Tribal officials met with legal and financial experts on February 27th during their regular executive session. The question before tribal leaders: is the tribe doing everything it can to ensure the proper handling of minors’ trust accounts and tax preparations, and what can it do to improve any concerns about the program?

Since the program’s inception, the Tribal Council has taken action to facilitate trust access for specific reasons, and over the years has consistently revisited the program’s guidelines and operations to ensure that the tribe is adhering to standards as set forth in the Indian Gaming Regulatory Act.

There have been some points that have come to the Council’s attention that warrant a review of the program once again.

Tax Payment & Filing Procedures

When a child is born to a tribal member, the tribal parent takes steps to enroll the minor. Once enrolled, the finance department moves to establish a trust account for the child after the parent has completed a Trust Adoption Agreement (TAA) form.

From the point that the TAA is executed, the tribe begins making monthly deposits in the minor’s trust account, except for the months of February, March and July. The first two noted here are sent directly to tribal parents to go towards any additional taxes that might be owed on the child’s trust besides what has already been withheld as monies are distributed
each month.

Tribal parents or legal guardians of tribal minor children or incompetent members (with special needs unable to handle their own affairs) are obligated to see that the proper tax forms are
filed each year for each minor’s trust account. In some cases, the trusts owe more taxes than the amounts that have been withheld by the tribe throughout the year. The February and March direct distributions to parents are specifically meant to be used to meet those additional tax requirements.

There have been cases where a child’s trust owes more than what has been withheld plus the two distributions. In those few cases, the excess monies owed to the federal or state governments are able to be withdrawn from the child’s trust account at JP Morgan. The parents must show proper documentation to the trust advisor at JP Morgan that indeed additional monies are owed to the IRS before trust funds can be withdrawn for this purpose and checks
from the trust are made directly payable to the IRS.

There have also reportedly been cases where parents combined their income with the minor child’s trust income totals and then requested funds from the child’s trust account, when in fact the tax burden was due to not enough being withheld from the parents’ income during the course of a year.

The Tunica-Biloxi Tribe of Louisiana is obligated by federal law, the Indian Gaming Regulatory
Act, 1988, protect and preserve “the interests of minors and other legally incompetent persons who are entitled to receive any of the per capita payments” [§ 2710
(b)(3)(C)].

The tribe must act to protect the minor’s interest and trust property. For that reason, parents wanting to access their child/children’s trusts for their own tax obligations
have been refused this access.

One of the questions tribal officials discussed with financial and legal experts specializing in tax matters and trust estates at the February meeting, is what about cases where parents are not having tax returns prepared for the children’s trust accounts or are not preparing the tax returns correctly? If a tribal parent/legal guardian fails to file tax returns on behalf of their minor child/children, this could result in the trust account being cited for failure to remit required taxes and penalized for such failure as well. In this event, the child would suffer, their holdings would suffer, due to the failure of their parent/guardian to have the necessary paperwork filed with the IRS for their benefit. In fact, JP Morgan reported to the Tribal Council that there are 23
trust accounts that are having taxes withheld as a result of mandates
from the IRS.

The Council is concerned with this scenario and wanted to look at what can be done to protect
the minor children and their financial security. The Council wants to be sure it is doing everything reasonably possible to protect the interests of the minor children.

Tribal attorney Brent Pearson (tax and estate planning specialist) and the trust advisor from JP Morgan, Mike McCoy explained that the tribe might indeed be creating a situation of increased liability by making tax payment distributions across the board when, in fact, it might not
be necessary. If the taxes withheld by the tribe are sufficient for a given year’s tax obligation, sending out per capita payments for tax payments could create a problematic legal issue for the tribe some time down the road. The Council asked for input from three other attorneys, PJ Laborde, David Laborde, and Chris Verret, and all agreed, the best course of action would be to only distribute additional funds for required tax payments once parents showed proof of need for additional funds through submission of completed returns.

The trust advisor along with the attorneys indicated that it would be better to deposit all of a minor’s per capita payments throughout the year and allow the bank to make quarterly estimated payments (thereby keeping more of the trust principle in the account earning interest income rather than making monthly payments to the IRS). At the end of the year, if any additional monies are owed to the IRS, those taxes could be accessed from the minor’s
trust account.

The discussion turned to‘what about the distributions for school supplies/expenses/uniforms’? In light of the multiple legal opinions about making distributions without proof of need, the Council wants to be sure it continues to adhere to guidelines established
in the current Master Trust Document without compromising the liability of the tribe. At the same time, all parties recognized that to require the submission of documented proof of need and expenditures for all 500+ trusts would create a tremendous burden on parents, the tribe, and the trust advisor.

