Raiding my retirement to help parent to CCRC??

[bingybear]

So if the grantors (your mom & dad), the trustee, and the beneficiaries all agree and sign off on the liquid trust assets being used for the CCRC and the trust is dissolved, who in the world will object? Since the trust will never be used to try to dodge paying for nursing home care, it's as if it never happened. If you're all in agreement and just did it, I'm not sure what the legal peril would be... who would object and sue the trustee?

I doubt it is that easy. The trust is an entity. I would expect it has its own tax number and files taxes. The parents are a beneficiary, not the owner. They really have no say in what happens with the trust. I think you need to go to court to break/dissolve the trust. This is usually AFAIK is because the trust can't fulfill it's purpose.

You're probably right that no interested party would object if the trustee violated the trust terms and just paid for the parent's LTC. But all risk would be on him.
One would also need to look at tax consequences. This is not like a revocable trust where the owner can pull assets out because they are owned by them.

Now the question could the trust create earning so they had to be distributed? That could make cash flow unless the trust also says it can't be used for LTC.

 

[pb4uski]

I concede that in theory there is legal risk of the trustee allowing a technical violation of the trust.... but it is along the lines of "If a tree falls in a forest and no one is around to hear it, does it make a sound?".

Would require some reasearch but the downside risk might be negligible if all interested parties sign off on it.

 

[Sunset]

Can a trust be sold, if the children (beneficiary of the trust) all sign away all benefits of the trust, and the trustee turns over trusteeship to the buyer of the trust. ?
After all the trustee must be able to hand over the reins somehow, what if the trustee died, and the successor died ?

I imagine it as sort of like selling life insurance benefits of a living person, or selling an annuity for cash.

 

[ERD50]

I concede that in theory there is legal risk of the trustee allowing a technical violation of the trust.... but it is along the lines of "If a tree falls in a forest and no one is around to hear it, does it make a sound?".

Would require some research but the downside risk might be negligible if all interested parties sign off on it.

That's what I gathered from a little googling.

Especially since it appears the trust was never actually used to protect the assets in any way, simply dissolving it would seem to almost be a non-event (but I am not a lawyer).

I think it would be different if it had been used to say, protect assets against a lawsuit, and then dissolved.

-ERD50

 

[GrayHare]

So if the grantors (your mom & dad), the trustee, and the beneficiaries all agree and sign off on the liquid trust assets being used for the CCRC and the trust is dissolved, who in the world will object? Since the trust will never be used to try to dodge paying for nursing home care, it's as if it never happened. If you're all in agreement and just did it, I'm not sure what the legal peril would be... who would object and sue the trustee?

Good points. If all beneficiaries sign off, I suspect that approach is the solution though it might not happen quickly.

 

[pb4uski]

The impression that I get is that the OP and his siblings (the trustee) and the parents are the only beneficiaries so it should be a pretty small group as long as everyone agrees.

 

[Texas Proud]

My sibling is the trustee. The way the trust is worded, my M&D can use earnings from the trust but not touch the principle.
They can't take out a loan on the assets since they do not own them. The trust does.
It seems very complicated. We hope to hear back from the other lawyer by next week.

As someone else has mentioned, there usually is a clause allowing principal to be used in case of health or welfare of your M&D.... I would be surprised if this is not the case...


Next, if it is only income that can be used, then sell everything and invest in REITS and other high dividend instruments.... when I was young and doing taxes there was one trust that was doing this... I had asked the partner why they were invested in these 'horrible' investments and he said to generate current income.... sure, the principal was declining over the years and they had a big cap loss carry forward they would never use, but they did generate an outsized income stream....

 

[Hermit]

Mom and Dad purposefully impoverished themselves using a very complex strategy so they could give more of their hard earned money to their children probably while only retaining the use of the house and income generated from their other assets. They did this while presumably of sound mind and body. Have they now changed their mind and is it now their wish to use the money they have already given away so they can live more comfortably than what is provided by the state? Are they still of sound mind and body to make such a decision? Do they want to? I guess as I get older I am starting to take the view of the older parents and I would want to make sure these changes are consistent with the parent's wishes.

