Inhiding Posted May 28, 2011 Share Posted May 28, 2011 My wife and her mom are the beneficiaries of a trust that consists of 3 commercial properties and 1 apartment/house. They are listed as 50/50 benefactors. Grandma set the trust up this way with the help of a lawyer, and she wanted it this way. Now the father-in-law (who is the executor of the trust or is it trustee?) says that since the trust skipped a generation, as it lists my wife and her mom instead of going 100% to her mom, that we actually owe more in property taxes than they do. He figured it to be 89% our burden, 11% their burden, and we now owe them $18,000. Taxes went up when the trust "changed" hands 3 years ago. Does this make sense? shouldn't they split the property taxes 50/50? This is in California by the way... thanks in advance for your answers. Quote Link to comment Share on other sites More sharing options...
Clubfoothead Posted May 28, 2011 Share Posted May 28, 2011 You should retain a California attorney. I would think it would be the Executor/Trustee's job to pay that and then to be reimburesed from any income generated by the estate but I'm not a lawyer. Here's the California Probate Code: http://www.aroundthecapitol.com/code/Probate_Code.html You should retain a California attorney. Good luck. Quote Link to comment Share on other sites More sharing options...
Puddy Posted May 28, 2011 Share Posted May 28, 2011 yomama is in Cali and I think this may be right up his alley. Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted May 28, 2011 Share Posted May 28, 2011 yomama is in Cali and I think this may be right up his alley. This. FWIW, it sounds like complete BS to me. Logic says that the taxes would be the same as the benefits - 50/50. But we all know that logic and taxes live on different planets. Quote Link to comment Share on other sites More sharing options...
nuke'em ttg Posted May 28, 2011 Share Posted May 28, 2011 I think this may be right up Whompers alley. the horse is extra Quote Link to comment Share on other sites More sharing options...
slambo Posted May 29, 2011 Share Posted May 29, 2011 (edited) If the resident huddle experts don't have the answers you need, check out this guy, Len Tillem. He does a Mon-Fri & Sunday radio show on KGO Newstalk 810 out of San Francisco. He specializes in trusts, estate planning, elder law, etc. His practice is in Sonoma, CA. He claims to answer email questions as well. We listen to him at work everyday and he seems to knows his stuff. Google Len Tillem and you'll get all the links you need. His radio show is on at 1-2pm pst Mon-Fri and I think Sundays are 1-4pm pst. He answers on air questions and is worth a listen. HTH Edited May 29, 2011 by slambo Quote Link to comment Share on other sites More sharing options...
Inhiding Posted May 29, 2011 Author Share Posted May 29, 2011 If the resident huddle experts don't have the answers you need, check out this guy, Len Tillem. He does a Mon-Fri & Sunday radio show on KGO Newstalk 810 out of San Francisco. He specializes in trusts, estate planning, elder law, etc. His practice is in Sonoma, CA. He claims to answer email questions as well. We listen to him at work everyday and he seems to knows his stuff.Google Len Tillem and you'll get all the links you need. His radio show is on at 1-2pm pst Mon-Fri and I think Sundays are 1-4pm pst. He answers on air questions and is worth a listen. HTH thanks! i will check it out. we are too far south to get 810 from SF, but maybe he is on somewhere else. Quote Link to comment Share on other sites More sharing options...
tazinib1 Posted May 29, 2011 Share Posted May 29, 2011 If the resident huddle experts don't have the answers you need, check out this guy, Len Tillem. He does a Mon-Fri & Sunday radio show on KGO Newstalk 810 out of San Francisco. He specializes in trusts, estate planning, elder law, etc. His practice is in Sonoma, CA. He claims to answer email questions as well. We listen to him at work everyday and he seems to knows his stuff.Google Len Tillem and you'll get all the links you need. His radio show is on at 1-2pm pst Mon-Fri and I think Sundays are 1-4pm pst. He answers on air questions and is worth a listen. HTH Agreed. I have listened on occasion and he really knows his chit. You can check him out Here and there is a link to listen to his show as well. Quote Link to comment Share on other sites More sharing options...
Inhiding Posted May 29, 2011 Author Share Posted May 29, 2011 Agreed. I have listened on occasion and he really knows his chit. You can check him out Here and there is a link to listen to his show as well. thanks Taz, i have that bookmarked. He probably won't be on tomorrow being Memorial Day. Through the wife's benefits at work we have a free legal services. We are definitely giving that a call on Tuesday. Quote Link to comment Share on other sites More sharing options...
