The owner of the Carolina Hurricanes, Peter Karmanos, is being sued by his three sons for borrowing more than $100 million out of their trust fund. If you have been following the Carolina NHL franchise, you may have noticed that the numbers (fiscal and physical) have been down since the Stanley Cup win in 2006. Peter Karmanos has allegedly been using the money in various forms of supporting the franchise.
You may be asking yourself: If it is his money in the trust, what’s the big deal? Well you must understand how trusts work and you better read all of the fine print before signing one — even if you are a multi-millionaire.
The truth is that there are many different kinds of trusts. The two broad categories of trusts include testamentary and living trust. The testamentary trust is set up with a will and is only established after the grantor’s death. Living trusts are established through the grantor’s lifetime and are separate from a will. We are going to focus on living trusts for now. *Please contact us if you would like more information on testamentary trusts.
Like a will, the living trust is a document that describes your wishes regarding your assets, dependents, and heirs upon your death. But, the living trust allows you to bypass the probate process — the lengthy, court supervised process of administering an estate. The details of the trust mean everything. When creating a living trust, you (the grantor) must decide whether you want to establish a revocable or irrevocable trust.
Choosing between the two really depends on the goals and objectives of the grantor; however, most people opt for a revocable trust, unless they need an irrevocable one to accomplish a specific goal or objective. Most trusts actually allow borrowing, as long as it is in best interest of the beneficiaries. It all depends on the type of trust, and how it is set up. The actual borrowing of the money wasn’t the big issue for Peter Karmanos. You may be eligible to borrow money from a trust fund but annual payments of principal and interest are due. It is reported that Peter Karmanos has failed to make these payments that were due in 2014 and 2015. It is because of this that his sons called in the lawsuit.
Each trust is specific, unique, and set up accordingly for the grantor and the beneficiaries. Some trust terms may even waive the duty of the trustee having to pay the money borrowed back. An estate attorney can be a huge problem solver when dealing with the complications associated with setting up a trust. You must pay attention to all the details regarding your trust. Be knowledgeable about what you’re signing and know what you can and cannot do. We would love to meet with you and discuss your possibilities. Contact us for a free consultation to learn more about what type of trust may be right for you and your family.
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