BTW, if I were in the children's shoes, I would pay the costs that the parents could not afford just for my own peace of mind, but I am in a position where I could do that without jeopardizing my own retirement. I would ask the other siblings to contribute while knowing that all of them would not be in such a position.

 

[Spock]

Reading between the lines, the parents were anticipating medicaid coming after their assets to reimburse for medicaid paying for their eldercare,
So grant the parents wishes by placing them in a a medicaid facility.

If the beneficiaries of the trust have the financial ability to pay for upgraded facilities while deferring reimbursement until the parents die and the trust is distributed, go for it.

The problem appears to be that they started shopping for a Cadillac (fancy CCRC) when all they originally budgeted a KIA.

 

[tinlizzy]

Maybe they set up the trust to ensure their children had to care for them in a home setting?

 

[Sunset]

Maybe they set up the trust to ensure their children had to care for them in a home setting?

Well since it's out of the parents hands, what they really did was set it up so the children can abandon the parents under some bridge as nothing will stop the children from benefiting from the trust.

 

[tinlizzy]

Well since it's out of the parents hands, what they really did was set it up so the children can abandon the parents under some bridge as nothing will stop the children from benefiting from the trust.

I got that from reading the thread. I wasn't knocking the kids but rather pointing out that some people find the thought of nursing homes so distasteful they might have thought this was a foolproof plan to avoid one.

My aunt and uncle set up a trust for their estate and my four cousins will only inherit when they each turn 68. Not one word about the trust when they were alive - total surprise.

People do screwy things.

 

[ChrisC]

I doubt it is that easy. The trust is an entity. I would expect it has its own tax number and files taxes. The parents are a beneficiary, not the owner. They really have no say in what happens with the trust. I think you need to go to court to break/dissolve the trust. This is usually AFAIK is because the trust can't fulfill it's purpose.

You're probably right that no interested party would object if the trustee violated the trust terms and just paid for the parent's LTC. But all risk would be on him.
One would also need to look at tax consequences. This is not like a revocable trust where the owner can pull assets out because they are owned by them.

Now the question could the trust create earning so they had to be distributed? That could make cash flow unless the trust also says it can't be used for LTC.

My MIL set up an irrevocable trust, managed by my wife as trustee, primarily for the benefit of my BIL who has MS and is an assisted living facility. The trust was also set up to enable MIL to get VA Aid and Attendance benefits but those plans went awry when she passed away before we could file the VA application -- we blew away the idea of her getting Medicaid benefits -- she was in assisted living facility when she passed away and if she ever needed skilled nursing care -- my wife and I were going to pay for those medical expenses minus any pension and social security income available to MIL.

MIL's trust is a non-grantor trust that has it's own tax EIN. We will soon be filing our first tax return for the Trust. In reading this thread, I'm surprised that the OP has not mentioned any tax filings or trust distributions. No trust distributions? Is trust income retained by the trust? And how are the trust assets invested?

Sounds like the OP's parents might have set up something they (or other family members) didn't fully understand. If the OP's sibling is the trustee, then I hope she has a good grip on how this trust is supposed to operate, but if it's a non-grantor trust (which means the grantors cannot benefit from the trust), then I hope there is an alternative source of resources and income to help OP's parents get into CCRC or an assisted living facility -- this might be something to discuss with the Trustee, if she has complete discretion over trust distributions.

 

[pb4uski]

albireo13, any update? What happened?

 

[albireo13]

So, latest update ...
we've inquired with several lawyers and have embarked on dissolving the trust. Apparently it is not too difficult if all parties involved agree and sign for it. Anyway, I hope it can be completed within a few weeks.

At that point the assets will all be available for my parents to use for their care.
It may be possible to re-establish a trust after they have gotten into the CCCRC .... TBD.

Anyway, a great learning experience. Not out opf the woods yet but, there seems to be a plan now.

I'll update as things progress. Thanks to all.

 

[pb4uski]

So will your parents miss out on the CCRC slot that was being held for them or will they hold it open for them while this all ts sorted out?