Legal Question in Wills and Trusts in California
Maximizing distribution of estate to children, one of whom owes back federal tax
A mother wishes to divide her estate equally among 3 children and to maximize the amount that each child is able to retain. Child #3 owes a significant amount of back federal sales and employer withholding tax from a business that went bankrupt; and the mother is concerned that the government will take whatever she leaves Child #3 to apply toward the tax debt of Child #3. Can the mother prepare a will or living trust that ensures that the distribution to child #3 is protected from being seized/attached by the govenment or should the mother distribute the estate to the other 2 children?
2 Answers from Attorneys
Re: Maximizing distribution of estate to children, one of whom owes back federal
Mother should provide that the share of her estate that the child with the financial problems interest will inherit will be distributed to another person IN TRUST for that child and is to be distyributed to the child ONLY when the time has run on the enforcement of the liens. The child cannot have any right to withdraw this money. Any payments or distribiutions to the child should be totally discretionary to the trustee.
This Trust will only be crteated on her death and will not come into existence if there is no longer a financial problem.
I would suggest that Mother use a living trust to accomplish this so that there is no public record as there would be with a will which would require probate court involvement.
Mother needs to talk to an experienced attorney because the language to accomplish this is is somewhat sophisticated.
Re: Maximizing distribution of estate to children, one of whom owes back federal
She can leave her estate to the child in trust. The trustee would have discretion to make distributions to the child. (The child's share can be protected from creditors as long as it remains in the trust--any distributions to the child can be attached by creditors.)
This type of trust planning should be done by an experienced attorney, but it can be done.
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