Legal Question in Wills and Trusts in Massachusetts
4 brothers started needham/ newtown Property Trust in 1970. Three commercial property rentals. The last brother/Trustee just died. Management company handles day to day mgmt. We are 6 destined to be “Tenants in Common”. According to Trust there is a ‘wind down period.”
Can you help us understand
1.Is there a specific time period which we have to adhere to, as we “wind down the trust”? Not even clear as to what needs to be done.
2.Are there any the tax liabilities or legal ramifications from the trust that can attach to us personally now that the trust has in effect legally terminated due to the passing of the last original brother?
3.Should we attempt to put the properties into a newly formed LLC to protect our individual families from taxes and liabilities.
2 Answers from Attorneys
Without knowing a bit more about the Trust it is difficult to give precise answers to your questions. Assuming there is no estate tax liability that can attach to the property held by the Trust (unless the value of the last brother to die had a taxable estate of more than $11 Million the only possible tax issue would be the Commonwealth of Massachusetts), then my observations are as follows:
Estate tax returns are due nine months after the deceased passes, unless an extension is requested for an additional 6 months, claims against an estate must be filed within 12 months after someone dies, so the wind down period should not exceed a year unless there is a claim or issue that arises.
As to personal liability, while the actions of the Trust prior to distribution may not be personal to the new owners, there can be a claim asserted against the property if there is a claim made for actions taken prior to the transfer However, once the 6 own the property as Tenants in Common you are the owners of the buildings and will be responsible for honoring leases and damages for claims asserted with respect to the operation or ownership of the building. While I assume the properties carry adequate insurance, it will be important to make sure all six owners are properly covered under those policies. You will also all be responsible for paying the property taxes on the property.
The 6 of you should consider transferring the the properties into an LLC in a partnership form so no personal liability will attach for the operation of the buildings.
I hope this was helpful.
Attorney Roth has given you very good advice. To his I would add: Hire an attorney asap to help you deal with this.