Several years ago MIL (and I think FIL) established a family trust (Living Trust). I am trying to get all things paperwork in order so we know where it all is and what they state. After FIL passed, MIL got a reverse mortgage in her name, and has collected monthly payments for 16 years. I view that as a separate thing, with its own rules. She just gifted her vehicle, which she intended to leave to him, to my husband, so that's taken care of. To my knowledge, there are no investments left, so household furnishings, personal property and bank accounts would be all that's left, unless I'm forgetting something. SIL has POA for medical and is on bank accounts with her. I mentioned the trust to MIL the other day, as a piece of mail had come, addressed to XX Family Trust. She said, "Oh, that is no more." I asked if she had cancelled or reorganized it somehow, and she said, "Oh, I don't know, I just quit using it," or something to that effect.
Is this something that needs to be checked up on, so there are no probate issues, or does it seem all the bases are covered? We are in California. I appreciate all you financial wizards.
Heirs may have to take out a mortgage if they want mons house.
If there is equity, yes it goes to the heirs.
The bad part is interest compounds on top if interest mo to, there are additional expenses such as the annual inspection. Miss the return of the homeowners questionnaire annually, you will find yourself in foreclose.
There are upfront costs as well.
Better to take out a hone equity where you pay interest only.
Depending on interest rates I will give you an example.
Borrow $10,000 and pay around $32 a mo. for interest. Nothing on principle. That is paid iff when you sell, or you can add extra pmts to reduce principal thus reducing interest payments.
There is an annual fee if around $50 a year.
DO NOT TAJE OUT A REVERSE MIRTGAGE. SO MANY HAVE COMPLAINRD
I owned a mortgage Co. And taught finance at a college.
Tom Selleck is W r o n g ... but then he will never need or lack in money for retirement
Shes outlived her “Modified tenure w a LOC option” RM. LOL 😂 😂 Someone buy that woman a lottery ticket, she’s born lucky!
Reason it’s at HUD & it’s servicer - NOVAD - is bc her RM has gone beyond the 98% & there is no equity in the property. (That’s its been sold around like a old single stinky sock from 1 servicer to another, to me, shows it’s been a bad acquire by servicers & last one offloaded it to NOVAD). NOVAD is the end stage servicer for HUD for HECM (federal lending guaranteed RM) & for FHA lends that have gone beyond bad for the original bank/mortgage co.
NOVAD has a heavy paperwork system & it has outside contractors that do property appraisals on the loans. NOVAD imo seems to be geared to do foreclosure on RMs but workarounds on FHA loans.
I’ve been on this forum a long time, I’ve got to say this is the first time ever someone has posted on a RM that returned to HUD / NOVAD.
have a couple of suggestions for y’all:
- do NOT contact NOVAD just yet but instead…
- find an elder law atty asap (mom pays) & be upfront that mom has old RM, might be an LT & family is wanting to sell house, as atty will need other legal - real estate atty - in on paperwork. Also atty does fresh POD and a Will as it seems neither exists, right?
- at a minimum I think 6-8 mo this to get this resolved. If mom can hold out at her home thats ideal. But if not, and you or Sissy need to front $ for moms care, get atty to do paperwork that it’s a loan to be repaid from mom’s assets or Estate.
- look at RM on the selling it or the 12 mo part, does it require a notification to servicer? This could be sticky as her original servicer is long gone and too is all the others afterwards. It’s now NOVAD. Discuss w atty as to how that needs to be done & atty does it.
- be Nancy Drew and find that Trust paperwork. Beyond mucho importante cause if house is the asset of LT, you or Sis will need fresh Certification if Trust completed to give you or Sis Trustee authority to do things. It would prob be a fresh Trustee of Trust document. Not a DIY but needs atty to do this. If there is not one to provide to NOVAD immediately, they will likely foreclose.
- pay for pull on the Title. Your atty can do this, but you can do it as well. Moms technically does this and her $ pays.
