ajgm[at]aol.com (ajgm) wrote:

- quote -

The trust should simply provide that upon the grandmother's
death, the obligation to pay the remaining balance on the
notes due from the grandchildren will be cancelled. For tax
purposes, this would be treated as a testamentary gift to
the grandchildren.

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ajgm[at]aol.com (ajgm) wrote:

- quote -

If "her" trust is a Living Trust, it becomes irrevocable at
date of death. Distributions can be specified in the trust
document (like a Will). She needs to include a conditional
bequest in the document, indicating the distributions you
indicated.

- quote -

Since the grandkids get nothing until she dies, this is an
inheritance. It really makes no difference to them what you
call it, it is not taxable in either case. The money is
included in her taxable estate (if there is one) and is
subject to estate tax before distribution.

- quote -

I thought you lost me here, then realized that grandma
LOANED the home purchase money to each grandkid, with the
outstanding loan balance being "forgiven" at death. This can
all be handled internally by the Executor of her estate,
with no need to cut checks and then ask for them back. In
effect, none of the grandkids get any financial inheritance,
merely a forgiveness of their debt to grandma. Hope she
keeps good payment records and is declaring the interest
received on her tax return.

- quote -

I see no large tax bill as a result of distributing the
assets of her estate. If the greatgrandkids are minors, then
their shares can remain in the trust until such age as they
can assume responsibility. Any income earned in the trust is
the responsibility of the ultimate beneficiaries (or their
guardians) for taxes.

Rather than just speculating or seeking anonymous advice on
the Internet, why not just spend the few bucks needed to
consult with a financial planner or elder attorney. You can
then quit being vague and give them all the information
needed to make a valid recommendation. It will be money well
spent.

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ajgm wrote:

- quote -

If the trust is a "grantor trust" (distregarded for income
tax purposes), then it's considered an inheritance for
estate tax purposes. If not, I have no idea.

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I am trying to gather information on Trusts and Taxes. The
situation is a grand mother wants to finance her
grandchildren's home purchase. What she is wanting is that
her trust state that at the time of her death the grandkids
will receive from her trust inheritance equal to the
remaining balance of any outstanding loans. Any remaining
funds will be divided to the great grandkids. The idea is to
secure the grandkids futures by making sure they own the
homes.

Question 1 - If this is the case will it be considered a
gift or inheritance?

Question 2 - If considered an inheritance do the TTEEs have
to cut a check to each of the kids and have them then pay
the trust or can it be applied to the loan internally? For
example can the trust state that each kid will receive
inheritance equal to the amount due on the mortgage which
will be applied by the TTEE to the outstanding debt in turn
paying their obligation to the trust.

Question 3 - If her plan will not work without dumping a
large tax bill on her family can the trust instructions
mandate the maximum annual gift to the kids (considering the
lifetime limits of course) ? The trust owns a few other
loans which will take 10 years+ to be paid off so the trust
will be in effect until those contracts are complete.

Any input would be appreciated.

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