A son has contacted an elder law estate planning attorney now that mom is in a nursing home and he’s unsure about many of the planning issues, as reported by the Daily Republic. The article, “Amending trust easier if parents can make informed decision,” describes the family’s situation, but what it really boils down to is, can a trust be amended?
There is one point to consider from the start. If the son been involved in the planning from the start, in a family meeting with the attorney and discussions with his parents, he might have less uncertainty about the details of the plan.
As for the details: the parents are in their 90s, with some savings, a few annuities, a CD and a checking account. They also have five acres of land, which has their home and a duplex on it and 12 additional acres, with a rental property on it. Everything they own has been placed in a family trust. The son wants to be able to pay her bills and was told that he needs to have a power of attorney and to be named trustee to their trust.
He reports that his parents agree with this idea, but he has a number of concerns. If they are sued, will he be personally liable? Would the power of attorney give him the ability to handle their finances and the real estate in the trust?
If his parents have a revocable or living trust, there are provisions that allow one or more persons to become the successor trustees, in the event that the parent becomes incapacitated or dies.
What happens when they die, as they each leave each other their share of the assets? The son would become the trustee, when the last parent passes.
Usually the power of attorney is created when the trust is created, so that someone has the ability to take control of finances for the person. If the trust has any of these provisions, the son may already be legally positioned to act on his parents’ behalf. The trust should also show whether the successor trustee would be empowered to sell the real estate.
Trusts can be drafted in any way the client wants it written, and the successor trustee receives only the powers that are given in the document.
As for the liability, the trustee is not liable to a buyer during the sale of a property. There are exceptions, so he would need to speak with an estate planning attorney to help with the sale.
Assuming the trust does not name the son as a successor trustee and also does not give the son power of attorney, the bigger question is are the parents mentally competent to make important decisions about these documents?
Given the age of these parents, an attorney will be concerned, rightfully so, about their competency and if they can freely make an informed decision, or if the son might be exercising improper influence on them to turn over their assets to him.
If the parents are competent, they can amend their trust freely as long as the trust document contains provisions allowing them to do so. Almost all revocable living trusts contain such provisions. If, however, they lack capacity, then making amendments to the trust will be considerable more difficult.
There are a few different steps that can be taken. One is for the son, if he believes that his parents are mentally competent, to make an appointment for them with an estate planning attorney, without the son being present in the meeting, in order to determine their capacity and wishes. If the attorney is not sure about the influence of the son, he or she may want to refer the parents for a second opinion with another attorney.
If the parents are found not competent, then the son may need to become their conservator, which requires a court proceeding.
Planning in advance and discussing these issues are best done with an experienced estate planning attorney, long before the issues become more complicated and expensive to deal with.
Reference: Daily Republic (Aug. 10, 2019) “Amending trust easier if parents can make informed decision”