Q. I inherited a small interest in my grandfather’s business in trust during my marriage. For approximately 10 years, I received distributions (about $20,000 per year) all of which I deposited into our two children’s 529 accounts. During the pandemic the distributions stopped because my father lost his job and the trustee took away the distributions from my brothers and I, redirecting it all to my dad.
My husband is now arguing that because we filed joint tax returns and he effectively shared in the tax obligation on $20,000 per year over those 10 years, he is entitled to half of my 10% ownership in the business. He is trying to value the business and just told me he needs to cash out our CD so he can raise $25,000 to pay his lawyer a further retainer and spend $10,000 to hire an expert to testify about the value of my interest in my grandfather’s business.
Is there a concise way for me to try to get him to let this issue go? I don’t want to spend any more money on lawyers or experts and prefer to spend my hard-earned money paying for our kids to go to college which is right around the corner.
A. You cannot make someone who is hell bent on a trial, settle a case. That being said, offer to use any distributions you receive between now and the time your children graduate college to cover college expenses off the top before either you or he has to contribute anything else and before the 529 funds are used. This offer ensures he continues to have some benefit from any distributions in the coming years.
Go on to explain to him that you receive no money from the trust at this point, that it has all gone to your dad for the last three years. Explain further that you do not control the trustee.
Acknowledge that your husband helped pay the taxes due on the distributions and thank him for doing so because it allowed you to save at least $100,000 for each of your children’s college expenses.
When you make the offer be sure he has a copy of the underlying trust instrument holding your share of the business and encourage him to ask his lawyer how the trustee can be obligated to pay anything to you or him over your father, so he knows a continued fight does not guarantee him one extra dollar.
Email questions to whickey@brickjones.com