[hic1957]

Hi -

Dad owes us money - my sister and I are being repaid by a monthly transfer from dad's social security into a trust set up for his benefit of which my sister and I are both the executors and the beneficary's (after his death) of the trust.

We are leaving what he owes us in the trust in case HE needs it -

When he dies though, this money is money we lent him and he repaid (albeit we left it for his benefit in the trust) - will the IRS think that this money was an inheritance and taxable as such? If so, how do we disperse the funds already accumulated in such a way that shows it is our money but designated for dad's use should the need ever arise?

Thanks

HIC

[ebaines]

First, you should be aware that only estates in excess of $2M owe estate taxes, so if your father's assets are less than that this is a moot point.

If your father's estate is more than $2M, I have to wonder why he can't just repay you what you say he owes you. However, to answer your question...

The money that is going into this trust fund you described is either your father's or your's, but it can't belong to both. As described, the funds are his (since he is the owner of the trust), and so would be a part of his estate when he dies. So yes, his estate would include the value of this fund and hence could generate an estate tax liability. However, if in fact he owes you this money, you could draw up a contract with him to document that his estate has an outstanding loan from a creditor (you) that is payable upon his death. That way when he dies the assets get paid out before the estate is valued.

[hic1957]

Thanks so much for your expedient response - to use your vernacular, the point IS moot, as I only wish the estate was worth 2 mil - but please allow me to clarify the situation - first - I don't think dad owns the trust - the only assets in the trust are the aforementioned savings account and the house that dad's currently living in (which the trust owns too) dad is the beneficiary of the trust but I didn't think that made him the owner?

Let's suppose dad writes me a monthly check against what he owes me, and I turn around and deposit that check into the savings account (which the trust owns) so that if anything should happen and he needs immediate funding - it is available (and separate from my own personal money) - as you advised, none of this is subject to estate taxes, but what about any other taces? When dad dies, to me, the money is nothing more than a return of capital - but will the IRS think that this money is income? Or capital gains?
Thanks again!

HIC