The Tribal Council wants to maintain this assistance to parents, and the solution considered, but not decided definitively, is to develop a graduated scale of distributions. In other words, parents would receive a portion of one’s month’s per capita for school uniform/supplies. It would start at a designated level and gradually increase over time as the minor grew and their needs theoretically increased.

JP Morgan has submitted a proposal to prepare the taxes for any minor’s trust if the parents or Council should so choose. While the Council did discuss this possibility, they are currently leaning towards giving parents the option to prepare their children’s tax returns themselves or having the trust advisor do so. JP Morgan has a tax division that is totally devoted to the taxation needs of their clients. The Council may take action to require that tax returns for minors whose parents are not filing the returns at all or filing incorrectly, be filed by the trust advisor in order to protect the trust assets for those children.

Renunciation of Benefits

Another question before the Council is, does a tribal parent/ legal guardian have the right to refuse per capita payments on behalf of a minor? Right now, the Second Amended Master Trust
Document allows for tribal parents to refuse per capita for their children...

“...the Trustee shall execute a TAA on behalf of the beneficiary unless the parents, legal guardians, or other duly authorized legal representative of said Beneficiary shall have executed a Renunciation of Trust Benefits renouncing and waiving all benefits which would otherwise inure to the minor under the Tunica-Biloxi Revenue Distribution Plan.”

Tribal leaders had begun to question if it is in the best interest of minors to allow parents to
renounce per capita payments for whatever reason(s). Further, does the Council or Tribe have the right to pass this decision off to the parents of a minor tribal member? Specifically, under the Indian Gaming Regulatory Act, the Tribe, as cited earlier, is charged with the responsibility to protect and preserve the per capita payments of minor children or incompetent
tribal members.

In the case where a tribal parent does not wish to create a trust for their child for whatever reason, some tribal leaders are supporting setting those funds aside until the minor child reaches a majority age and can decide for themselves whether or not to take the monies.

If the tribal parent refuses to set up a trust for their child, the tribe can establish one, but the trust would be taxed at the maximum rate allowed. Despite this, the minor’s interest would still be protected to the greatest extent possible by the tribe minimizing the potential liability to the tribe. This issue and a solution will most likely be added to the next amended version of the Master Trust Document.

Emancipation Issues

Officials also considered emancipation issues that might affect tribal members. Legal advisors clarified for Council members when and how a minor might obtain the legal status of being emancipated--being free to make decisions as if they were 18 years of age. Officials discussed how this designation would impact trust access procedures for an emancipated individual.

Financial Training Called For in the Master Trust Document

The last and yet not least important issue considered during this important meeting was the requirement for formal financial training of tribal members seeking closure of their trust accounts. The Master Trust Document calls for 6 hours of class instruction in accounting/ finance/money management...

“...each beneficiary shall have taken a financial planning course of no less than six (6) inclassroom hours of instruction. The Tribe must approve all financial planning courses.”

Since before the spring of 2004, the Tribal Council has allowed members wishing to close out their trust accounts to submit a letter from a financial advisor stating clearly that the member has met with them and discussed the importance of financial planning. There has been some concern that this simpler and less demanding requirement could be creating a liability for the Tribe as Settlor and Trustee of the trust accounts.

It is significant to note that the trust attorney Brent Pearson indicated that he never advises clients to distribute or close out a trust before the age of 25. Pearson also noted that under Section 5.2 of the Master Trust Document, the tribe does have the ability to allow the lesser requirement of simply meeting once with a financial advisor.

Discussions of late have focused on the importance of adhering to the more stringent requirement especially in light of the Council’s desire to have tribal members closing out their trusts act responsibly in the handling of their trust funds.

JP Morgan has offered to conduct such classes in the metropolitan areas of Houston and Chicago as well as in Marksville, Louisiana.

There has also been talk of beginning those financial planning classes before the age of 21, carrying them out earlier possibly starting at the age of 18 and having them repeated over the 3 years until the age of 21 when tribal members are able to close out their trusts. The belief is that with repeated instruction and guidance at an earlier age, members would be more inclined to follow the advice and learn to practice responsible money management.

By instilling good money management skills in the young tribal adults, it is hoped that they would handle their financial affairs more effectively, planning for and ensuring their future financial security.

The results of the meeting with tribal legal and financial consultants will be published in a future issue of the tribe’s newsletter as some changes will be made to the Second Amended Master Trust Document.