My mother and I were listed as Trustees on the 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 would do it anyway.  She qualified for the reverse mortgage and spent over $170,000 in two years before she died.  Within 30 days after the loan became due, I was notified 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 repair 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 she was the property’s sole owner and trustee.  My name was never removed from the Deed and title 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 two hours of counseling and agree to the parameters of the loan so my mother could obtain the loan.  How could this have happened?

Speculating on Property Title and Legal Processes

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

This is just a guess, so please don’t hold me to this.  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 are confused about some of your terms and facts.

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 the 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 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 does not affect your mom’s ability to direct the trust’s affairs 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 designated by the trust, which doesn’t even mean the individual has any ownership interest.  It sounds like you may have been a successor trustee, not a co-trustee with Mom.

Successor Trustee

If you were a successor trustee, you would be able to step in upon your mom’s passing or, in some cases, her incapacitation (depending on the trust itself).  But as a successor trustee, your mom still has total control of the trust and can borrow in its name as long as the terms of the trust give her that authority.

HUD allows borrowers to take title in the 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 shocked if your mom’s trust also did not go through this.  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.

However, if you are a beneficiary and a co-trustee, then there was a mistake, and I 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.  However, it’s advisable to obtain an opinion from the attorney once they have access to the trust and any amendments for review.

Regarding your sister, only the borrower has the authority to withdraw from the line of credit.  Did Mom make the 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
• Reverse Mortgage Trust Q&A – Ask ARLO