revocable living trust as partner
So a club follows what you wrote below. Is that partner still considered "individual" or should they be entering "trust"?
On February 16, 2014 at 2:24 PM Laurie Frederiksen <laurie@bivio.biz> wrote:
Dear Bob,
If your club partnership agreement includes wording such as this:
Transfers to a Trust. A partner may, after giving written notice to the other partners, transfer his interest in the partnership to a revocable living trust of which he is the grantor and sole trustee.Your club allows a certain type of trust as a member.If it does, the name should be changed on your club account to the name of the trust. The social security number should remain the same as the your social security number.
I'm not sure where you are seeing this question:
Do I have to select Trust
rather than Individual when answering the 2013 tax
questionnaire?
Laurie Frederiksen
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On Sat, Feb 15, 2014 at 11:29 AM, Robert (revocable trust) Mann wrote:
I've set up my personal assets as a revocable living trust,
in Michigan. Is there an issue with transferring my club
partnership into the trust? Do I have to select Trust
rather than Individual when answering the 2013 tax
questionnaire?
Bob,
My current belief is that revocable living trusts are treated as individuals for the purposes of Form 1065 Schedule B and Schedule K-1, but I'm doing additional research to confirm this. I would explain the logic behind my position, but seeing as tax law and logic rarely appear in the same place at the same time, I'll wait until I can confirm (or refute) my position.
As to the wording of the partnership agreement clause regarding revocable living trusts as members, I don't believe that changing the wording to allow trusts with co-trustees is a good idea. What happens the co-trustees disagree on something. Which co-trustee has the authority to act on behalf of the trust?
Ira Smilovitz
On Tue, Feb 18, 2014 at 8:18 PM, Bob Mann <sailrmann@maestroanalyzer.com> wrote:
So a club follows what you wrote below. Is that partner still considered "individual" or should they be entering "trust"?On February 16, 2014 at 2:24 PM Laurie Frederiksen <laurie@bivio.biz> wrote:
Dear Bob,
If your club partnership agreement includes wording such as this:
Transfers to a Trust. A partner may, after giving written notice to the other partners, transfer his interest in the partnership to a revocable living trust of which he is the grantor and sole trustee.Your club allows a certain type of trust as a member.If it does, the name should be changed on your club account to the name of the trust. The social security number should remain the same as the your social security number.
I'm not sure where you are seeing this question:
Do I have to select Trust
rather than Individual when answering the 2013 tax
questionnaire?
Laurie Frederiksen
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On Sat, Feb 15, 2014 at 11:29 AM, Robert (revocable trust) Mann wrote:
I've set up my personal assets as a revocable living trust,
in Michigan. Is there an issue with transferring my club
partnership into the trust? Do I have to select Trust
rather than Individual when answering the 2013 tax
questionnaire?
I believe you are correct as to the treatment of revocable trusts, Ira. Social Security numbers are used as the ID for the trust until the person dies. A revocable trust should be done for an individual and should not be set up for a couple. It can have more than 1 trustee in case 1 becomes unable to handle the affairs.
Linda Wiltse
From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of ira smilovitz
Sent: Thursday, February 20, 2014 8:23 AM
To: club_cafe@bivio.com
Subject: Re: [club_cafe] revocable living trust as partner
Bob,
My current belief is that revocable living trusts are treated as individuals for the purposes of Form 1065 Schedule B and Schedule K-1, but I'm doing additional research to confirm this. I would explain the logic behind my position, but seeing as tax law and logic rarely appear in the same place at the same time, I'll wait until I can confirm (or refute) my position.
As to the wording of the partnership agreement clause regarding revocable living trusts as members, I don't believe that changing the wording to allow trusts with co-trustees is a good idea. What happens the co-trustees disagree on something. Which co-trustee has the authority to act on behalf of the trust?
Ira Smilovitz
On Tue, Feb 18, 2014 at 8:18 PM, Bob Mann <sailrmann@maestroanalyzer.com> wrote:
So a club follows what you wrote below. Is that partner still considered "individual" or should they be entering "trust"?
On February 16, 2014 at 2:24 PM Laurie Frederiksen <laurie@bivio.biz> wrote:
Dear Bob,
If your club partnership agreement includes wording such as this:Transfers to a Trust. A partner may, after giving written notice to the other partners, transfer his interest in the partnership to a revocable living trust of which he is the grantor and sole trustee.
Your club allows a certain type of trust as a member.
If it does, the name should be changed on your club account to the name of the trust. The social security number should remain the same as the your social security number.
I'm not sure where you are seeing this question:
Do I have to select Trust
rather than Individual when answering the 2013 tax
questionnaire?
