I am trustee of my fathers trust. He is still alive, but he is living in a residential care facility. Can I sell his home, or even buy it for myself? Or do I need to wait until he is longer with us?
Sherry
Dear Sherry,
It is certainly possible for you to sell your father's home to raise money for his care. You can even sell the home to yourself. But you have to be careful. As trustee, you owe your father a fiduciary duty of competence and loyalty. Simply put, everything you do as trustee is supposed to be for your father's benefit, not for your own.
So while you can sell yourself your father's home, you have to pay a fair market price for the property instead of giving yourself a sweetheart deal. If you buy your father's home for less than what it's really worth, you can get sued by your father or someone acting on his behalf for a breach of fiduciary duty or even financial elder abuse.
You could even get sued by your brothers and sisters, because the fiduciary duty your owe your father as trustee passes to all of the trust beneficiaries upon your father's death. Understand that as a trustee, you can be made to account for everything you do with your father's assets, both during his lifetime and after his death. If you want to play it safe, you should build an understanding among you, your father, and all of his other beneficiaries.
But that's not all. Know tax consequences of selling your father's home. If you sell the home while your father is alive, there will be capital gains tax. While your father can deduct the first $250,000 in capital gains from taxation if he has lived in the home for two of the last five years, this deduction may not be enough to prevent your father from having to pay tax on his capital gains. But if you sell the home only after your father's death, there will be no capital gains tax due at all because of the step-up in cost basis the home will enjoy on his death.
Selling his home now will also make it more difficult for your father to qualify for Medi-Cal benefits should he need nursing home care, because a sale of the home would turn an exempt asset (the home) into non-exempt cash that counts against Medi-Cal's $2,000 resource limit.
Sometimes it isn't so easy. As a trustee you need to walk a careful path that will protect your father and his interests while protecting yourself from potential liability. If you do want to proceed with buying your father's home, you really need to review the matter in detail ahead of time with a trusts and estates attorney.
Len & Rosie
Dear Len & Rosie,
My aunt is 88-years-old. She has become deeply involved in the sweepstakes scams and no amount of discussion or persuasion will convince her she has not won a million or more dollars. Other family members, friends, her bank's manager, and the local police have also talked with her. She continues to send several checks a day to these people in the amount of $20 or more. She buys unneeded junk at premium prices and magazines which she does not read. She gets over ten of these letters a day.
She now gets phone calls asking her to wire $15,000 to some address and to be sure not to tell any of her relatives. The manager at her bank fortunately did convince her not to send the money. Someone saying she is from Publishers Clearing House has been calling telling her she is coming with balloons and flowers and will stay with her all day to help her manage all the money she has won. Is there some way for me to stop these sweepstakes mailings to her?
James
Dear James,
The next time you see one of the normal sweepstakes letters, not the illegal scam letters your aunt receives daily, read it closely instead of throwing it away. Sweepstakes solicitations are written to confuse people into believing that they have already won. The fact that you may not have the winning entry is buried in the fine print. People susceptible to undue influence fall for these letters, and wind up buying magazine subscriptions in the mistaken belief that doing so increases their chances of winning. Even "legitimate" sweepstakes solicitations take advantage of the elderly and naive.
Illegal scam sweepstakes letters take this a step further by proclaiming outright to be the winning entry, leaving out the disclaimer in the fine print. Instead of asking the elderly to buy a magazine subscription, the letters request a modest "processing fee". Most people see right through this and throw away the letters, but many elderly persons buy into it, because there are enough legal sweepstakes out there to make them believe that the one they received is for real. Anyone like your aunt who sends a check gets put on a "sucker list" and is targeted by many different scammers all selling the same false promises.
You should contact the Postal Inspector's office of the US Postal Service and let them know what is going on. There is little you can do to stop your aunt's mail. The best way to protect her may be to take away her checkbook and take over the management of her finances, either with a power of attorney or trust, or even by filing for a conservatorship if your aunt is not willing to help you protect herself.
Len & Rosie
Dear Len & Rosie,
I am one of nine children. Our father is deceased, and mother has severe dementia. There is a family trust and a bypass trust, with the three oldest sons as trustees. Can I request an outside audit to see what is going on with the family money?
Trish
Dear Trish,
Years ago, your parents created an A/B trust. When your father died, the B trust (the bypass trust you mentioned) should have been funded with your father's half of your parents' assets, up to amount that passed free of estate tax in the year of your father's death. Everything else should be held within the A trust (the family trust). Your rights with each of these trusts are different.
You are probably not entitled to an accounting of either trust. Unless the trust says different, you are entitled to an accounting only if you are, right now, entitled to distributions from the trust. Chances are, both trusts exist solely for your mother's benefit until her death.
For the B trust, while you're not entitled to an accounting, you should be entitled to general information regarding the assets owned by the trust and how the trust is performing. But the trustees do not have to tell you anything at all about the A trust, because only your mother has a right to that information while she is still alive.
