Q: After the grantor of a revocable trust resigns and the successor trustee takes over, may the grantor gift trust assets?
The grantor transferred a trust asset's title to a beneficiary–my brother. But per the trust: upon the death of the grantor, the asset, a condo, goes to my brother, but not for free. To equalize, an amount equal to its appraised value is to be withheld from my brother's share of the trust residuary. Elsewhere, the trust is explicit about requiring equal distribution of its assets among its 3 beneficiaries. The successor trustee played no role in the transfer; heavy undue influence and weak capacity did it. Also helpful: though listed on the schedule of trust assets and subject to trust instructions (as per above), the condo was not titled to the trust, possibly because it's foreign and the lawyer lacked means. So: 1) If of capacity, a grantor can change a trust. That didn't occur. Was grantor authorized to sign an ostensible trust asset away after resigning as trustee? 2) Did my brother circumvent the trust? It still says to withhold the condo's value from his share of the residuary.
A:
All questions like this of course depend on exactly what the Trust states.
However, normally a grantor retains rights (written this way explicitly in the Trust) to do pretty much as he pleases with every asset. This only applies to a Revocable ("Living") Trust. If the Trust was Irrevocable then the grantor retained absolutely no authority at all to do anything.
The fact that the condo was never deeded to the Trust raises its own questions. When I advise a client, I make sure every piece of real estate is re-deeded into the Trust. The fact that the condo is foreign makes for an interesting headache but I don't think it matters as long as the grantor had capacity to gift the condo.
If this was a Revocable (Living) Trust and this grantor is a widow of the other grantor, then you have an entirely new set of problems but the transfer of the condo may not have been 100% legitimate.
As to withholding the value of the condo from a share, it would depend entirely on how the Trust is written. You will have to parse the language carefully but my guess would be that it would still count against the brother's share.
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