Using kids trust fund for bills?

[BK911]

Getting a lot of confusing information, especially from the lawyers.
Trying to help a widow figure out what she can and cannot do.
Widow's husband inherited a LOT of money less than a year before he passed.
Most of this money went to a trust for the 6 year old girl per the deceased will.
We are trying to figure out what the widow can use some of this money for.
I understand laws are different in each state, and nothing is exact.
But in general, can this money be used for part or all of a mortgage? Utilities? Food?
In the will it says to maintain a middle class lifestyle.
Widow wants to pay off the house.
Thoughts?

[Bigtoe32067]

I think with the correct attorney she’ll be able to access some of the money if she’s spending it for the benefit of the child.
Good luck to her.

[craigster59]

I work with a guy who received a decent settlement for his autistic son. It is in a trust and the court assigned a trustee.

He's not the greatest with money and has tried to "dip in" every now and then. Apparently in his case you are audited and need to show that the money was used for the benefit of the trustee. Hookers and blow are off the table, but reasonable living expenses and vacations are applicable.

Don't know about paying off a mortgage but I would think a certain percentage could go towards "comfortable, debt free lifestyle" as long as the house goes to the kid upon sale or her demise. But hey, what the heck do I know?

[BK911]

Thanks guys.
She is considering putting the house in the kids name.

[john70t]

There are a ton of tiger traps and blank spaces left in the OP's vague and confusing description.
Any one of these could be the obtuse legal determining factor, which an estate attorney and judge would instantly recognize.

1). Is the inherited bounty truly the husband's money right now?
Or is his portion of money (and probably partially eventually hers) estate still in probate?
Is their any ruling on on record of this?

2). Who is the husband's Trustee of record per his will?
If it's not the surviving wife...
And those original funds have not cleared probate..
Then she may be committing fraud punishable by prison.

3). "Considering" means jack. getthefkouttahereyabum sez the judge.

4). Who is the guardian for the 6yo? State? Private? Family?
How are they involved? They should be.

5). There is her husband's remaining part of the estate which she is probably entitled to.
vs.
His will which stipulates what goes to the kid. That sounds like it includes most of what he recently inherited.
Those two accounts should be kept separately. Absolutely.

The Trustee is 'probably' granted powers to compensate themselves for nominal time and expenses in executing the terms but anything more than that might be grey territory.

If she is Guardian for the kids as well, it could be a conflict of interest, and a mess.
Putting funds into a separate trust to be distributed at legal age or above should be a safe option.

Co-mingling funds and suddenly making large transfers of ambiguously-questionable ownership of estate is never a good idea. IMO.
(but I'm not one of those lawyer people)

[flatbutt]

IDK the law but if the money isn't used for the direct benefit of the kid then it just ain't right.

[gtc]

I'm no Warren Buffett, but with rates so low right now why would she pay off the house?

[greglepore]

Need more info. Is she the parent and natural guardian (ie no court appointed guardian?) Is she also the trustee?

Agree with gtc, she should think about refi and maybe placing the house in the trust. This makes more sense than paying it off, and will protect her as trustee and the kid.

But the question is broad, and without the trust document hard to answer.

[speeder]

Wait...he left her nothing?

Help me out here.

[BK911]

The wills have been executed.
The deceased will stated the 6 yo got a trust fund with the money.
The wife got a little bit, but nothing compared to the entire estate.
Wife has custody of the 6 yo.
The wife is the trustee of the trust fund.
The wife makes about $10 an hour and cannot afford the house and all the bills on her income alone.
I am trying to help her figure out if she can use any of the trust fund money for the bills since they all benefit the child also; needs a home, electricity, food, etc...
Without some of the money the house will probably get sold and they will move to a small apartment that the widow can afford.
How much is ethical, and how much is legal? Two different things.
I understand that there are a lot of specifics, but what about in general?

[BK911]

Thanks Greg, that is another thing we were considering; putting the house in the girls name and let the trust pay for it. Just not sure that is legit.

Wife is the mother of the girl.

[john70t]

Originally Posted by BK911

Wife has custody of the 6 yo.

Originally Posted by BK911

Wife is the mother of the girl.

https://children-laws.laws.com/legal-guardianship/tennessee-guardianship-law#:~:text=Under%20TN%20guardianship%20law%2C%20t he%20guardian%20of%20a,guardianship%20relationship %20lasts%20until%20the%20child%20is%2018.
The limitations on Tennessee guardianship law might require a separate Conservator to deal with financial issues for the protected person, but ultimately, the extent of the arrangement under TN guardianship law is limited to the judge’s decision and the limited ability of the protected person to maintain some essential functioning.

"Essential functioning" should include the ability of the child to stay in her own home and maintain a necessary quality of lifestyle.
Same as before...
Same school. Same friends. Same place. Protecting the child's rights.
All of that is included in the package.

If the child's home situation is now under duress, that should be a valid argument for a judicial ruling with some leeway. I would think.


(search legal guardianship+law+tennessee)

[BK911]

Nice, thanks John!