Laurie Frederiksen
Invest with your friends!
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Click here to Subscribe to the Club Cafe email list. Click here to UnsubscribeOn Sat, Feb 15, 2014 at 11:29 AM, Robert (revocable trust) Mann wrote:
I've set up my personal assets as a revocable living trust,
in Michigan. Is there an issue with transferring my club
partnership into the trust? Do I have to select Trust
rather than Individual when answering the 2013 tax
questionnaire?
|
This email is free from viruses and malware because avast! Antivirus protection is active. |
I haven't been able to find a definitive answer to the question of how to complete Schedule B, question 2 or Schedule K-1, Item I1 when the member is a revocable living trust, but the indications that I've received from other tax professionals support my position that these trusts are treated as individuals with regard to these two Form 1065 issues.
Ira Smilovitz
The reasoning for this position lies within the Internal Revenue Code sections 671 et seq., and the associated regs found in 26 CFR 1.671-1 et seq which address Grantor Trusts. Grantor trusts are defined as being owned by the grantor to the extent that certain conditions exist. Without going into the specifics, revocable living trusts meet these conditions. Since they are owned by the grantor and use the grantor's SSN to report income, they are not trusts for the purposes of Schedule B, question 2 or Schedule K-1, item I1.
It's my guess that Schedule B, question 2 exists as an alert to the IRS that there may be income cross-matching/reporting issues with regard to K-1s issued to non-1040 filing entities. Similarly, the presence of an entry other than "individual" in Schedule K-1, item I1 identifies the specific partner(s). I doubt there is any consequence if a club with "living trust" members answers yes to Schedule B, question 2 or identifies those members as trusts on Schedule K-1.
Ira Smilovitz
On Thu, Feb 20, 2014 at 12:27 PM, Linda <wiltse@optonline.net> wrote:
I believe you are correct as to the treatment of revocable trusts, Ira. Social Security numbers are used as the ID for the trust until the person dies. A revocable trust should be done for an individual and should not be set up for a couple. It can have more than 1 trustee in case 1 becomes unable to handle the affairs.
Linda Wiltse
From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of ira smilovitz
Sent: Thursday, February 20, 2014 8:23 AM
To: club_cafe@bivio.com
Subject: Re: [club_cafe] revocable living trust as partner
Bob,
My current belief is that revocable living trusts are treated as individuals for the purposes of Form 1065 Schedule B and Schedule K-1, but I'm doing additional research to confirm this. I would explain the logic behind my position, but seeing as tax law and logic rarely appear in the same place at the same time, I'll wait until I can confirm (or refute) my position.
As to the wording of the partnership agreement clause regarding revocable living trusts as members, I don't believe that changing the wording to allow trusts with co-trustees is a good idea. What happens the co-trustees disagree on something. Which co-trustee has the authority to act on behalf of the trust?
Ira Smilovitz
On Tue, Feb 18, 2014 at 8:18 PM, Bob Mann <sailrmann@maestroanalyzer.com> wrote:
So a club follows what you wrote below. Is that partner still considered "individual" or should they be entering "trust"?
On February 16, 2014 at 2:24 PM Laurie Frederiksen <laurie@bivio.biz> wrote:
Dear Bob,
If your club partnership agreement includes wording such as this:Transfers to a Trust. A partner may, after giving written notice to the other partners, transfer his interest in the partnership to a revocable living trust of which he is the grantor and sole trustee.
Your club allows a certain type of trust as a member.
If it does, the name should be changed on your club account to the name of the trust. The social security number should remain the same as the your social security number.
I'm not sure where you are seeing this question:
Do I have to select Trust
rather than Individual when answering the 2013 tax
questionnaire?
Laurie Frederiksen
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On Sat, Feb 15, 2014 at 11:29 AM, Robert (revocable trust) Mann wrote:
I've set up my personal assets as a revocable living trust,
in Michigan. Is there an issue with transferring my club
partnership into the trust? Do I have to select Trust
rather than Individual when answering the 2013 tax
questionnaire?
This email is free from viruses and malware because avast! Antivirus protection is active.
Hi;
Our club opened the discussion about revocable living trusts
that have multiple trustees. Our agreement provides for ones
with sole trustees and would be interested to hear if
others permit revocable living trusts where the trust has
multiple trustees as partners in their club. If so, how was
partnership agreement worded to permit this?
Thanks,
Scott
Our club opened the discussion about revocable living trusts
that have multiple trustees. Our agreement provides for ones
with sole trustees and would be interested to hear if
others permit revocable living trusts where the trust has
multiple trustees as partners in their club. If so, how was
partnership agreement worded to permit this?
