A browser Sarah has sent the following question to ASK ARLO!

My mother and I were listed as Trustees on deed and title of the home she was living in. I was named executor of her irrevocable trust. The house was paid in full, but she had an equity loan and medical bills for approximately $27,000. She told me she wanted to take out a Reverse Mortgage to pay for the equity loan and medical bills. I advised her of other options besides the reverse mortgage and she said she was going to do it anyway. She qualified for the reverse mortgage and spent over $170,000 in two years before she died. I was notified within 30 days after the loan became due that they were Moving forward with foreclosure if I did not list the house for sale or pay back the loan. Also, I discovered that my sister, who talked her into the reverse mortgage and who was not on title, was taking money from the Reverse Mortgage Credit line for over $50,000. When all was said and done, I sold the home to satisfy the Reverse Mortgage loan but had to sell under market value since there was little money left in my mother’s checking account to do repairs on the house and continue to pay for the house insurance and taxes. I recently discovered through the attorney who wrote up the irrevocable trust that my mother took out the RM and said that she was the sole owner and trustee of the property. My name was never removed from the deed and title at any time before, during, or after she took out the reverse mortgage. My attorney told me this was illegal and flawed and should never have happened. As part owner of the home, I needed to do the two hours of counseling and agree to the parameters of the loan for my mother to obtain the loan. How could this have happened?

Hello Sarah

I could not attest to the actual terms of the trust or how the entire transaction should have been handled including title, vesting and counseling requirements, but I think I might have an idea based on some of your comments.

This is just a guess though so please don’t hold me to this and I would encourage you to take this as a starting point to talk to your attorney.

If you were on title to the property, your mom would not have been able to encumber the property without your knowledge and consent, but I do not believe you were based on your comments.

Let me explain why what you are saying leads me to believe you have some of your terms and facts confused.

Title in Name of Trust 

Firstly, if the title was in the name of the trust, then neither you nor your mom were on the Deed to the property (title to the home), the trust was.

To place a property in a trust you are placing the title to that property in the name of the trust and therefore, neither you nor your mom would have been individually on title at that point.

You can’t have it both ways.  The property was either vested in your mom’s name (or your mom’s name and your name) individually, or it was in the name of the trust.

The next question I have and cannot determine without seeing the trust was:

Who was/were the trustee(s) of the trust, the beneficiary(ies) of the trust and are there any successor trustee(s) of the trust (more specifically, are you named as a successor trustee)?

The fact that you are the executor of the trust makes no difference in your mom’s ability to direct the affairs of the trust while she is alive, it just names you as the individual who will act when she is no longer able.

An executor can be anyone so designated by the trust and doesn’t even mean that individual has any ownership interest.

And it sounds like you may have been a successor trustee, not a co-trustee with mom.

Successor Trustee 

If you were a successor trustee, that would allow you step in upon your mom’s passing or in some cases, in her incapacitation (depending on the trust itself).

But as a successor trustee, your mom still has total control of the trust and can still borrow in the name of the trust as long as the terms of the trust give her that authority.

HUD allows borrowers to take title in their names of their trust, but all trusts go through a legal review to determine that the trust meets HUD requirements and that the trust grants borrowers the authority to borrow in the name of the trust.

I would be very surprised if your mom’s trust did not go through this as well.

If you are a successor trustee, you are not required to sign anything for your mom to close the loan.

There are no counseling requirements for successor trustees, executors or others named in the trust.

If however you are a beneficiary and a co-trustee, then there was a mistake made and I would recommend you check with your attorney to determine what remedy you would have at this point.

Contact Your Attorney 

I honestly cannot tell you as that would be a legal issue and I cannot give you legal advice.

I truly believe though that once your attorney reviews the trust documents, you may find that mom had the authority to do what she did on her own without your involvement but you should get an opinion when the attorney has the trust and any amendments available to review.

About your sister, only the borrower has authority to make withdrawals from the line of credit.

Did mom make the line of credit withdrawals and give the money to her or did she forge her name?

If your sister fraudulently withdrew money from your mom’s account, you should check with your attorney to see what recourse you have.

Or if you believe your mom was the victim of elder abuse by your sister, there may also be some recourse, but I cannot tell you that for sure, and again you should ask your attorney.

That would be a legal matter. 

Also See:

Downright Illegal Reverse Mortgage Advertising Scams