You have options. If you believe that your brothers are mismanaging the trust, you can petition the court on your mother's behalf to demand an accounting. You can do this only if your mother gave you a power of attorney while she had the ability to make decisions, or if you are appointed by the court as the conservator of her estate.
The other option is to wait until your mother's death to demand an accounting. Your mother's right to an accounting passes to her children and the trust beneficiaries upon her death. After your mother's death, it is possible for you to force the trustees to account for every thing they have done with the trust's assets for the entire time they have served as trustees.
That's the legal answer. What you really ought to do is to sit down with your family and discuss the issue like rational adults. Do not accuse your brothers of doing anything wrong unless you have a good reason to believe they are taking advantage of your mother. Hopefully your brothers will see that you are only trying to look out for your mother the same as them and be a little bit more open with information about your mother's finances.
Len & Rosie
Dear Len & Rosie,
My mother-in-law Hazel, passed away recently. Her daughter, my sister-in-law, was put on her bank account and a mutual bond fund when Hazel could no longer manage things on her own. She withdrew all of the money out of the account even though Hazel had a will splitting her estate fifty-fifty with her children.
Please warn your readers about this happening to them. Our case is in court now, but we have to prove Hazel's intent that everything be divided equally. Our case looks really weak, but if at least I can spread the word. You never know what a sibling might do when a death occurs. Parents need to know to be very specific when making out their wills.
Sharon
Dear Sharon,
Experience has lead us to expect the worst from people when a parent or other relative whose estate they have an interest in dies. In most cases, children get along well with one another and are happy to cooperate to make things fair. But more often than we would like to acknowledge, otherwise normal, kind and caring people become crazed and turn on their siblings like wolves fighting over a bone.
It is unfortunate that we cannot assume the good intentions of our children. The best way to make sure our assets are divided the way we want upon our deaths is to create an estate plan, either a revocable trust or a will, that clearly and concisely spells it out. Hazel this this, but there was a glitch. She had a will that divided everything up equally. But she made a mistake when she put her daughter on her bank accounts as a joint tenant. Joint tenancy property does not pass through probate, no matter what the will says. Your sister-in-law was well within her legal rights in keeping the money with only a "Sorry, Charlie" to your husband. Her morality is different question.
How could this have been avoided? The easiest way would have been for Hazel to put both of her children on her bank accounts instead of just her daughter. Or, she could have added her daughter to her bank accounts using the bank's power-of-attorney forms. This would have allowed your sister-in-law to pay her mother's bills without becoming a joint owner of her mother's bank accounts. If Hazel owned enough assets that avoiding probate was important to her, then she should have created a trust.
Adding children to your accounts as a joint tenant is a cheap and easy way to avoid probate. But in Hazel's case, it backfired. You can be sure that your lawyers will earn more money in this lawsuit than they would have earned in probate fees if Hazel's estate had been subject to probate. Its a hard lesson to learn, Sharon, but maybe you'll get lucky and win in court. Good luck.
Len & Rosie
Dear Len & Rosie,
My mother has been diagnosed with the early stages of Alzheimer's disease. I am her only child. It has been twelve years since her trust was written. I have concern's that a family member has influenced her to change the trust to her benefit. I can't remember the name of the original attorney who drew up the trust. Is the trust part of public records? If they are, can I review them? If I am able to find the attorney who drew up the trust, can I call them up and ask for a copy of the trust? Can I ask if it has been changed? If the trust has been changed. What are my legal options?
Annie
Dear Annie,
Trusts are not public documents. They are not recorded anywhere. However, you may be able to identify the attorney who prepared your mother's trust by examining the deed to her home. Get a copy of the current vesting deed (the last recorded deed) to your mother's home from the County Recorder or a title company in the county where you mother's property is located.
Many attorneys prepare and record deeds for our clients. When we do so, we have the deeds sent back to our office from the County Recorder so we can make sure that the deeds are properly recorded. So if the name of your mother's attorney is on the deed, you can contact him or her. Also, lawyers are frequently also notaries. You can check the California State Bar attorney search page age www.calbar.ca.gov to see if the notary is an attorney. The State Bar webpage will also provide you with the address and telephone number of the attorney.
Unfortunately, this may not solve your problem. Your mother's lawyer is not going to provide you with a copy of your mother's trust or answer any of your questions while your mother is alive and has not be deemed incapacitated. The attorney owes your mother a duty of confidentiality, so he or she won't answer your questions unless your mother is incapacitated and you are named within the trust as her successor trustee.
Talk to your mother about this. An early diagnosis of Alzheimer's does not mean she is incapable to talking to her attorney and asking him or her to provide you with a copy of her estate planning documents. If your mother is incapacitated, the lawyer should provide you with the information you need unless your mother changed the trust and named someone else as successor trustee. If this is the case and you suspect foul play, you may want to see an attorney and consider filing for a conservatorship over your mother.
Len & Rosie
Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at (707) 996-4505, or on the Internet at www.lentillem.com. Len also answers legal questions each weekday, Noon-12:45 PM, and Sundays, 4-7 PM, on KGO Radio 810 AM.