Thanks,
Scott
|
On Fri, Sep 4, 2015 at 10:55 AM, Scott Freeman <scottbefreeman@gmail.com> wrote:
Hi;
Our club opened the discussion about revocable living trusts
that have multiple trustees. Our agreement provides for ones
with sole trustees and would be interested to hear if
others permit revocable living trusts where the trust has
multiple trustees as partners in their club. If so, how was
partnership agreement worded to permit this?
Thanks,
Scott
Scott - We have/had the same issue come up in my club where BOTH my husband and I are partners and joint trustees on a revocable living trust.
My understanding as joint trustees, either one of us can transact business of the trust as a trustee independent of the other. We are in the process of amending our PA to remove the word "sole". This question came up before and below is the response:
A. Transferring your percentage of the club to a living trust is fairly straightforward. First, your partnership agreement must allow a living trust as a partner. If the agreement doesn't currently provide for this, the club should carefully consider adding a paragraph addressing this issue to its agreement; for example, see the example of a partnership agreement contained in BetterInvesting's Investment Club Operations handbook. Second, write a letter of instruction to the club directing it to make the name change. Third, the club's treasurer will need to change your name in the club's accounting software to The Victor J. Kurowski Living Trust. Finally, all future club paperwork must be signed as "Victor J. Kurowski, trustee for the Victor J. Kurowski Living Trust."
Therefore, we amend the PA, and as individual members assign our shares to our joint revocable trust.
Hope this helps.
Megan McKinlay
On Fri, Sep 4, 2015 at 7:55 AM, Scott Freeman <scottbefreeman@gmail.com> wrote:
Our club opened the discussion about revocable living trusts
that have multiple trustees. Our agreement provides for ones
with sole trustees ....
Thanks,
Scott
|
Laurie - you are probably right with regards to most trusts. Everyone would need to verify the set-up of their trust.
As separate account holders in our investment club, and as trustees, able to do "business" for the trust (it only takes one of us) under our own name, I don't think your concerns would apply to my situation as we would continue to manage our separate accounts as we have as a married couple and in a community property state(s) participating in one investment club.
In my/our situation, our trust is set up for the surviving trustee to become "sole" trustee in the event of the demise of the other. As I understand the wording I submitted, I would vote my position/shares INDEPENDENT of my husband's under my name, trustee for the McKinlay Living Trust, and my husband would do the same under his name. IF both of us would check out of this lifetime together, then the partnership would terminate our individual accounts due to death and disburse them to the Living trust. The executors would take care of it from there and not be involved in our investment club.
We are in WA state (primarily) and I am unaware of any requirements that would affect the club. Our attorney was aware of our investments in the partnership and included it in our "to-do" list to fund the trust. In the years since then, both our capital accounts have appreciated to the point we feel we need to include them in our trust.
If anyone knows anything different, I would definitely be open to learning as we do not want to cause problems with the investment partnership ... nor our executors. :-)
Megan
On Fri, Sep 4, 2015 at 8:58 AM, Laurie Frederiksen <laurie@bivio.biz> wrote:
I would think there is a little more to it. It seems that your partnership agreement needs to include wording on how decisions will be made if the two people controlling the one account disagree with each other about how to vote on any club business or, if one active trustee passes away and leaves the trust to someone who has not previously been active in club affairs.
Laurie Frederiksen
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Megan,
Your attorney represents you, not the investment club. The issues here aren't with your estate planning but with club operations.
If you have one trust with both of you as trustees, and the membership in the club is held within the trust, there is only one "member" in the club, the trust. Your "separate" accounts are a fiction and your club's PA should provide a means to determine who can exercise the rights of membership. It shouldn't be both of you simultaneously, unless you are each deemed to control a fractional portion of the trust's power.
For instance, if your club operates "one vote per member" and you and your husband are voting your shares independently, you are getting two votes where the trust should have only one.