[MBAtarga]

I don't believe legally that she can put the house in the name of a 6 year old - even if she could, I don't think that is of any benefit - especially if she pays it off.

As was first suggested, there is no excuse to arm chair quarterback this. She needs an attorney - and the trust funds can certainly be used to pay those bills.

[cstreit]

Attorney. Trying to figure out wills and estates on your own is a loooong road.

[wdfifteen]

Trustees typically get paid for their service as trustees. The amount might be stipulated in the trust. Mom can demand to be paid a reasonable amount for managing the trust. As the trustee she can pay herself. It's done all the time so a little research should reveal what a reasonable/legal amount would be for the size of the trust.
How high functioning is the child and how long can her money be expected to last?
States vary, but one thing to consider is that if the child runs out of money and needs government assistance like Medicade, the state recoups its expenses from the recipient's estate once the recipient dies. Making the house one of the trust's assets could potentially mean the state gets the house and mom gets thrown in the street.
I would look at spending down the trust assets to pay normal living expenses. It seems reasonable that the child's trust can pay to the mother the cost of maintaining the child's standard of living. That would include housing, transportation, food, etc.

As stated before, you need an attorney if you don't already have one. I understand coming here noodling for ideas (I do it all the time), but PPOT is no substitute for a professional.

[TimBer]

Assumption 1: Your friend is also in Tennessee.
Assumption 2: This is a testamentary trust (i.e. created via the will)

A trustee shall administer the trust as a prudent person would, by considering the purposes, terms, distributional requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill and caution.
Tenn. Code Ann. 35-15-804

Need to look at the section of the will that sets up the trust, but here are the basics:

(b) Unless the terms of the instrument expressly provide otherwise and without limiting the authority conferred by § 35-15-815, a trustee may:
(1) Collect trust property and accept or reject additions to the trust property from a settlor or any other person;
(2) Acquire or sell property, for cash or on credit, at public or private sale;
(3) Exchange, partition, or otherwise change the character of trust property;
(4) Deposit trust money in an account in a regulated financial-service institution;
(5) Borrow money, with or without security, and mortgage or pledge trust property for a period within or extending beyond the duration of the trust;
(6) With respect to an interest in a proprietorship, partnership, limited liability company, business trust, corporation, or other form of business or enterprise, continue the business or other enterprise and take any action that may be taken by shareholders, members, or property owners, including merging, dissolving, or otherwise changing the form of business organization or contributing additional capital;
(7) With respect to stocks or other securities, exercise the rights of an absolute owner, including the right to:
(A) Vote, or give proxies to vote, with or without power of substitution, or enter into or continue a voting trust agreement;
(B) Hold a security in the name of a nominee or in other form without disclosure of the trust so that title may pass by delivery;
(C) Pay calls, assessments, and other sums chargeable or accruing against the securities, and sell or exercise stock subscription or conversion rights; and
(D) Deposit the securities with a depository or other regulated financial service institution;
(8) With respect to an interest in real property, construct, or make ordinary or extraordinary repairs to, alterations to, or improvements in, buildings or other structures, demolish improvements, raze existing or erect new party walls or buildings, subdivide or develop land, dedicate land to public use or grant public or private easements, and make or vacate plats and adjust boundaries;
(9) Enter into a lease for any purpose as lessor or lessee, including a lease or other arrangement for exploration and removal of natural resources, with or without the option to purchase or renew, for a period within or extending beyond the duration of the trust;
(10) Grant an option involving a sale, lease, or other disposition of trust property or acquire an option for the acquisition of property, including an option exercisable beyond the duration of the trust, and exercise an option so acquired;
(11) Insure the property of the trust against damage or loss and insure the trustee, the trustee's agents, and beneficiaries against liability arising from the administration of the trust;
(12) Abandon or decline to administer property of no value or of insufficient value to justify its collection or continued administration;
(13) With respect to possible liability for violation of environmental law:
(A) Inspect or investigate property the trustee holds or has been asked to hold, or property owned or operated by an organization in which the trustee holds or has been asked to hold an interest, for the purpose of determining the application of environmental law with respect to the property;
(B) Take action to prevent, abate, or otherwise remedy any actual or potential violation of any environmental law affecting property held directly or indirectly by the trustee, whether taken before or after the assertion of a claim or the initiation of governmental enforcement;
(C) Decline to accept property into trust or disclaim any power with respect to property that is or may be burdened with liability for violation of environmental law;
(D) Compromise claims against the trust which may be asserted for an alleged violation of environmental law; and
(E) Pay the expense of any inspection, review, abatement, or remedial action to comply with environmental law;
(14) Pay or contest any claim, settle a claim by or against the trust, and release, in whole or in part, a claim belonging to the trust;
(15) Pay taxes, assessments, compensation of the trustee and of employees and agents of the trust, and other expenses incurred in the administration of the trust;
(16) Exercise elections with respect to federal, state, and local taxes;
(17) Select a mode of payment under any employee benefit or retirement plan, annuity, or life insurance payable to the trustee, exercise rights thereunder, including exercise of the right to indemnification for expenses and against liabilities, and take appropriate action to collect the proceeds;
(18) Make loans out of trust property, including loans to a beneficiary on terms and conditions the trustee considers to be fair and reasonable under the circumstances, and the trustee has a lien on future distributions for repayment of those loans;
(19) Pledge trust property to guarantee loans made by others to the beneficiary;
(20) Appoint a trustee to act in another jurisdiction with respect to trust property located in the other jurisdiction, confer upon the appointed trustee all of the powers and duties of the appointing trustee, require that the appointed trustee furnish security, and remove any trustee so appointed;
(21) Pay an amount distributable to a beneficiary who is under a legal disability or who the trustee reasonably believes is incapacitated, by paying it directly to the beneficiary or applying it for the beneficiary's benefit, or by:
(A) Paying it to the beneficiary's conservator or, if the beneficiary does not have a conservator, the beneficiary's guardian;
(B) Paying it to the beneficiary's custodian under the Uniform Transfers to Minors Act, compiled in title 35, chapter 7, part 2, and, for that purpose, creating a custodianship or custodial trust;
(C) If the trustee does not know of a conservator, guardian, custodian, or custodial trustee, paying it to an adult relative or other person having legal or physical care or custody of the beneficiary, to be expended on the beneficiary's behalf; or
(D) Managing it as a separate fund on the beneficiary's behalf, subject to the beneficiary's continuing right to withdraw the distribution;
(22) On distribution of trust property or the division or termination of a trust, make distributions in divided or undivided interests, allocate particular assets in proportionate or disproportionate shares, value the trust property for those purposes, and adjust for resulting differences in valuation and basis for income tax purposes;
(23) Resolve a dispute concerning the interpretation of the trust or its administration by mediation, arbitration, or other procedure for alternative dispute resolution;
(24) Prosecute or defend an action, claim, or judicial proceeding in any jurisdiction to protect trust property and the trustee in the performance of the trustee's duties;
(25) Sign and deliver contracts and other instruments that are useful to achieve or facilitate the exercise of the trustee's powers;
(26) On termination of the trust, exercise the powers appropriate to wind up the administration of the trust and distribute the trust property to the persons entitled to it; and
(27) Unless the terms of the instrument expressly provide otherwise:
(A) A trustee who has authority, under the terms of a testamentary instrument or irrevocable inter vivos trust agreement, to invade the principal of a trust to make distributions to, or for the benefit of, one or more proper objects of the exercise of the power, may instead exercise such authority by appointing all or part of the principal of the trust in favor of a trustee of a trust under an instrument other than that under which the power to invade is created or under the same instrument; provided, however, that the exercise of such authority:
(i) Does not reduce any fixed income interest of any income beneficiary of the trust; and
(ii) Is in favor of the proper objects of the exercise of the power;
(B) The exercise of the power to invade the principal of the trust under subdivision (b)(27)(A) shall be by an instrument in writing, signed and acknowledged by the trustee and filed with the records of the trust;
(C) The exercise of the power to invade principal of the trust under subdivision (b)(27)(A) shall not extend the permissible period of the rule against perpetuities that applies to the trust;
(D) This section shall not be construed to abridge the right of any trustee who has a power of invasion to appoint property in further trust that arises under any other statute or under common law;
(E) The exercise of the power to appoint principal under subdivision (b)(27)(A) shall be considered an exercise of a power of appointment, other than a power to appoint to the trustee, the trustee's creditors, the trustee's estate, or the creditors of the trustee's estate;
...
Tenn. Code Ann. 35-15-816

[greglepore]

As a practical matter, it would make more sense for the trust to own the house than the child. The child has no assets and can't buy the house-the trust can. This would allow a refi at the current low rates. It makes no sense to pay off the house with rates below 3%. It is fundamental that a trust can own real estate. When does the trust terminate? At 18 or later?

As a practical matter, if the parent is the trustee and mutually supporting both child and themselves, so long as there isn't self dealing (ie European vacations for just mom) no one is likely to question the actions of the trustee. The only scenario where this happens is where there is a beneficiary down the road that feels their assets were squandered.

[john70t]

Macully Culkin, Gary Coleman, Jackson Five, Little Rascals and many others were robbed by their parents.

[speeder]

Originally Posted by greglepore

As a practical matter, it would make more sense for the trust to own the house than the child. The child has no assets and can't buy the house-the trust can. This would allow a refi at the current low rates. It makes no sense to pay off the house with rates below 3%. It is fundamental that a trust can own real estate. When does the trust terminate? At 18 or later?

As a practical matter, if the parent is the trustee and mutually supporting both child and themselves, so long as there isn't self dealing (ie European vacations for just mom) no one is likely to question the actions of the trustee. The only scenario where this happens is where there is a beneficiary down the road that feels their assets were squandered.

And when that happens, it’s usually too late. “Squeezing blood from a rock,” and all that.

From what I’ve always understood, (disclosure-not a lawyer), the parent left w the child will automatically have the same standard of living afforded to the child or children. They live in the same house, eat the same food, go on the same vacations, etc.