Well, it's very close here, first if the account is an "UGMA", which you earlier stated, then it is 18 for NC. UTMA is a slightly different account, and UTMA age is 21 for NC as of July 1, 1985. So, look closely at the account information when you get it. It still looks like she shouldhave had the account at 18. Look over everything carefully, C shold also be looking into her tax returns. When she turned 14, she was supposed to have tax returns filed for anything that was "income" out of the trust. Not to worry you, but look into this aspect. You can request back copies from the IRS for a fee. We'll be here when the packet arrives, enjoy the holidays.
FYI: "C" legal right to examine records FYI, just in case it comes up..."C" has had the legal right to examine the records of the account since the age of 14. This is from the NC state laws re: UGMA/UTMA: (e) A custodian shall keep records of all transactions with respect to custodial property, including information necessary for the preparation of the minor's tax returns, and shall make them available for inspection at reasonable intervals by a parent or legal representative of the minor, or by the minor if the minor has attained the age of 14 years. (1987, c. 563, s. 2.) Again, I would start the search for the tax records of Mom, and see if there are any for "C". Not to worry you, but this is a "big one" also. Needs to be looked into. Once you have the account paperwork from the brokerage firm, you can start backing into this. However, if "C" has not been notified of anything by the IRS, then perhaps these things were taken care of.
Speaking of taxes Not that any of you will be surprised, but C has never seen any tax returns or been allowed info on her account until she finally received a monthly statement a few months ago. As for taxes, she insisted that she do her own taxes this past year. Of course, the account was still under her mother's control at that time, and all paperwork and IRS-related docs (i.e., earnings on account) were sent to her mom. C says that she has never signed a tax return, in her life, till this past tax year. My understanding is that her mother could have paid the taxes on the account, as long as she submitted some form (don't know the # of the form). In any case, C has never signed a tax return prior to last year. What does this tell you? I am not sure.
This may sound a bit silly, but I would be very interested to know how they "sent" the package...Usually brokerage firms are sort of "high flying", and they use overnight letters, not regular mail. If they sent this regular mail, they are stalling. There are more than two here, there is a "major" rule, "Rule 401": "KNOW YOUR CUSTOMER". This is the compliment to the "Prudent Man Rule", where the broker is supposed to know what is best for his customer, even moreso than the customer does. The broker must take steps to ensure the client's best interests are protected, even protecting the client from himself. There may have been some churning here, there are criteria that the FINRA/NASD look for in this type of activity. If there are securities pruchases and sales within short periods, without making gains, or showing losses, then there is a good case. There may be a lot of information to try and review, if you have any trusted friends/associates who have investment knowledge, have them look at it. Or, it would be worth taking the statements to an accountant or securities attorney for review. At this point, I would also start looking at the "Arbitration Clause" of the account agreement. You may want to start preparing now for a submission. Again, we'll be here for you...
Could you please advise? When C insisted on doing her taxes, her mother gave her some docs and C took them to H&R Block. She had no idea what she was even looking at. She has pulled these docs out for me. Her mom evidently screwed up and put this in - as this would be for 2007 taxes, not 2006. Please advise if I am reading this correctly. Keep in mind the fund should have been turned over to C in Nov 2006, on her 21st birthday This is a statement from the Brokerage firm, "Confirmation of Transaction." Here is exactly what it reads: You sold $ 508.495 shares at a price of 34.880009 Principal: 17,736.31 Comm/Comm .00 Net Amount 17,736.31 Trade Date 01/29/2007 Trade # xxxxx Settlement Date 02/01/2007 CUSIP Number xxxxxxxxx Entry date 1/30/07 Marekt: Over the Counter We acted as principal - not as market maker Additional Information or Instruction CNFRM XXXXXXXXX CTRL XXXXXXXXXXXXXXXXX Book - Customer DIV-R, LTCG-R, STOG-R Do we have a smoking gun here? This is clearly after C's 21st birthday. In addition, there is no way this was used for "C's use." C was on a scholarship so no one can justify that the money went to C's college tuition, or any other expense for her benefit. C and my son live in a house I own, so . . . how was this used for her benefit? Do we have a clear violation here? Any comments or advice at this point?
Your pima facia thoughts may be accurate, but you really need to wait until you have all of the information available to you. You will need to piece together the whole picture and then ask the questions that arise from that landscape. The evidence, if this is what it is, is not going to go away. And there may be other pieces that may come to light that may just focus your questions a little more closely or give you answers. The brokerage statements will tell you a lot.
