Q: Can I be Trustee of a Living Trust if I owe federal restitution?
I owe $575,000.00 for restitution on a mail fraud case. My mother removed me as beneficiary in her Living Trust to any real estate property. Upon her death I am now only allowed to live in one of her rental properties for the rest of my life, rent free.
All real estate property will be held in the trust for 2 minor children (my nephew’s) until they reach the age of 25 years old (approx 15 years). The trust says NO property can be sold and there is a Spendthrift Clause. However, she assigned me as the Trustee. My mother is elderly and in poor health. Will this expose the Trust to lose assets?
Thanks!
A:
Serving as a trustee of a living trust while owing federal restitution can be legally complex and might put the trust's assets at risk under certain circumstances. Your debt from restitution could potentially expose the trust to claims by creditors, depending on various factors including how the trust is structured and the laws governing it.
A spendthrift clause is designed to protect trust assets from the beneficiaries' creditors, but it might not offer complete protection if you, as the trustee, have significant financial liabilities. Your role as a trustee involves managing the trust's assets, and this position could be scrutinized by your creditors, particularly if they believe the trust's assets are being used to shield you from paying restitution.
Given the complexity of your situation, it's important to discuss this with a legal professional who can assess the specifics of the trust, your personal financial situation, and the potential implications for the trust's assets. They can provide guidance on whether you should continue as trustee or if an alternate arrangement might better protect the trust's assets and serve the interests of the beneficiaries.
Remember, the primary goal of a trust is to manage and protect assets for the beneficiaries, and it's crucial to ensure that your role as trustee aligns with this objective and complies with legal requirements.
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