So, on the advice of an oh so clever lawyer I had an insurance policy in the name of ME, Family Trust. Decided the insurance was a bad deal, so I went to cash in the policy. First, it took about 3 months of back and forth just to surrender the policy. They finally issued me a check, made out to Family Trust. Deposited it via the ATM. Got the check back, saying it was not the name on the account. There is no account to the Family Trust. Except for the purpose of the life insurance policy there is no such thing as this family trust. What do I have to say or do to get this check deposited?
You need a different lawyer.
You could open a checking account in the name of the family trust.
I don’t know if it works the same for trusts, but I have had that problem with an estate. First you go to the IRS web site and get a tax id for the estate. You take that to the bank and create a count in the name on the check with the tax id that is registered for the name. You deposit it to the new account. Wait a few days. Close the account.
If there are tax consequences because the amount is large enough, then you might have to file a return on behalf of the trust but that you would need to look into.
Like I said though, that’s what I did for payments being made to a decedent. I created an account in the name of “estate of John Smith” with myself as the authorized signer on the account. They accepted the checks made out to the decedent and did not require that they be made out to the estate.
Trusts are different animals though so there might be more to it. Your local IRS office might be able to help. They also have a toll free number but that advice is often canned and they are afraid to go off script.
good lluck.
IALBNYL. (I am a lawyer, but not your lawyer). I don’t know what state you are in. I would say talk briefly with a lawyer. One could give you a road map of what you need to do in 1/2 hour. Then do all the legwork yourself.
Who is the trustee of the trust? Is it an irrevocable insurance trust, or your living trust?
Generally, the first step is to open an account for the trust. Fill out Form SS-4 with the IRS (can be done electronically)
I live in Maryland.
I am not sure what kind of trust it is, but its sole purpose was to own my life insurance policy, if that helps.
I am appalled that this is so complex. There was never a problem with the insurance company cashing my premium checks. It is annoying that there is a problem with getting my cash value out.
I really don’t want to have to pay a lawyer for even a half hour of their time. This whole mess was lawyer created.
Did you actually set up a legal trust called “ME, Family Trust”, or did you just buy insurance in the name of “ME, Family Trust”?
Thats the thing. There was never an actual trust set up. If there was everything would be somewhat understandable. In this case there was just a life insurance policy set up as Me, family trust. Nothing else. It was simply to avoid estate taxes on this one thing only.
In other words, you have a check in the name of an entity that doesn’t exist, i.e. the ME Family Trust? You may want to speak to the attorney that advised you to do this. You really should talk to an attorney on this.
Why would the attorney tell you to get the insurance in the name of a Trust that hadn’t been set up? Did the insurance company ask to see a copy of the Trust?
This all originally happened 15 years ago. I have no recollection of the name of the attorney, or even who recommended him. It was set up for the sole purpose of making the payout excludable from estate taxes. If a trust was actually set up I do not now and never had any knowledge of it. We where never given any papers to either sign or keep. What I want now is simple, a method of depositing the cash value check from the insurance company which is made out to Me, Family Trust, My Wife, Trustee. I don’t see why Me Wife, Trustee cannot just deposit it into her account.
I ran into the same thing when my father died. Some of his assets were in the trust, other stuff was in his name personally.
Think of it this way. There’s a company named Me, family trust. Your wife is authorized to write checks for that company. She can’t just take a check made out to the company and deposit it into her own checking account. She has to deposit that check into the company account and then write a check to herself (or to you) from the company.
You need to open an account for the Me, family trust. To do that, you’ll need the documents that show the Me, family trust actually exists, has an IRS number and all that.
Now your oh so clever lawyer who advised you to do this should have actually set up a trust for you before having you start putting your assets in the name of the trust. But unless you authorized him to do that, what the lawyer told you to do was simply advice on how to set things up, and not the actual follow-through.
(I don’t understand why anyone would advise you to make your life insurance policy payable to a trust because death benefits aren’t taxable to the heirs, but that’s a different issue entirely.)
If you don’t remember the attorney who sent you down this path, you’d better find another attorney. I know you don’t want to do that, but as you say, the whole mess was lawyer-created, and you’ll need a lawyer to untangle it.
One reason is so that the trust can pay any estate tax and/or administration costs using the life insurance proceeds. That way, the estate never has to sell off any property to cover the tax, and it can distribute assets to the beneficiaries sooner, without worrying about how much to keep to cover the estate tax. They file a form to shorten the statute of limitations, which means the IRS must audit or assess additional tax within 18 months (rather than 36). After those 18 months, the trust/estate can distribute any left over insurance money to the beneficiaries as an added bonus.
Is the check so small that it’s not worth straightening this whole mess out?
Ton unscrew this pooch you are going to need some sound legal advice. in writing. And it’s going to cost you.
The insurance company did what they were supposed to do - stand by ready to pay the ME Trust if you croaked. As Trustee, your wife was probably required to sign the cash surrender form. They then cut a check to the owner of the policy, the ME Trust. If a bank accepts it for deposit into her personal account, they are liable to the ME Trust for this possible embezzlement.
Good luck.
Well, I can promise the ME trust would not care at all.
Plan B is to go to the bank and open an account in the name of ME, trust, with my wife as trustee and her ss number as the trust tax id number, deposit the account and then close it after it clears. Since the bank employees are not lawyers, I assume I don’t need any papers or anything like that.
I’m surprised the insurance company issued the policy in the name of the family trust without requiring proof of the trust’s existence e.g. a trust deed.
Yes, they definitely did. I wish now that they had not. I did not know I was setting myself up for extreme aggravation. Admittedly, I probably would have gotten the policy anyway, but at least I would have known that there was a problem. An why the hell the lawyer did not explain that I would need to pay for someone to set up a trust when I assumed that what he did was all there was too it. My BIL is a lawyer, and I suppose he can send a few things threw a word processor and make it for me. I would hate to have to shell out $125 to legalzoom to get it done, and further assume that a human lawyer (oxymoron?) would cost more than that.
Here is some information that might help - http://www.willsandprobate.com/FAQ/life-ins-trust.htm
However I don’t know if what is presented there is necessarily true in every state. I won’t swear to this, but I have this vague recollection that the insurance policy itself can define and create the trust into which the proceeds will pass. IOW, I think (not sure though) that in some cases the trust doesn’t have to exist prior to the death of the insured. It may be possible for the policy to call the trust into existence at the time the policy becomes payable.
But again, I could be hallucinating and that could be complete bullshit. It is however the first question I would ask when you speak to a lawyer.
Seriously. When random strangers on a message board are telling you to talk to a lawyer instead of, say, endorsing the check over to a Nigerian princess, it’s time to talk to a lawyer.
Yep, that’s what I would do if I were you (I am a lawyer but not yours, BTW). This sounds like a “satisfy the bank” situation, not a “let’s get this all figured out and make sure we are optimizing everything” situation.