10 Jul Can I get money from a house in a trust to care for Dad?

Q. My father is 101. I have a live-in caregiver that stays 24/7. He can not afford this service so I pay for him, figuring when he passes, I will inherit his house. The house is in a trust. How can I avoid paying taxes? Can I do a loan or reverse mortgage or something else from the trust or get it put in my name now?
— Beneficiary

A. Trusts can be complicated, and they can also cause unintended consequences.

For that reason, we recommend you meet with an estate planning attorney who can work with you and your dad to make sure his assets are positioned as intended.

But generally, here’s what you should know.

The terms of the trust will dictate whether the trust beneficiary will receive a step-up in the basis of a house or whether the house can be distributed to the beneficiary prior to the death of the grantor, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.

She said if the trust is revocable, there may be other types of planning, such as an outright distribution of the house with the retention of a life estate to obtain a step-up in basis.

An irrevocable trust may also be able to be terminated or amended depending on the trust terms and the trust laws of the state that govern the trust, she said.

“While it is possible to get a reverse mortgage on a house in an irrevocable trust, it will reduce the equity in the home and will not necessarily reduce or eliminate capital gains taxes on the equity remaining in the house, if any,” she said.

Again, you should meet with an attorney to review the trust and see what steps, if any, can be taken to meet your dad’s goals.

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This story was originally published on July 10, 2023.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.