Waiting is so hard . . . Of course you are right . . . we are just so anxious to find out what has transpired and prove wrong-doing. C said - how are we ever going to get through this? It is so emotionally exhausting. My feeling is - this has been going on for a long time - and no reason to get upset about it now - if there is anything that can be done to hold others responsible - we will - and if not - then she knows the history and that is that. As mentioned earlier - it is going to take some expert eyes to sort through the paperwork much less make a determination as to what has occurred. I guess that is what Mom was counting on - that it would be "all greek" to C - and so she would just throw up her hands and say - forget it - nothing I can do about it now. And there may be nothing that can be done, but as you said . . . we have to piece together a whole picture . . . for now - I think I am going to shift focus to Thanksgiving and fixing that turkey dinner.
Smart ... It's taken a long time to get to where it is now...it will likely take some time to figure out what happened. As of now, everyone but C is still on the hook. Time will tell who wriggles off.
Whoa...now you need to track the transaction. This broker is in trouble, as is "Mrs Ops Mgr", as she would have to "approve" the trade. This is an unauthorized trade, if "Mom" entered it. The broker should have known this, and the "principal" who signed off the ticket as well. Unless, "C"'s name was used as the account holder, then this is just more smoke. Long story short, the broker himself could be forced to "replace" the securities into "C"'s account, out of his own pocket. The brokerage firm would have to eat the money if it was withdrawn. This "gun" is getting hotter and hotter.. "C" should look at all the trades in this account made since she turned 18, and she could legally claim they were "DK" trades, ("DK" = "Didn't Know" about trade). This is a broker's worst nightmare as they have to replace the securities/proceeds, and are subject to violations. Remember, "C" is the LEGAL holder of the account, "Mom" was the custodian. I've never seen a case this extreme, but it is conceivable the brokerage firm would at least have to "right her account" back to when she turned 18! And...you would have to assume "position held" at that point and extrapolate the value as of today. This is where a good accountant, strong in securities, should come in. However, there is a concern for "C" and taxes on this liquidation trade. If this money is still in the account, then there are no tax consequences. Any monies/securities withdrawn are subject to taxation to "C". The first $750 are tax free, the rest is taxed at "Mom's" tax bracket rate. But..if the money was withdrawn, then legally "C" is responsible for the taxes on it. (Yes, I know what you're thinking and saying..). Actually all withdrawals after "C" turned 14 are her responsibility. Tax forms should have been submitted in her name since that age, for any withdrawals. FYI, the notation that the firm "acted as principal" means the brokerage firm bought the shares, and held them in inventory. They make money "on the spread" of sales price vs. purchase price. This is the "confirmation" that the "trade" went through, and was completed. You will need to see what the "order ticket" stated, as it should say "entered by custodian for benefit of "C". Again, the key item here is what happened to the cash proceeds from the sale? The account statement will show cash balances, as well as "positions" or securities holdings. I'm wondering what fully transpired here... Once you have all the history you can get, the main damage you'll need to assess is tax consequences. This is where it will get ugly. Technically "C" is responsible for any back taxes that may be owed (if any). If "C" discovers IRS liabilities, THEN she should seriously consider suing her mother and stepfather if they do not accept financial responsibility. A visit to your local IRS office should be on your list of main action items. Hopefully, as a note of support (and to reduce anxiety) "C" can walk in and be "coming forward" which is usually a good cause for granting "amnesty" for legal consequences. If there are tax issues, proceed carefully, we'll try to help with some generic advice there also, as that will come back to helping her credit reports also. There are some "ex" IRS agents on the forum who can help in this area also.
I want to thank all of you for being so willing to discuss all of this on the board. The victim as well as those people in the know. I'm sure I'm not the only one, who's reading this thread daily (or hoursly ;-) ) to see how things are playing out. This is an incredible learning experience in a field, that I've never dealt with. Especially, because we see it unfold piece by piece, just the way real life works. It's not just a sample case, it's the way we would see it happen, if it were to happen to us, starting off with a situation that seems beyond hope turning into something empowering with options. Thank you all for the lesson.
I agree with the possible tax consequences issue. And they could be significant. However, given that C appears not to be the initiator of trade activity, she would have at least a prima facia case for punitive damages that may offset any out-of-pocket costs that she may incur. The facts on the ground will dictate how best to proceed.
