My brother is the trustee of an irrevocable trust that was created 3 years ago. My parents are the grantors and my brother and I are both beneficiaries. Recently, I am trying to buy a house and I asked my brother to use the trust to gift me 50k for down payment. He agreed at first and then later on asked me to sign a loan agreement claiming that the trust has been created less than 5 years so gifting anything would appear that the trust was created for the purpose of tax avoidance. He also claim many lawyers noted this. Is this true?
Are your parents still living? I’m inclined to think it’s not a tax avoidance issue but rather an asset protection for long term care issue, but more information is needed to know for sure.
If you find this answer helpful, please mark it here on AVVO as helpful. My answer is based on the limited facts presented. It does not create an attorney-client relationship. Use the ‘Find-A-Lawyer’ search engine at the top of this page and consult with a licensed attorney in your jurisdiction.
Your brother may be thinking of the 60-month look-back for Medicaid planning transfers. You should consult a Medicaid planning attorney, also known as "Elder Law" for more information.
Ms. Willi is a tax attorney, CPA, and Ohio-Certified Specialist in Estate Planning, Trust & Probate Law, with offices in Westerville, Ohio. She serves client families and private business owners throughout Ohio. Ms. Willi responds to Avvo questions as a public service to help educate and provide general guidance to questioners, but her responses are not legal advice and do not create an attorney-client relationship. Her posts are provided for informational purposes only and are not a substitute for advice provided by an attorney or licensed tax professional. Her phone number is 614-890-0500 and her website is www.willilaw.com.
Don’t sign anything that says anything that is not true. Tell him to revise the release so it does not say anything untrue.
You have no way to know for sure if the trust is a Medicaid protection trust, which is where the "five year look-back" comes into play.
If you assume that it is, the gift has been made, and the damage was mostly done, when your parents moved their assets into the trust. It may be advisable not to distribute anything for five years, because if he has the ability to distribute the trust, and you guys can give back the money that way, this is something you can be forced to do if either of your parents has long-term care needs before the fifth anniversary of any of those gifts.
Your brother's statement that it will "look like a gift" unless you sign a promissory note has no basis in law. It would be (mostly) true if you were borrowing directly from your parents, but since they already made the gift that doesn't apply here. However, for the reasons stated above, there may be good reason not to distribute anything.
Attorney Rosenberg is admitted to practice in Connecticut and Massachusetts, and currently practices in South-Central Connecticut with an emphasis on estate planning, elder law, probate, and tax matters. All correspondence through this website appears publicly, is not confidential, and does not create an attorney-client relationship between you and Atty. Rosenberg. Discretion should always be employed when posting personal information online. ~~~~~~~~~~~~~ All online content provided by Atty. Rosenberg on this and other websites is provided for general informational purposes only, and does not constitute legal advice. All content is general in nature. Attorneys are unable to ask the questions necessary to fully understand the legal issues faced by any particular poster. Postings and responses to questions only provide general insights on the topic discussed. They are not tailored to any readerâ€™s specific situation, will not be accurate in all states, and are never updated or maintained to reflect changes in the law. No person should take action based on the information provided by anyone on Avvo.com or any other law-themed website without first consulting a local attorney with significant experience in your area of concern. Persuant to Circular 230, no online content may be used by any person to avoid taxes or penalties under the Internal Revenue Code.
Years licensed, work experience, educationLegal community recognition
Peer endorsements, associations, awardsLegal thought leadership
Publications, speaking engagementsDiscipline