A testamentary trust exists for the benefit of someone to use the dividends and interest as income until the time of their death. At that time the principle of the trust is then distributed to the trustees. During the life of this trust, can any of the Trustees take a loan from the principle and pay it back to the trust with interest, as an investment?
Answer
It may depend on the language of the trust, in terms of what the trustee is permitted to do. However, it's probably never a good idea for the trustee to be borrowing money from the trust [huge conflict of interest], even if the trust agreement were to allow it.
Answer
I agree with Jon, that it depends upon the language of the trust. I also agree that even if permitted, this is not a good idea.
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