Inhiding Posted June 1, 2011 Author Share Posted June 1, 2011 This. FWIW, it sounds like complete BS to me. Logic says that the taxes would be the same as the benefits - 50/50. But we all know that logic and taxes live on different planets. Quick update: Called the lawyer, and yes logic prevails in this sense. Taxes are a shared liability of the trust, equally shared! The dumbsh1t father in law (trustee who runs the trust) claims that since our portion of the trust raised the taxes (due to generation skipping), that we are responsible for 89% of the tax and now claims that every time that a draw was used to pay our portion of the tax, an equal draw needs to be paid to my wife's mother to make it equal and he says we "owe" $18,000 to her. Lawyer says that if he actually takes a draw to do this that we are owed the same amount, and could be grounds to remove him as trustee. This is going to be one slippery slope, but given the history of the relationship between them and us it would not be a bad thing. When my wife & ! started dating 20 years ago they disowned her until we had kids and then they wanted us to come around. Question is, do we let him hang himself and then bring out the lawyer, or do we do it up front? $18,000 would take care of a lot of things around the Inhiding house... hmmmm... heck even $6,000 would be nice Quote Link to comment Share on other sites More sharing options...
Big Country Posted June 1, 2011 Share Posted June 1, 2011 Have you checked with your lawyer to see if there are any steps you guys can take to maybe force the liquidation of the trust or an equitable division of the trust assets so you can all go your separate ways and not have to deal with this potential headache? Quote Link to comment Share on other sites More sharing options...
Inhiding Posted June 1, 2011 Author Share Posted June 1, 2011 Have you checked with your lawyer to see if there are any steps you guys can take to maybe force the liquidation of the trust or an equitable division of the trust assets so you can all go your separate ways and not have to deal with this potential headache? He is the 2nd person to recommend this, but the Father-in-law is such a d-bag he doesn't want to sell yet (market is too low) and they have their business in the building (main tenant) and they are not ready to retire so that is holding up the idea of a sale. He doesn't want to get kicked out of his space. Also we are throwing the idea around of just selling them our half, but again the d-bag he is (an i am truly understating the d-bagginess of him) he will completely low-ball us and we will get nowhere. he doesn't negotiate, just here is my offer, take it or leave it. Property has been assessed at 1.9 million, and he says he will give us $250K for our half!!!! and like grains of sand through the hourglass of time, so are the days of our lives! Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted June 1, 2011 Share Posted June 1, 2011 Question is, do we let him hang himself and then bring out the lawyer, or do we do it up front? $18,000 would take care of a lot of things around the Inhiding house... hmmmm... heck even $6,000 would be nice Upfront, IMO. Prevention is better and less expensive than cure. Quote Link to comment Share on other sites More sharing options...
Big Country Posted June 1, 2011 Share Posted June 1, 2011 He is the 2nd person to recommend this, but the Father-in-law is such a d-bag he doesn't want to sell yet (market is too low) and they have their business in the building (main tenant) and they are not ready to retire so that is holding up the idea of a sale. He doesn't want to get kicked out of his space. Also we are throwing the idea around of just selling them our half, but again the d-bag he is (an i am truly understating the d-bagginess of him) he will completely low-ball us and we will get nowhere. he doesn't negotiate, just here is my offer, take it or leave it. Property has been assessed at 1.9 million, and he says he will give us $250K for our half!!!! and like grains of sand through the hourglass of time, so are the days of our lives! Doesn't matter if he doesn't want to sell, is there anything in the provisions of the trust or other legal action that you can take to force the sale of the properties (at which the father in law would have to make competitive market rate bids against other interested buyers if he wanted to keep the property), or, as was going to be my next suggestion and you mentioned, come up with plans to sell your portion of the trust assets to them. You have assessed values of the properties, so it is pretty straightforward that you are entitled to 50% of the value (less any liabilities). Your original post states there are 3 commercial and 1 residential property. Do you have separate assesments on the value of each? Is it possible to equitably split the properties in a way that each party is getting a relatively equal share of asset value, such that you could then manage/sell the properties that are now yours independently from those that are theirs? I know when properties are held in trusts it can get sticky depending on the provisions of the trust, but this is not something that you should sit back on and say oh well, nothing I can do here. You really must explore all legal options with your lawyer. You also must make sure you have full access to all financial records and transactions involving trust assets/accounts/proceeds. And, like Ursa said, definitely address the tax and disbursement issue upfront. Quote Link to comment Share on other sites More sharing options...