Ira Smilovitz
On Fri, Sep 4, 2015 at 1:06 PM, Megan McKinlay <mike.meganmckinlay@gmail.com> wrote:
Laurie - you are probably right with regards to most trusts. Everyone would need to verify the set-up of their trust.As separate account holders in our investment club, and as trustees, able to do "business" for the trust (it only takes one of us) under our own name, I don't think your concerns would apply to my situation as we would continue to manage our separate accounts as we have as a married couple and in a community property state(s) participating in one investment club.In my/our situation, our trust is set up for the surviving trustee to become "sole" trustee in the event of the demise of the other. As I understand the wording I submitted, I would vote my position/shares INDEPENDENT of my husband's under my name, trustee for the McKinlay Living Trust, and my husband would do the same under his name. IF both of us would check out of this lifetime together, then the partnership would terminate our individual accounts due to death and disburse them to the Living trust. The executors would take care of it from there and not be involved in our investment club.We are in WA state (primarily) and I am unaware of any requirements that would affect the club. Our attorney was aware of our investments in the partnership and included it in our "to-do" list to fund the trust. In the years since then, both our capital accounts have appreciated to the point we feel we need to include them in our trust.If anyone knows anything different, I would definitely be open to learning as we do not want to cause problems with the investment partnership ... nor our executors. :-)MeganOn Fri, Sep 4, 2015 at 8:58 AM, Laurie Frederiksen <laurie@bivio.biz> wrote:
I would think there is a little more to it. It seems that your partnership agreement needs to include wording on how decisions will be made if the two people controlling the one account disagree with each other about how to vote on any club business or, if one active trustee passes away and leaves the trust to someone who has not previously been active in club affairs.
Laurie Frederiksen
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Just a thought on how to handle something like this. One could handle this as having a regular member and keep the living trust out of the club for membership and have the beneficiary as the living trust. That may be a way to obviate the issue altogether.
Tim Hoyman
From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of ira smilovitz
Sent: Friday, September 04, 2015 12:04 PM
To: club_cafe@bivio.com
Subject: Re: [club_cafe] Sole or Joint Trustees for revocable living trust as partner
Megan,
Your attorney represents you, not the investment club. The issues here aren't with your estate planning but with club operations.
If you have one trust with both of you as trustees, and the membership in the club is held within the trust, there is only one "member" in the club, the trust. Your "separate" accounts are a fiction and your club's PA should provide a means to determine who can exercise the rights of membership. It shouldn't be both of you simultaneously, unless you are each deemed to control a fractional portion of the trust's power.
For instance, if your club operates "one vote per member" and you and your husband are voting your shares independently, you are getting two votes where the trust should have only one.
Ira Smilovitz
On Fri, Sep 4, 2015 at 1:06 PM, Megan McKinlay <mike.meganmckinlay@gmail.com> wrote:
Laurie - you are probably right with regards to most trusts. Everyone would need to verify the set-up of their trust.
As separate account holders in our investment club, and as trustees, able to do "business" for the trust (it only takes one of us) under our own name, I don't think your concerns would apply to my situation as we would continue to manage our separate accounts as we have as a married couple and in a community property state(s) participating in one investment club.
In my/our situation, our trust is set up for the surviving trustee to become "sole" trustee in the event of the demise of the other. As I understand the wording I submitted, I would vote my position/shares INDEPENDENT of my husband's under my name, trustee for the McKinlay Living Trust, and my husband would do the same under his name. IF both of us would check out of this lifetime together, then the partnership would terminate our individual accounts due to death and disburse them to the Living trust. The executors would take care of it from there and not be involved in our investment club.
We are in WA state (primarily) and I am unaware of any requirements that would affect the club. Our attorney was aware of our investments in the partnership and included it in our "to-do" list to fund the trust. In the years since then, both our capital accounts have appreciated to the point we feel we need to include them in our trust.
If anyone knows anything different, I would definitely be open to learning as we do not want to cause problems with the investment partnership ... nor our executors. :-)
Megan
On Fri, Sep 4, 2015 at 8:58 AM, Laurie Frederiksen <laurie@bivio.biz> wrote:
|
That is far worse. For one thing, beneficiary designations for partnership interests generally are not valid. Second, removing the partnership interest from the trust eliminates the benefit of having the trust, namely to avoid probate.
Ira Smilovitz
On Fri, Sep 4, 2015 at 2:18 PM, Tim Hoyman <tim@timhoyman.com> wrote:
Just a thought on how to handle something like this. One could handle this as having a regular member and keep the living trust out of the club for membership and have the beneficiary as the living trust. That may be a way to obviate the issue altogether.
Tim Hoyman
From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of ira smilovitz
Sent: Friday, September 04, 2015 12:04 PM
To: club_cafe@bivio.com
Subject: Re: [club_cafe] Sole or Joint Trustees for revocable living trust as partner
Megan,
Your attorney represents you, not the investment club. The issues here aren't with your estate planning but with club operations.
If you have one trust with both of you as trustees, and the membership in the club is held within the trust, there is only one "member" in the club, the trust. Your "separate" accounts are a fiction and your club's PA should provide a means to determine who can exercise the rights of membership. It shouldn't be both of you simultaneously, unless you are each deemed to control a fractional portion of the trust's power.
