BulldogTom Posted February 11, 2015 Report Share Posted February 11, 2015 Situation: Mom is living with boyfriend. Mom draws up a will and a trust. Says if she dies, boyfriend can live in the house for as long as he wants or until he dies. At that point, the home can be sold by the 3 children who are beneficiaries of the trust. Home has a mortgage on it. Mom dies. Boyfriend refuses to move or die. His choice, no moral judgments here. Trust now is paying the mortgage and the property taxes on the home. My take - the beneficiaries cannot take a deduction for the taxes and interest on the loan. All of it is investment expense or investment interest, and can only be carried forward until there is income to absorb the loss. Am I on the right track? Tom Newark, CA Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 11, 2015 Report Share Posted February 11, 2015 What do the trust document and will say about those costs? And where is the money coming from to pay the mortgage and property taxes? Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted February 11, 2015 Author Report Share Posted February 11, 2015 (edited) Trustee is given broad discretion to classify all costs as Income or Principal at his sole discretion. Trustee, who is also a beneficiary, is loaning the money to the trust to make the payments. (protecting the asset from creditors until the boyfriend moves or dies) Tom Newark, CA Edited February 11, 2015 by BulldogTom Quote Link to comment Share on other sites More sharing options...
Randall Posted February 11, 2015 Report Share Posted February 11, 2015 Not really an answer to your question. But why is beneficiary lending money to the trust to pay for all this? How much is the home worth? How much is the mortgage? If trust owns the home but has no other assets or income, let the bank foreclose, evict the person. Hire a lawyer and see what their options are? How about the beneficiaries move in with him and crowd his lifestyle. Maybe he'll move then. Just wondering about the bizarre situation. Quote Link to comment Share on other sites More sharing options...
Richcpaman Posted February 11, 2015 Report Share Posted February 11, 2015 Have the Trustee offer the "life Estate" person something to move out so that they can dispose of the house. Your client is stuck. Usually, even with the life estate, that person still has to pay to live in the house. Which could include the mortgage and taxes. Or, as a minimum, rent. Rich 1 Quote Link to comment Share on other sites More sharing options...
Cathy Posted February 11, 2015 Report Share Posted February 11, 2015 (edited) "My take - the beneficiaries cannot take a deduction for the taxes and interest on the loan. All of it is investment expense or investment interest, and can only be carried forward until there is income to absorb the loss. Am I on the right track?" Tom, It appears you are on the right track. If there is never any income (or not enough income) to absorb the losses, they cannot be used on the taxpayers personal tax returns until after the trust is dissolved. The trust I dealt with had capital gain losses from the sale of securities each year so my client is now deducting (since the trust no longer exists) the $3,000 maximum capital gain loss each year until the loss is completely used. HOWEVER, you have a unique situation as the funds used to create the losses have been loaned to the trust....I would research it more, but since the losses are because of a loan(s), I would think that the loan(s) (with interest) would have to be repaid before any of the losses are taken on the beneficiaries returns??? Sounds like the research can be delayed as it sounds like it might be years and years before the trust can be dissolved. Cathy Edited February 11, 2015 by Cathy 1 Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 11, 2015 Report Share Posted February 11, 2015 But here is why I also asked about the will. Does that put any restrictions on the life estate -- such as the requirement to pay the costs? Or make any other provision for the costs. The beneficiaries and trustee are under NO obligation to support the (now-former) boyfriend. Unless there is a real connection to this particular house, I'd say let the bank take it. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted February 11, 2015 Author Report Share Posted February 11, 2015 The boyfriend is supposed to pay the costs of utilities and upkeep on the home. The taxes and mortgage are not addressed in the trust or the will. The home appraised at 125K DOD and is subject to a 30K mortgage at DOD. Loan from trustee to trust is documented and will be paid back upon sale of the home with the remainder to be split 3 ways by the sibling beneficiaries. I think I am asking 2 questions: 1. Is the Mortgage interest really investment interest to the trust, as there is no income and never will be on the home? (I think it is) 2. If the answer to #1 is yes, where does the carryover of unallowed interest reside, in the trust or with the beneficiaries? Thanks for your input. Tom Newark, CA Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted February 12, 2015 Report Share Posted February 12, 2015 Shame Mom did not have mortgage insurance. But I agree with you on #1, and I think it resides in the trust until the trust is finally dissolved. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted February 12, 2015 Author Report Share Posted February 12, 2015 Shame Mom did not have mortgage insurance. But I agree with you on #1, and I think it resides in the trust until the trust is finally dissolved. Thanks KC. Tom Newark,CA Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 12, 2015 Report Share Posted February 12, 2015 I concur with KC. If the trust and the will make no provisions, the trust eats it until dissolution. Buy the boyfriend lots of stuff that's bad for him and hope he eats it all? Quote Link to comment Share on other sites More sharing options...
Randall Posted February 12, 2015 Report Share Posted February 12, 2015 Everybody move in with him. Make him take the couch. 1 Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted February 12, 2015 Report Share Posted February 12, 2015 Sorry, but if the guy meant that much to Mom, they really should accept her decision. Probably he was there for her more than her own kids were. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted February 12, 2015 Author Report Share Posted February 12, 2015 Probably he was there for her more than her own kids were. Not Quite. She loved him, they enjoyed life together. The kids were close to mom, but did not like the boyfriend. They are doing their best to uphold her wishes. But they don't like him and never could see what mom saw in him. Tom Newark, CA 3 Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 13, 2015 Report Share Posted February 13, 2015 Yet another sad case where provisions meant to help end up hurting others, who were not meant to be hurt. I suppose it's still better than the kids being at each other's throats - at least they can unite around dislike of the boyfriend. Quote Link to comment Share on other sites More sharing options...
Randall Posted February 13, 2015 Report Share Posted February 13, 2015 At the least, I would contact a lawyer and see what options are available. Quote Link to comment Share on other sites More sharing options...
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