Inhiding Posted June 2, 2011 Author Share Posted June 2, 2011 the wife went by their house today informing them that we have a lawyer and the lawyer said BS on the taxes. His response? "The lawyer is probably wrong, i talked to my accountant, and a CFO friend." George Foreman Grill?? Seriously?? So wifey told them that they can do a conference call right now if need be. Now we are exploring the option of a second opinion. Free legal service through her benefits at work, so no biggie. The properties are all on the same lot, so it would be more cumbersome to split them up. The house/apartment is over two of the buildings, and 1 building is vacant. thanks for letting me have a place to vent, since i am consoling the wife about it. Quote Link to comment Share on other sites More sharing options...
tazinib1 Posted June 2, 2011 Share Posted June 2, 2011 His response? "The lawyer is probably wrong, i talked to my accountant, and a CFO friend." It's obvious you are not dealing with somebody that has a firm grasp of things. Lawyer up and be prepared for any blind siding on his part. He sounds the type. Quote Link to comment Share on other sites More sharing options...
SEC=UGA Posted June 2, 2011 Share Posted June 2, 2011 (edited) THe property taxes went up when the estate transferred title? Ar we talking about property or estate taxes? Edited June 2, 2011 by SEC=UGA Quote Link to comment Share on other sites More sharing options...
Inhiding Posted June 2, 2011 Author Share Posted June 2, 2011 THe property taxes went up when the estate transferred title? Ar we talking about property or estate taxes? property taxes on the buildings when it was reassessed when the trust changed hands upon Grandma's death. If we can get a 2nd lawyer through the work benefits without paying we will get a 2nd opinion for him. If he have to pay then it will be on him to pony up for it. Quote Link to comment Share on other sites More sharing options...
Inhiding Posted June 2, 2011 Author Share Posted June 2, 2011 It's obvious you are not dealing with somebody that has a firm grasp of things. Lawyer up and be prepared for any blind siding on his part. He sounds the type. and a third person he talked to was the person who answered the phone at the county assessors office. Quote Link to comment Share on other sites More sharing options...
SEC=UGA Posted June 2, 2011 Share Posted June 2, 2011 property taxes on the buildings when it was reassessed when the trust changed hands upon Grandma's death. If we can get a 2nd lawyer through the work benefits without paying we will get a 2nd opinion for him. If he have to pay then it will be on him to pony up for it. I'm not saying that your FIL is lying to you, but this scenario doesn't make much sense. Most municipalities reassess properties on a one, two or three year basis. The property taxes should not have gone up over the past three years unless you're in an area that only reassesses upon transfer of title or when improvements are made (which are far and few between.) Or, you are in an area that has somehow completely avoided the economic meltdown. Further, I have never heard of a property assessment increasing exponentially due to it passing to a generation further removed from the initial title holder. If the property was reassessed at a high rate, I would protest the reassessment with the municipality in which the property is located, unless this is a case where the property assessment has remained flat over the past 10+ years from when the property was purchased or improved. Also, since this is not a primary residence, no sort of homestead exemption would have been in place that is now lost. This whole thing seems VERY odd. Quote Link to comment Share on other sites More sharing options...
Inhiding Posted June 2, 2011 Author Share Posted June 2, 2011 I'm not saying that your FIL is lying to you, but this scenario doesn't make much sense. Most municipalities reassess properties on a one, two or three year basis. The property taxes should not have gone up over the past three years unless you're in an area that only reassesses upon transfer of title or when improvements are made (which are far and few between.) Or, you are in an area that has somehow completely avoided the economic meltdown. Further, I have never heard of a property assessment increasing exponentially due to it passing to a generation further removed from the initial title holder. If the property was reassessed at a high rate, I would protest the reassessment with the municipality in which the property is located, unless this is a case where the property assessment has remained flat over the past 10+ years from when the property was purchased or improved. Also, since this is not a primary residence, no sort of homestead exemption would have been in place that is now lost. This whole thing seems VERY odd. From what I remember, the taxes went up when the trust changed hands (maybe I'm wrong or mis-remembering it), but the property was valued at 1.9 million, and with the real estate market (small coastal community on the Central Coast of California) the value went down, so the FiL had the property reassessed to lower the taxes. Maybe that opened up the can of worms when he did that. We will look into the whole situation. Very odd indeed. thanks for the points to ponder SEC=UGA. We will look into the tax portion with the attorney. It was a primary residence for Grandma, who setup the trust. She lived in the house above the businesses. Quote Link to comment Share on other sites More sharing options...
yo mama Posted June 2, 2011 Share Posted June 2, 2011 This is what I do for a living. While you may be subject to federal "generation skipping transfer tax" (which is like federal estate tax) that has nothing to do with property tax reassessments. On that front, Prop 13 allows a transfer of the decedent's current property tax assessed value between parents and children - but not grandparents and grandchildren (unless your parents are dead). So you might get hit by both GSTT on the federal level and a partial property tax reassessment on a state level in connection with the portion of the property you received. How the responsibility for those tax liabilities will be apportioned going forward will be governed by the trust agreement, if it addresses the issue, and default state law if it doesn't. If you need a lawyer feel free to shoot me a PM. Quote Link to comment Share on other sites More sharing options...