Mom has 9K, she needs to pay for things so no “self dealing” issues.
About Realtor & their “appraisal”, is Realtor actually doing true appraisal with appraiser license # & their state of CA seal attached to report? OR it is actually Realtor doing “listing comparable” document. If Realtor MLS, they can do a comps document easy peasy & based on what other properties in the zip or similar footprint sold for. NOT the same thing as a property appraisal; it’s more a wish price that property might sell for & could be way way more if comps in moms hood have flips, Reno’s or new builds atop tear downs.
Appraisal mucho importante as it allows mom as RM holder or their heirs to buy HECM property at that value or 90/95% of RM balance; whichever is lower (although you have to have the $ to do this asap). Mom supposedly balance $417k, if property appraises at $590k, family could buy it at 90/95% of RM balance…. a great deal. But if appraisal comes in at 350k, the best would imo be you pack up stuff mom / family want to keep, estate sell other stuff & let NOVAD deal with home.
It’s an unusual situation. Strange times for home & car buying (just bought my car lease & value is 11k over end of lease $, this is not supposed to happen, who knew!)
Really Pinky, imo, u & Sissy cannot DIY this, so meet with attys till u find one that understands mom’s unique situation. And pls let us know what happens w NOVAD. Appreciate it!
The home is an asset of the Living Trust, isn’t it?
Is the home the only asset in the Trust?
A RM and a LT can coexist, but the RM has the priority position on ownership when your MIL dies or moves out of the home and causes the RM to become due in full usually 30 days after RM sends notifications. There will be paperwork explicitly describing the LT/RM relationship and that RM is secured lending and priority. If you don’t have a copy of the RM, get one.
Are y’all kinda expecting to inherit the home? If so, I’d suggest you find out an estimate on what $ amount repayment would be needed to the RM if say MIL died this summer. I’m not being morbid but the RM agreement (HECM) is very specific as to payment in full. It could be a significant amount of $ paid in a narrow period of time & you imo need to have a plan as to where your are getting your cash from on short order if you want to acquire her home.
You mentioned probate……. so she’s transferred her car to her son & has her home in a LT / RM and no other investments & no other property?
If so, imo I don’t think you’d need to have probate concerns. Her bank accounts in her name could go POD so bypasses probate and life insurance have beneficiaries named so too bypasses probate. Could SIL already be POD on her bank accounts as she is already a signatory on them? ((Or if they are titled in the Trust, they pass outside of probate.)) Contents of the home could go via estate sale. Thetes nothing needing probate.
Please realize the RM is not going to let family have the property sit around for months; RM is going to acquire it asap as is their right for secured lending. That she was paid over 16 years means she got a Line of Credit RM, which tend to have lower interest rates on the mortgage. Still could be quite a bit owed to RM. If her neighborhood has had huge huge increases in value, actually buying it from the RM could be worthwhile. It’s strange times for property value.
Trusts can defund. You want to have a planned defunding and have the paperwork done by an atty if possible. But I’m guessing that she said “oh it’s no more” as she is aware that the RM is going to take over the house that’s an asset of the LT so LT doesn’t matter anymore.
But it’s actually that she has been getting & continues to get a fixed amount now for 16 years….. if so it’s a Tenure RM…. used to sold as an “annuity lending” years ago which was misleading. If it’s that she got $ for 16 years and it has ended it’s a Term RM. Each type does the initial up front, then the interest, MIP at different rates. Find her mortgage agreement, all the details and repayment schedule & requirements will be in the document.
if you don’t mind me asking, she did the RM in 2005? 2006? That was right b4 the housing bubble burst. Does she even still have her original mortgage provider (bank) still doing RMs?
Please search for your paperwork and the lawyer who prepared the Trust. It will give you needed information. Items in Trust may be protected from Probate. And remember, the POA abilities cease at death, Trustee or Successor Trustee does not.
