Raiding my retirement to help parent to CCRC??

[Sunset]

This thread is very valuable as I had always heard of trusts, and know some relatives that have property in a trust.
It has seemed like an estate planning or protection instrument.
But I've been too cheap to consider getting one.

Besides the good points to having one, now I know of one thing that is bad about them.

I don't understand, why cannot the OP parents make the trust spend some money on themselves ?
If it is because only the trustee can do this, and they are not the trustee, then who the heck would the parents have given all that power and control to ?

 

[brucethebroker]

If I loaned the money to help out Mom and Dad, I would put the debt in writing, with payment schedule, and have my parents sign it, plus have all siblings witness it with signatures. Something happens to Mom and Dad in the future, and the siblings might "forget" you loaned the money. Inheritances can do that.

 

[Aerides]

I would not borrow against your 401k, can you look into a HELOC instead?

I'd want to have a very clear picture of all the legal parts and the certainty of this trust becoming available in the short term before I touched anything.

 

[albireo13]

Oooops, I meant a 401K loan.

They need >$200K for the CCRC closing, more than I can get with a HELOC.

From what I'm hearing from the layer, most trusts he deals with are revocable.

 

[pb4uski]

How much can the trust could provide now? And over time? If so, perhaps the CCRC might accept a substantial amount down and monthly payments to give you and your parents time to sort out the situation.

Who is the trustee?

 

[audreyh1]

This is sort of blowing my mind. So the parents tied almost all of their money in this irrevocable trust to pass it on to the kids and now don't have the money they need to pay for their long-term housing needs?

 

[audreyh1]

I would definitely speak with the CCRC as soon as possible. I would bet they have familiarity with this situation or similar and might help arrange a bridge loan until the house is sold.

But the house is also in the trust?

 

[jj]

Where's the original lawyer who set up the irrevocable trust? What do they have to say about this?

 

[Dash man]

We just updated our estate plan and used revocable trusts that won’t be funded until the first of us passes. An irrevocable Trust was discussed as a future possibility if we exceeded the estate tax exemptions because the irrevocable Trust removes the assets put in the trust from the estate to avoid estate taxes. You basically relinquish control of the assets when they are put into a irrevocable Trust. If the beneficiary is the mother, to me this trust doesn’t make sense. If it’s another beneficiary the assets are likely tied up until the death of both parents. Sounds like a major mistake. I’d recommend seeking out a different estate attorney to look over the trust for a loophole and check the title of all assets to make sure they are actually part of the trust.

 

[albireo13]

This is sort of blowing my mind. So the parents tied almost all of their money in is irrevocable trust to pass it on to the kids and now don't have the money they need to pay for their long-term housing needs?

Pretty much that's it.

 

[albireo13]

But the house is also in the trust?

Yes, the trust owns the house. The house can be sold but, the proceeds of the sale are owned by the trust.

 

[bingybear]

How long has the trust be funded? Has it been more than 5 years? My guess if that is true, you may be looking for a nursing home that will take them if they have 2 ADLs that they need help with. You would be spending down what they have outside of the trust and getting them into medicaid.

 

[ivinsfan]

This is sort of blowing my mind. So the parents tied almost all of their money in is irrevocable trust to pass it on to the kids and now don't have the money they need to pay for their long-term housing needs?

I wouldn't touch this situation with a 10 foot pole..in my mind the kids need to come up with the needed funds..you're going to get paid back when the parents die and you get the money they had to "protect" from going to eldercare costs

 

[ncbill]

If I loaned the money to help out Mom and Dad, I would put the debt in writing, with payment schedule, and have my parents sign it, plus have all siblings witness it with signatures. Something happens to Mom and Dad in the future, and the siblings might "forget" you loaned the money. Inheritances can do that.

That won't protect the OP, since the parents have divested themselves of their assets

Those assets, now held in the irrevocable trust, will be distributed under the terms of that trust, regardless of the parents' debt obligations.

My guess is the trust terms are very restrictive, allowing only the earnings (but none of the trust principal) to be used for the parents' support.

 

[pb4uski]

This is sort of blowing my mind. So the parents tied almost all of their money in is irrevocable trust to pass it on to the kids and now don't have the money they need to pay for their long-term housing needs?

Hoisted by their own petard.

The unintended consequence of trying to cleverly avoid using your own resources to pay for your own nursing home care and get Medicaid to pay so that money can go to the kids.

 

[Texas Proud]

I did not read all the comments, but I would ask your parents to take out a loan against the trust....

I would not want to keep my assets from being in the market when they created the problem....


One question is... who gets the remainder of the trust when they pass

 

[ERD50]

This is sort of blowing my mind. So the parents tied almost all of their money in is irrevocable trust to pass it on to the kids and now don't have the money they need to pay for their long-term housing needs?

Pretty much that's it.

Where's the original lawyer who set up the irrevocable trust? What do they have to say about this?

Wow. I have only a tiny exposure to this stuff, but the irrevocable trusts I've seen or read about have an exclusion to be able to spend for care of the grantor. But maybe that was eliminated to try to keep funds away from a nursing home? I'd def want to talk to the original lawyer.

This is not directed at the OP, I realize they are in a tough bind and are looking for help, not a lecture (and they may have had nothing to do with this anyhow), but I guess this is a lesson for all of us - be very careful if you try to have your cake and eat it to. In trying to keep funds away from a Nursing Home, they ended up keeping the funds away from themselves.

But since the kids are the beneficiaries, then yes, it seems like the kids ought to do whatever they can to help the parents out. Hope you all get along...


Can the siblings come up with some cash, or take out a loan? Or is this just your share you are talking about? Or maybe just a matter of timing, faster to get one loan than co-ordinate with others?

Good luck.

 

[ERD50]

I did not read all the comments, but I would ask your parents to take out a loan against the trust....

I would not want to keep my assets from being in the market when they created the problem....


One question is... who gets the remainder of the trust when they pass

Three people have asked "Who is the trustee?", but no answer from OP (unless I missed it). This is critical. The parents may not be able to take out a loan, even if they are trustees, if the trust doesn't allow for it?

-ERD50

 

[growing_older]

If all the assets are tied up in the trust and the trust prevents using those assets to pay for the CCRC, why would the CCRC accept them? Does the CCRC know that as soon as they are admitted they are planning to apply for Medicaid, since all the assets are already committed to heirs? This sounds like a poorly planned trust or an overly aggressive attempt to manipulate government safety nets.

 

[albireo13]

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.

 

[pb4uski]

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?

 

[bobandsherry]

Wondering why OP's parents created a trust like this to begin with. Advise to speak with a qualified lawyer is only real way to resolve this. Any other advise is worth what OP has paid for it.

 

[Sarah S]

My parents had similar but we chose not to utilize medicaid and paid for my parents' care. However, I do remember being told by the trust lawyer he had left a tiny string that could undo the trust if needed. I don't know how it worked but it sounded as if it was his standard practice. Definitely get good legal advice from someone who really knows this part of the law.

Good luck

 

[ncbill]

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.

In that case the only fair way to handle the CCRC fee while leaving the trust intact is to assign its payment proportionately among the children.

So if two children, each pays half of the CCRC fee and waits to get reimbursed via the assets in the trust after the parents die.

 

[ncbill]

I should also point out that years ago I read posts from a lawyer who pointed out that their state (CT?) passed specific legislation allowing the state to "bust" Medicaid trusts to get access to the underlying assets.

So anyone thinking of taking the route of the OP's parents should carefully discuss it with a qualified attorney, since the trustee might have to domicile any trust outside the state of residence to protect assets from seizure.