Inhiding Posted June 4, 2011 Author Share Posted June 4, 2011 This is what I do for a living. While you may be subject to federal "generation skipping transfer tax" (which is like federal estate tax) that has nothing to do with property tax reassessments. On that front, Prop 13 allows a transfer of the decedent's current property tax assessed value between parents and children - but not grandparents and grandchildren (unless your parents are dead). So you might get hit by both GSTT on the federal level and a partial property tax reassessment on a state level in connection with the portion of the property you received. How the responsibility for those tax liabilities will be apportioned going forward will be governed by the trust agreement, if it addresses the issue, and default state law if it doesn't. If you need a lawyer feel free to shoot me a PM. Could you inform me of the default state law or where I might go about finding it? Now the FiL says that he thinks our lawyer is lying, and he is getting his own attorney, and if that one agrees with ours then he says that we will need to take him to court! Un-fu**ing-believable. What a tool... I surely hope he enjoyed the last time he saw his grandkids because it's gonna be awhile before he does again. time to remove him from being the trustee... Quote Link to comment Share on other sites More sharing options...
SEC=UGA Posted June 6, 2011 Share Posted June 6, 2011 Could you inform me of the default state law or where I might go about finding it? Now the FiL says that he thinks our lawyer is lying, and he is getting his own attorney, and if that one agrees with ours then he says that we will need to take him to court! Un-fu**ing-believable. What a tool... I surely hope he enjoyed the last time he saw his grandkids because it's gonna be awhile before he does again. time to remove him from being the trustee... He sounds like a real winner... So, your FIL came up with this whole "you owe 89%" thing prior to even consulting with a lawyer? Have you told the dude to go fu(k himself and that you'll see his sorry ass in court? Quote Link to comment Share on other sites More sharing options...
SEC=UGA Posted June 6, 2011 Share Posted June 6, 2011 (edited) I'm thinking it is not the property tax for which he is hitting you up. It sounds like possibly the transfer tax: ETA: I did not put those emoticons in there, the cut and paste must have been formatted in such a manner as to cause them to pop up and I'm not inclined to rummage through and delete them. 2010 California Code Probate Code Article 2. Proration Share | PROBATE CODE SECTION 20210-20215 20210. (a) Except as provided in subdivision (, any generation-skipping transfer tax shall be equitably prorated among the transferees in the manner prescribed in this article. ( This section does not apply: (1) To the extent the transferor in a written instrument transferring property specifically directs that the property be applied to the satisfaction of a generation-skipping transfer tax or that a generation-skipping transfer tax be prorated to the property in the manner provided in the instrument. (2) Where federal law directs otherwise. If federal law directs the manner of proration of the federal generation-skipping transfer tax, the California generation-skipping transfer tax shall be prorated in the same manner. 20211. The proration required by this article shall be made in the proportion that the value of the property received by each transferee bears to the total value of all property received by all transferees, subject to the provisions of this article. 20212. In making a proration required by this article: (a) Allowances shall be made for credits, exemptions, and deductions allowed for the purpose of determining the tax payable. ( Interest and penalties on any deficiency shall be charged to equitably reflect the benefits and burdens of the deficiency and of any tax deductions associated with the interest and penalties. 20213. If a trust is created or other provision made whereby a transferee is given an interest in income, or an estate for years or for life, or another temporary interest in property, the tax on both the temporary interest and other interests in the property shall be charged against, and paid out of, the corpus of the property without apportionment between the temporary and other interests. 20214. (a) If all property does not come into the possession of the trustee, the trustee is entitled, and has the duty, to recover from the transferees, the proportionate amount of the tax with which the transferees are chargeable under this chapter. ( If the trustee cannot collect from any transferee the amount of tax apportioned to the transferee, the amount not recoverable shall be equitably prorated among the other transferees who are subject to proration. 20215. (a) If a person is charged with, or required to pay, a generation-skipping transfer tax greater than the amount prorated to that person because another person does not pay the amount of generation-skipping transfer tax prorated to the other person, the person charged with or required to pay the greater amount has a right of reimbursement against the other person. ( The right of reimbursement may be enforced through the trustee in the discretion of the trustee, or may be enforced directly by the person charged with, or required to pay, the greater amount and, for the purpose of direct enforcement, the person is subrogated to the position of the trustee. © The trustee or person who has a right of reimbursement may commence a proceeding to have a court determine the right of reimbursement. The provisions of Article 3 (commencing with Section 20220) shall govern the proceeding, with changes necessary to make the provisions appropriate for application to the proceeding, and the court order determining the right of reimbursement is an enforceable judgment. Edited June 6, 2011 by SEC=UGA Quote Link to comment Share on other sites More sharing options...
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