the trust are. The trust is the entity which must repay the funds. If monies have already been distributed from the trust to the extent that it does not have enough money to repay this loan, and funds are not sufficient in the estate to equalize the distributions to all beneficiaries including the trust, then yes, all beneficiaries of the trust must repay the loan proportionally to the share they may have received. (This is a moot point if the trust is the ONLY beneficiary, which is not clear from your posts.) Get a copy of the will.

[DTS]

Burke

Sorry about my post not being clear. I was having trouble with clarity the other night and trying to word my post correctly! My fault.

Yes, the trust will have to repay the loan before any distributions. The trust is not a beneficiary.