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katiekat2009 Asked July 2013

Could I set up an irrevocable trust for mom while I have POA?

Would this work? I'm looking at selling some land of my mom's which would
put a sizable chunk of money in her account (I'm her POA.). In order to make sure that this money is used only for her care until she dies, could I set up an irrevocable trust for her while i have POA?

GardenArtist May 2016
Good point; ask an attorney on Law Day.

Back to the issue - what exactly is the wording about irrevocability? Something's missing here - a trust doesn't become irrevocable generally after one of the Settlors dies.

momcare101 May 2016
Thanks GA. Both mom and dad signed the trust as Trustors and Trustees, with three children listed within the trust as successor trustees. In a separate paragraph immediately after the sentence that says if both or either trustor becomes unable or incompetent, my name is listed again separately as power of attorney. A durable power of attorney was executed and signed on the same day as the trust and it lists all three children's names in order of succession. It is the bank's underwriter who is looking at this and keeps saying we cannot touch it because after dad died it became an irrevocable trust. But i question if that person is reading further than the word "irrevocable" to where it discusses incompetence and transfer of power to me. Mom suffers from Alzheimers and is definitely incompetent (we have a letter from her doctor). Very frustrating. As luck would have it there is a local law day this week with attorneys donating their time to assist with legal questions so i'm going to take the trust and see if someone can advise me before I shell out $ for a trust lawyer.

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GardenArtist May 2016
Momcare, I think some of the information being given to you is incorrect, but it depends on how the trust was structured.

1. Who are the "Settlors", i.e., the persons who executed the Trust? Was it your father or your father and your mother?

2. If both your parents executed (and created) the Trust, there should have been provisions (as well as a Pour-Over Will) addressing how his assets were to be handled on his death, as well as succession of trust management (i.e., your mother assumes his responsibilities).

3. If your mother was a co-Settlor, she could still make changes; that's correct.

However, if your father executed the Trust for him and your mother, and she's now a Trustee rather than a co-Settlor, that's a different story.

4. Is your mother unable to make decisions, and/or does she have cognitive functions that render her unable to manage the Trust? Is this provision in the Trust itself or in a separate POA?

5. I would try different banks to get a HELOC to finance your mother's care. I went to 4 different banks when I needed to get a HELOC to maintain and repair my sister's house after her death, and found that most of them had no idea how to deal with a Trust. Only Chase put me directly in contact with the trust legal team in another state so we could work out the details. The 3 other banks were clueless.

momcare101 May 2016
We live in CA. Mom and dad's trust was revocaheble as long as one survived. Upon dad's death the trust became irrevocable altho it states mom (surviving trustor) can still make changes and decisions regarding the trust. It also has a clause that states if she becomes unable or incompetent to make decisions then the power of attorney (me, her daughter and also named successor trustee) can assume those duties. Mom is running out of her retirement funds and requires care. I want to get a line of credit from her house (all equity, no mortgage) to continue to pay her care. Bank says since it is now an irrevocable trust it can't be done. Why then does it say I can assume her decisions on the this trust if she becomes incompetent? What is my recourse? Thanks.

mlface Aug 2013
we live in WA and are meeting to set up irrevocable trust. Cost $4500 which could save you much more. The attorney was recommended by 2 people in different cities. They say make sure you have a trusted trustee for the trust.

momhouseme Aug 2013
I know someone whose wife is in skilled nursing past stroke; she will never return home. He got the irrevocable and since her 1/2 got spent on the NH he has a pot load of money; she sold a home over 1 milllion and purchased a condo for 800k and just bought a new 40k something car...he evaded medicare for sure!

pamstegma Aug 2013
Put the money from the land sale in a separate account that pays out to her in the monthly amount that she needs. You cannot hide the money from Medicaid at this point, many states are already passing laws that enable them to seize irrevocable trusts.

VeteranCaseWrkr Aug 2013
Yes, you can touch the money in an irrevocable trust. Just make sure you use a good Attorney who is very familiar with setting up the EIN and explaining to you how to transfer assets. Make sure you retitle the home to the trust before the close of escrow. If you are in CA I can help you, send me a private message.

ferris1 Aug 2013
You do say if your mother is competent. If she is, she will have to make the trust, and whether or not it is irrevocable or revocable will depend on her wishes. An attorney can advise which is which for her. If she is incompetent, did her POA state you could act on her behalf in real estate transactions? If it does, then you can sell the land, but again, consult a real estate attorney concerning land deals. Thank you for wanting to provide for her livelihood.

CarolLynn Aug 2013
Keep in mind that there are tax consequences too. Depending on the purchase price of the property plus any allowable improvements deducted from the sales price of the property gives you the net profit upon which capital gains taxes are calculated. If this was not a residential property that she lived in, there is no exemption so the text structure could be relatively high.

If the funds you have allotted for private take care exceed her lifetime to the extent that she would still own the property at the time of her death, the property is "stepped up" in basis. The new basis is the value of the property on the day of her death. Example: if she bought the property for $5000 and put in $1000 of improvement, the "basis" is $6000. If you then sell it for $106,000, your mom pays capital gain on $100K. BUT, if you are able to hold onto it until her death, and it's worth $120,000 on the day of her death, the basis is "stepped up" to $120,000. If you sell the house the next day, the capital gain is $120K minus $120K ir "zero" so there is no capital gains tax.

So you see, there's a financial trade off whichever way you go which is why you want to make sure you know what the options are and why you're doing what it is you're doing.

CarolLynn Aug 2013
Be careful about a revocable trusts. There ARE reasons to have them but you must be sure you need one for her. You must consult an elder care financial planning attorney. A lot will depend on her age and what's wrong with her and how long her existing funds are projected to last.

momhouseme Aug 2013
the trust you are talking about usually and I recall, ties up the money.....

momhouseme Aug 2013
Completely understands an irreovable trust before you enter into one because that money is untouchable .....please consult an attorney and get second and third opinions. In our area seminars were offered about these types of trusts. Not to mention the trust back when I was exploring cost 10k+ Understand what this trust does and how it ties up monies

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