Estate/Trust Distribution Question

[Anonymous]

Don't know if there are any estate lawyers out there, specifically with knowledge of Maryland law, but thought I'd throw this out there.

A trust, in clearly attempting to get around the Maryland estate tax, leaves the heirs $1 million "in cash or in kind." The rest goes to the spouse (who is the trustee).

Basically the entire estate is property. The heirs would be willing to co-own the property.

If the property gets its post-death appraisal at more than $1 million, is the only option of the trust's trustee to sell the property, give the heirs the divvied-up $1 million, and then keep the profits (some of which would go to pay the expenses of the trust)?

Would there be any option for the land to still be transferred to the heirs, albeit with the issue of the estate tax then coming to the forefront?

[Anonymous]

There may be more to this trust - for example a clause where the trustee/spouse can live in it until their death, and THEN the property gets distributed to the OTHER beneficiaries. By how you've written it, the trustee is a beneficiary. All of the beneficiaries are heirs, including the spouse. When speaking of a trust, those who receive assets through a trust are beneficiaries.

If all of the beneficiaries are in agreement, there is no reason to sell the property. That INCLUDES the trustee beneficiary.

If one beneficiary wants the cash instead of the property, things get tricky, and you will likely have to consult a lawyer to see what can occur. If it is only the spouse who wants/needs cash, the other beneficiaries can buy the property from the trust - in the end this will really mean only providing cash to the trustee to cover estate expenses and the amount of the valuation over $1 million.

Hope this helps.

[Anonymous]

Transfer the land to a company/trust, and give each heir a % of shares in that company based on their share of the property.

[Anonymous]

Anonymous wrote:There may be more to this trust - for example a clause where the trustee/spouse can live in it until their death, and THEN the property gets distributed to the OTHER beneficiaries. By how you've written it, the trustee is a beneficiary. All of the beneficiaries are heirs, including the spouse. When speaking of a trust, those who receive assets through a trust are beneficiaries.

If all of the beneficiaries are in agreement, there is no reason to sell the property. That INCLUDES the trustee beneficiary.

If one beneficiary wants the cash instead of the property, things get tricky, and you will likely have to consult a lawyer to see what can occur. If it is only the spouse who wants/needs cash, the other beneficiaries can buy the property from the trust - in the end this will really mean only providing cash to the trustee to cover estate expenses and the amount of the valuation over $1 million.

Hope this helps.

Thanks so much for the reply. Hope you don't mind some clarifications that might help.

The trust bequeaths the $1 mil in cash or in kind specifically to the children (of which I am one). Anything else goes to the surviving spouse, after the estate costs are paid. And it's not a step- situation, these are my parents.

The property was owned only by my deceased parent, and is not the house my parents lived in. (Their house is/was owned jointly, I assume with rights of survivorship.)

The surviving parent's estate (worth more than $1 million on its own) will eventually go to the children as well, so if this isn't handled before the surviving parent passes away (no spring chicken!), the entire point of doing it this way (to in essence get two exemptions from the Maryland estate tax) would be nullified. And the trustee/spouse/parent clearly doesn't like the notion of paying taxes to The Man. , so we're getting the sense that the surviving parent just wants to get this over and done.

My siblings and I would really like to control the disposition of the property ourselves. It's many acres, may not sell promptly, and there's always the fear potential complications (i.e., a remarriage or some such).

But if the appraisal comes in above $1 million, we are just feeling like we have no options other than to watch our surviving parent liquidate it. Yes, the money would be nice to have, but hard feelings would probably linger.

This isn't a terribly contentious situation (yet!), but I'm just wanting to have some idea of what sort of options there may be when it comes time to discuss how to handle it. And we all share the same estate lawyer, so I'm not quite comfortable going to him for counsel.

Thank you again. This is just no fun to have this potentially be an unhappy situation on the heels of a devastating loss.

[Anonymous]

I don't recognize the need to get it done quickly - it's in a trust and therefore is already owned by the beneficiaries. The surviving spouse's share is only the amount that is over $1 million. So only that amount would be included in her estate. Hopefully there is a successor trustee named in the trust in case the surviving spouse/current trustee passes away. And there may be a clause stating who the spouse's share will pass to in case of the spouse's death.

The best thing would be for all of the beneficiaries to gather around a table and talk about their concerns. Might be best to have the estate attorney there in order to answer legal questions.

If you all really want to keep the property, say so. If you want it out of the trust, the children can buy it from the trust. Or have it re-titled.

[Anonymous]

Thanks again, this is helpful. I'm the successor trustee (for both parents' trusts/estates).

Hopefully we can, as you said, gather around a table and get to an answer we're all comfortable with.

Really appreciate your response.