A/B Trust - Does the irrevocable Trust (when split) need to have the full amount of cash in it?

Asked 4 months ago - North Hollywood, CA

My Grandparents had a A/B Trust. He had most of his money tied in stocks. When my grandmother passed the trust was split (her part being irrevocable) with $750,000 per the document i have from the lawyer & another 720,000 went into my grandfathers sub trust. Since most of his money was in investments did he have to sell off stock to fully fund my grandmothers irrevococable trust? Or could her trust be left empty & upon his death (which recently occured), her trust would need to be fulfilled and whats left goes into his trust? Since my grandfather has now passed, & we have a statment from the broker with a total of 1.2M. Not sure if 750k needs to be sold to fulfill my grandmothers irrevocable trust first or if her account had to be funded upon her death & that 1.2M is all part of his trust.

Additional information

NOTE: I was added to the trust after my grandmother died. So i am not part of her irrevocable trust. I am only part of my Grandfathers part. So now that the stock broker sent a statment for the 1.2M, i wasnt sure if my grandmothers trust needs to fulfilled with part of that 1.2 or if her trust had to have been funded with her portion upon the split?

Attorney answers (3)

  1. Michael Raymond Daymude

    Pro

    Contributor Level 20

    1

    Lawyer agrees

    Answered . Your numbers are significantly large enough that you need to retain counsel to advise you. The terms of trust govern, whether revocable or not.

    The irrevocable trust should have its own corpus, not necessarily "cash."

    Your rights under either trust will depend on the exact terms of the declaration of trust and whether your grandfather held a power of appointment and exercised it on your behalf.

    Do yourself a BIG favor and consult and retain trust counsel. Your question cannot be answered in the abstract. -- Michael

    My answers are for general information only. They are not legal advice. Answers assume California law. I am... more
  2. David Thomson Egli

    Contributor Level 12

    Answered . Please follow the advice of attorney Michael Daymude. How and when the assets of a trust are divided up can have adverse tax consequences, particularly if there has been a delay and the values of the assets have changed.

    I am licensed to practice law only in the state of California. The answer provided above is for general... more
  3. Dianna Marie Wilke

    Contributor Level 7

    Answered . I agree with the prior answers, you should retain counsel to make sure its done properly. To answer on what your grandfather should have done, assuming the trust is drafted consistent with most, he needed to divide the investment accounts. The stock would not have needed to be sold, but using the other lawyer's numbers, $750,000 worth of stock needed to be put in the B trust's name. This is a general and very simplified answer, but unless the trust states otherwise, cash is not required to fund the B trust.

    Also your grandfather failing to fund that trust at her death does not alleviate the requirement to do so, barring a loophole within the trust allowing for that. The trust likely still needs to be funded and the appreciation from those assets (calculated from the date your grandmother died) needs to be included in that value. It is particularly important if the beneficiaries of her trust are different than his.

    As you can see there are a lot of moving parts, so you want to make sure that it is done properly. Consult an attorney to get it in order.

    This answer is merely an opinion based on limited knowledge of actual facts and should in no way be deemed legal... more

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