For instance, if your club operates "one vote per member" and you and your husband are voting your shares independently, you are getting two votes where the trust should have only one.
Ira Smilovitz
On Fri, Sep 4, 2015 at 1:06 PM, Megan McKinlay <mike.meganmckinlay@gmail.com> wrote:
Laurie - you are probably right with regards to most trusts. Everyone would need to verify the set-up of their trust.
As separate account holders in our investment club, and as trustees, able to do "business" for the trust (it only takes one of us) under our own name, I don't think your concerns would apply to my situation as we would continue to manage our separate accounts as we have as a married couple and in a community property state(s) participating in one investment club.
In my/our situation, our trust is set up for the surviving trustee to become "sole" trustee in the event of the demise of the other. As I understand the wording I submitted, I would vote my position/shares INDEPENDENT of my husband's under my name, trustee for the McKinlay Living Trust, and my husband would do the same under his name. IF both of us would check out of this lifetime together, then the partnership would terminate our individual accounts due to death and disburse them to the Living trust. The executors would take care of it from there and not be involved in our investment club.
We are in WA state (primarily) and I am unaware of any requirements that would affect the club. Our attorney was aware of our investments in the partnership and included it in our "to-do" list to fund the trust. In the years since then, both our capital accounts have appreciated to the point we feel we need to include them in our trust.
If anyone knows anything different, I would definitely be open to learning as we do not want to cause problems with the investment partnership ... nor our executors. :-)
Megan
On Fri, Sep 4, 2015 at 8:58 AM, Laurie Frederiksen <laurie@bivio.biz> wrote:
I would think there is a little more to it. It seems that your partnership agreement needs to include wording on how decisions will be made if the two people controlling the one account disagree with each other about how to vote on any club business or, if one active trustee passes away and leaves the trust to someone who has not previously been active in club affairs.
Laurie Frederiksen
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Sent from my iPhone
Hi Scott,
The reasons behind the general recommendation to only allow trusts as members of the club that are revocable with a sole trustee are these:
1. If the trust has more than one trustee(s), they would be voting members of the club. If the trustee changes, the club would have a new member whose investment philosophy might not align with the rest of the club.
2. The second potential problem is that some states provide special tax treatment for investment clubs as long as the members of the club are natural persons or specified other entities (eg., revocable trusts, but not trusts and estates in general).
Laurie Frederiksen
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Click here to Subscribe to the Club Cafe email list. Click here to UnsubscribeOn Fri, Sep 4, 2015 at 10:55 AM, Scott Freeman <scottbefreeman@gmail.com> wrote:Hi;
Our club opened the discussion about revocable living trusts
that have multiple trustees. Our agreement provides for ones
with sole trustees and would be interested to hear if
others permit revocable living trusts where the trust has
multiple trustees as partners in their club. If so, how was
partnership agreement worded to permit this?
Thanks,
Scott
Hello,
If a club wanted to accept a trust with dual trustees, how would the wording in the by-laws need to be worded. Any suggestions or somewhere to get advice. We had members that just provided their trust agreements that are joint trustee's.
Thanks
Glen Mallette
Hi Scott,
The reasons behind the general recommendation to only allow trusts as members of the club that are revocable with a sole trustee are these:
1. If the trust has more than one trustee(s), they would be voting members of the club. If the trustee changes, the club would have a new member whose investment philosophy might not align with the rest of the club.
2. The second potential problem is that some states provide special tax treatment for investment clubs as long as the members of the club are natural persons or specified other entities (eg., revocable trusts, but not trusts and estates in general).
Laurie Frederiksen
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Click here to Subscribe to the Club Cafe email list. Click here to UnsubscribeOn Fri, Sep 4, 2015 at 10:55 AM, Scott Freeman <scottbefreeman@gmail.com> wrote:Hi;
Our club opened the discussion about revocable living trusts
that have multiple trustees. Our agreement provides for ones
with sole trustees and would be interested to hear if
others permit revocable living trusts where the trust has
multiple trustees as partners in their club. If so, how was
partnership agreement worded to permit this?
Thanks,
Scott
Our club is trying to modify the partnership agreement to
include sole or joint trustees. Our lawyer suggested that
we word the new amendment to state that only the death of
the initial grantor, triggers the withdrawal. This would be
applicable to either a joint or sole revocable trust. Do
you agree? Thanks.
include sole or joint trustees. Our lawyer suggested that
we word the new amendment to state that only the death of
the initial grantor, triggers the withdrawal. This would be
applicable to either a joint or sole revocable trust. Do
you agree? Thanks.