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as the grantor of the trust. Hamilton’s involvement was a mere
formality; she signed the trust document and funded the trust
with a nominal amount. Considering the economic realities, the
true grantor of the trust was Richard Pelham. Richard Pelham,
upon the advice of his tax preparer, consulted with an attorney
who drafted the trust documents, and Richard Pelham paid $2,495
for the trust package and asked his daughter to write a check for
$700 to the trust. Richard Pelham also transferred intangible
assets to the trust, such as the business name and the ongoing
business operations of Lake Lock & Key.
The business was operated in substantially the same manner
both before and after the trust was created. The business and
its activities continued under the same name, used the same work
order invoices, used the same taxpayer identification number for
filing its State unemployment tax return and sales tax return
with the State of Texas, and used the same business equipment.
After the establishment of the trust, Richard Pelham continued to
manage and work for the business.
The trust did not have an independent trustee. Richard
Pelham had control over the trust activities and trust assets.
Richard Pelham was named as the sole trustee of the trust, and he
had exclusive control over the trust and the business operations.
Richard Pelham paid the personal expenses of the Pelhams from the
trust bank account. Additionally, Paula Pelham was named as
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Last modified: May 25, 2011