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I'm the trustee of a trust. A family member of the beneficiary would like to make a loan from the trust. Is that wise to do?

Hyattsville, MD |

This is a special needs trust.

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Attorney answers 3

Posted

The terms of the Trust control how the money may be used, and you have a special duty (you are a "fiduciary") to observe the terms of the Trust document. Your discretion is likely very limited. And if the loan is to someone other than the beneficiary, and is not for the benefit of the beneficiary, it is very likely improper. Would you like a PG County referral? You are very much at risk if the loan is improperly made.

Asker

Posted

THANK YOU ALL FOR THE RESPONSES! The family member is actually the father of the beneficiary. The family is going through hard times as a result of what happened to the beneficiary. The beneficiary acquired this Trust through a settlement that he received from an accident that left him paralyzed. The beneficiary has the Trust so he is set for life, but the family is still struggling and has fallen behind and would like this loan to get back on track. I understand what the father is going through. In situations like this, no one really thinks about the family and the hardship they suffer, or what they might be going through, so I totally empathize with the family, but I in no way want to do anything to jeopardize the Trust.

Thomas C Valkenet

Thomas C Valkenet

Posted

The situation you describe is sad, but it is exactly what you are not allowed to do--the money is for the beneficiary of the Trust, not his/her family. Imagine, for a moment, that loans deplete the trust to the point that the beneficiary is not "set for life" in the event of another serious setback. Subject to the advice you may receive during a real in-person consult with a lawyer who will read the Trust, you should not do this. Period.

Asker

Posted

Thank you and I understand! The reason I was considering it is because of the situation and the Trust doesn't state otherwise. And you mentioned loans...I am talking about one loan to the family of the beneficiary...that's it, not loans. And the loan amount is $25,000, which is very small in comparison to the Trust amount. Also, under what circumstances would I loan money to the beneficiary? I guess I don't understand this part because the Trust provides whatever he wants, except food and shelter. I actually have a Trust advisor, but he is on FML for a while, so I will look into finding another one. Thanks again!

Posted

I would proceed with extreme caution. I would have a lawyer review all the facts of the situation to determine if this makes sense or not. Very likely, it would not be appropriate for you to lend the money.

James Frederick

***Please be sure to mark if you find the answer "helpful" or a "best" answer. Thank you! I hope this helps. ***************************************** LEGAL DISCLAIMER I am licensed to practice law in the State of Michigan and have offices in Wayne and Ingham Counties. My practice is focused in the areas of estate planning and probate administration. I am ethically required to state that the above answer does not create an attorney/client relationship. These responses should be considered general legal education and are intended to provide general information about the question asked. Frequently, the question does not include important facts that, if known, could significantly change the answer. Information provided on this site should not be used as a substitute for competent legal advice from a licensed attorney that practices in your state. The law changes frequently and varies from state to state. If I refer to your state's laws, you should not rely on what I say; I just did a quick Internet search and found something that looked relevant that I hoped you would find helpful. You should verify and confirm any information provided with an attorney licensed in your state. I hope you our answer helpful!

Asker

Posted

THANK YOU ALL FOR THE RESPONSES! The family member is actually the father of the beneficiary. The family is going through hard times as a result of what happened to the beneficiary. The beneficiary acquired this Trust through a settlement that he received from an accident that left him paralyzed. The beneficiary has the Trust so he is set for life, but the family is still struggling and has fallen behind and would like this loan to get back on track. I understand what the father is going through. In situations like this, no one really thinks about the family and the hardship they suffer, or what they might be going through, so I totally empathize with the family, but I in no way want to do anything to jeopardize the Trust.

James P. Frederick

James P. Frederick

Posted

You are welcome! This does sound like a very tough situation and there may be options available for the family. Courts are VERY protective of incapacitated persons and their assets, however, so caution is definitely needed. An attorney can review the situation with the family and discuss possible options for help.

Posted

Your first obligation is to the trust -- not to the beneficiaries. In most cases, trust documents are clear on prohibiting loans except in exigent circumstances and even then, only to the beneficiary. To make a loan to a family member of the beneficiary would likely be highly improper.

DISCLAIMER: Brandy A. Peeples is licensed to practice law in the State of Maryland. This answer is being provided for informational purposes only and the laws of your jurisdiction may differ. This answer based on general legal principles and is not intended for the purpose of providing specific legal advice or opinions. Under no circumstances does this answer constitute the establishment of an attorney-client relationship. For legal advice relating to your specific situation, I strongly urge you to consult with an attorney in your area. NO COMMUNICATIONS WITH ME ARE TO BE CONSTRUED AS ARISING FROM AN ATTORNEY-CLIENT RELATIONSHIP AND NO ATTORNEY-CLIENT RELATIONSHIP WILL BE ESTABLISHED WITH ME UNLESS I HAVE EXPRESSLY AGREED TO UNDERTAKE YOUR REPRESENTATION, WHICH INCLUDES THE EXECUTION OF A WRITTEN AGREEMENT OF RETAINER.

Asker

Posted

THANK YOU ALL FOR THE RESPONSES! The family member is actually the father of the beneficiary. The family is going through hard times as a result of what happened to the beneficiary. The beneficiary acquired this Trust through a settlement that he received from an accident that left him paralyzed. The beneficiary has the Trust so he is set for life, but the family is still struggling and has fallen behind and would like this loan to get back on track. I understand what the father is going through. In situations like this, no one really thinks about the family and the hardship they suffer, or what they might be going through, so I totally empathize with the family, but I in no way want to do anything to jeopardize the Trust.

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