What is the saying?..this is when the rats start running from the ship?.. Obviously this need to be investigated, and the account history, and transactions "recreated" to be certain. The tax records will also need to be investigated. But, "C" does have legal grounds to claim this is not her "income, as of her 18th birthday, but that this was "theft", or at a minimum "misdirection of funds". She also has the defense of "Didn't Know" of these trades and liquidations, and hence are not "true withdrawals, therefore NOT income". But, unfortunately she is the one left to deal with the mess. She has grounds for actions against both the brokerage firm, and "Mom". I am captivated to know the true extent of the damage to the account..
yes, we are also very captivated by the possibility of finding out what has happened here Just FYI...Ani has also found what seems to be a home that my mother and step dad built as a spec house....interesting. Step dad didn't have a job at that time either and mom is a teacher's assistant. hmmm Oh and the spec house...it's listed now for $489,000
ok, that's interesting. Who's name is the property in? Are there any liens/mortgages against the home or is it owned free and clear? If there's equity, then it would be worthwhile at looking to possibly put a cloud on the title to keep them from selling without notifying you.
Just what I was thinking. I'd get an attorney, one versed in taxes and securities, and fast. Perhaps there's a way to cloud the title and keep the home from being sold, or if it is sold, have the proceeds go to C. After all, if it was bought with her money, it's rightfully hers. Better would be for C to live in it at least two years. That way any profit (up to $500K if she's married0 would be tax-free and could help with any expenses she's racked up, or with back taxes if the IRS assesses taxes and penalties against her. Like Bizwiz, I think she can make a case for not having any knowledge, and hopefully the IRS will either grant amnesty or give some relief on the penalties and interest. That's where the lawyer comes in.
I recommend going on line for your local county's website, and see who the recorded deed holder is, i.e. is it in your Mom's/Stepdad's names?, or are you listed on the mortgage somewhere? The information is there, just a quick search to find it. You are actually doing a quick title search yourself on the property. The reason I stress this is that legally property can be held in a trust account for a beneficiary by a custodian. I would be looking for mortgage dates, etc. to try and line up with any withdrawals from your account. If this is the case, then you can also stop the sale of the property, this gives you great leverage. The good news is that if this is a "spec house", usually they have a great margin/mark up, so there is a source of "equity" to go after, should you need to. As a suggestion for researching the account, and history of violations; if money is an issue for hiring accountants, attorneys, etc., try your local SCORE office (www.score.org), there are retired/active business professionals who give free advice, and I can guarantee at least one would take this on for a review! Another resource is any local college, they would also be able to help with some expert reviews and advice. And do not overlook your own bank, most have investment services now, and I'm sure they'd be glad to help. Perhaps as you've found out on this forum, there's a wealth of resources and information out there, a little research and asking goes a long way! Once again, I think the goal here is to put this mess behind you, and get you out of it as "cleanly" as possible, (avoid/remove tax consequences, clear up any debts in your name, clean up your credit reports, remove any "Public Records", set you up for your future life as best as possible). I sense you know the "money is gone", though there may be some hope of getting some back. It's all about moving forward now, and putting you on the best track for a new life. You still have a ways to go to "clean up this mess", but we're here for you to help with every aspect that we can. It sounds like you have a great family that you're marrying into, and that's more important than any "trust fund" could ever be. The good news that in this sloweer housing market, you'll have some time to research this account mess, and figure out the financial damages.
Being a Real Estate investor, this is what I would do to cloud the title: I would create a memorandum, saying, that I swear under oath, that I have an equitable interest in the property and that legal actions is forthcoming. Handwrite: Please cross reference to ...(insert address of the property) over the top (otherwise the clerk will only reference to your name) Then rush record it. Would this hold up in a court of law?No. But what it would do is make the closing attorney (when they do the title work, getting ready for closing) take notice. A closing atty does not represent the buyer nor the seller. He/She represents the mortgage company at closing. Subsequently, no atty would sign off on the title without at least contacting you (put ph# in memorandum) and finding out if the legal action has been filed, yet. In that moment you will have notice, that something's about to happen. By then, which is probably going to be months down the road, you will know more what happened and you will be in touch with an attorney. You might be ready to file suit and supplement your memo with a lis pendens. Your parents won't know until that moment, so they will keep up the house and make the mortgage payments etc. This would just be enough to make an atty stop with the closing and let you know what's happening with the house. I'm not a lawyer, so this is not legal advice.
