I am not asking for legal advice. This is purely theoretical but I have to use myself as an example. I suppose this is a version of the classic White Elephant problem. My great-grandfather had the good sense in the 1930’-1960’s to buy up the mineral rights to hundreds of thousands of acres in Northwestern Louisiana. In the past few years this gas become known as the latest American Gold Rush because of the Haynesville-Shale Natural Gas Strike which may be the 4th largest strike in the world. Lots of people became multi-millionaires over night include my grandmother, my father and his sister.
However, neither me nor my two brothers knew we had a trust of our own until the trust company sent out a direct tax statement in error. Now we keep getting tax statements in the tens of thousands of dollars on a regular basis and I am being audited by both the IRS and the Massachusetts Department of Revenue. Our CPA just pays them and takes care of it but what if something went wrong?
I don’t get any money from any of this and I don’t even know anything about my trust at all except that I can’t expect to see anything until I am over 50. What if it was set up so that I couldn’t get anything until I am 120? The tax bills alone exceed my income and I have nothing to show for it.
Again, this isn’t about me but is it possible to bankrupt someone by setting up something in a financial and legal structure in their name?
This was an episode of the Facts Of Life, Blair found herself under an IRS audit while still junior at Eastland School For Girls, but little does she realize she isn’t a little girl but a super corporation that her father set up to avoid taxes. Then she has to realize everything between her and her father involves money, including the vacations he took her on and wrote off as a business expense.
I’ve read about people who set others up in dummy corporations without them ever knowing it. Eric Schlosser wrote in his book “Reefer Madness” about a guy who was into marketing porn would use his relatives to set up dummy corporations without them ever knowing it. Then he started using people’s names he pulled out of phone books and managed to con out of their social security number. The were never aware they even had millions (at least in theory)
Of course this is different from the OP as that case involved fraud and it should be easy enough to have the person arrested. But would you do that to your mother or grandmother?
Still you often hear of parents or aunts and uncles who use their children or nephews social security numbers to get credit and mess it up so bad the child has to declare bankruptcy.
So I would say the OP senerio sounds very plausable. If a theif can steal your info and screw you over it should be easy for a relative, especially a well meaning one.
Reminds me of a story I once heard (can’t remember where I heard it): A jewelery store gave away a diamond necklace in a raffle, and reported the raffle to the IRS. The necklace was valued at the store’s asking price (lets say it was 10,000). The IRS then assigned a tax liability to the winner of 30% * 10,000 = 3,000. The winner didn’t have the money to pay the tax bill, so they went to sell the necklace, and found out that they could only get $2,000 for it. Basically, winning the raffle ended up costing them $1,000.
How are you current liable in any way if you are not getting current distributions from the trust? What monies is the CPA using to pay these tax invoices?
The OP asked a theoretical question, not a question about his own situation. You responded by telling him how he could get advice about his own situation. I reiterated that the OP is not looking for advice about his own situation. I was thereby trying to signal to you that your post was not responsive to the OP’s request. I assumed you would like to know this, since I assumed you wanted to respond to the OP’s request.
I honestly don’t know. The only thing I do know is that I own part of a group of companies that are very lucrative at the moment for all involved. I do not get to see anything or know what it is all about. I just have the names of trust attorneys and CPA’s that I forward stuff to when I get them in the mail. My family is dysfunctional to say the least and I have to go through a lot of hassle for something that I don’t get any benefit from whatsoever. About a week ago, I was willing to start making phone calls to have my name taken off whatever they have going but I don’t even know how to go about it and don’t want to spend the money to do so (which relates to the question).