The lawyer did what is called a pour over of their original will naming each heir, in Moms case her children in the will and the lawyer also made sure my POA was up to date. He also said I needed to be added to my Moms bank account to keep that from going into probate.
you are right to make sure you are getting you Moms affairs in order. Make sure she has a will and make sure you research reverse mortgages. My MIL had one. She put her daughter on it but when she passes the money taken out needs to be repaid usually within a year.
my brother recently died in Florida. He had no will but had a very small amount in a checking account, a lot of stuff in a collectors store and two cars that don’t run. None of us had the power to do a thing about it. The landlord of the store gave me a hard time about rent. We paid the months rent and two of his friends moved the stuff out. The landlord kept bugging me about the cars. The probate court felt bad and told me the cars were the landlords problem. He could file abandonment of property in the court and eventually it would be his property and he could dispose of them.
I'm going to take this opportunity to say something else: Despite what people like Suze Orman say, not everyone needs a trust. Some states have long, drawn-out and expensive probate (California) and others do not (Colorado). So in some states creating a trust just to avoid probate doesn't really make sense. For one thing, you most likely will still need a will. You also have to transfer title to whatever you are transferring into the trust. If you want to transfer it back out you will have to change the title. Your trustee (if you can find someone who will want to take care of it) depending on the terms on the trust, will have to keep records and pay any taxes that accrue. If there is a good reason to have a trust, create a trust. If not, don't do it just because someone on t.v. says you need to. One BIG exception. Strongly consider a pet trust. A well-drafted pet trust provides more protection for your pets than including money in your will for their care.
Sounds to me like it wasn't funded. Is there an actual copy of the trust anywhere? Nevertheless, I'd get a trust and estate attorney involved to make sure.
Thanks again!
First, someone (the POA?) should review all assets and see how they would be passed down: joint accounts, pay on death beneficiary designations, living trust, or will (possibly pour over will that just moves everything not otherwise specified into the living trust at death).
It is possible, but not often required, that the home was moved out the trust when the reverse mortgage was acquired. This would explain why MIL doesn't think it matters anymore. A quick check of the most recent property tax bill is a good place to start; verify by consulting the county's records (title companies may offer a complimentary brief report in hopes of getting your business if you sell). Generally, if it was moved out of the trust, it can be moved back in after the loan is set up. This could be desirable if the successor trustee might want to reclaim the house by paying off the reverse mortgage, or if there is any remaining equity that they'd like to keep out of probate.
If there is anything in the trust, it may be desirable have the successor trustee made into a co-trustee if MIL is to the point of handing off responsibilities to the POA/co-trustee. If any of the beneficiaries have predeceased your MIL or if new beneficiaries might need to be added (new descendants?) that should be updated at the same time. A really old trust might need updating for revised tax laws or incapacity language. The law office where I had my trust done offers periodic reviews without charge and has been reasonable about not suggesting unneeded work.
If there is no POA or an old POA, the sooner one is created the better. It is better to have someone who can work with the reverse mortgage holder (e.g., if MIL has to move out) rather than let the process slowly work through their procedures while charges accrue (This is important if there is any equity left.)
Occasionally notifications and advice on changing laws of estate, trust, and planning issues would be included. If the change made a significant difference in any aspect of trust documentation or trust management, the firm would recommend seeing one of their attorneys to update their EP package.
Back to the issue of updating, I think it also depends highly on the Living Trust, specifically whether it's an ongoing family issue (such as wealthy families often have) or primarily for estate planning and end of life issues.
When done properly, and depending on the assets, quarterly or annual statements would be issued, disbursements may be made (depending on Trust terms), and tax data (including the schedules to the beneficiaries) issued, and returns filed.
If the Trust was never funded, it has no assets, and doesn't have to deal with taxes on assets, or since you wrote that to your knowledge there are no assets, it woludn't be an issue b/c assets are apparently nonexistent.
As to the RM, since it's in your MIL's name, it shouldn't be considered a trust asset. However, if the house property was transferred to the Trust after it was created, it won't be covered in terms of asset distribution according to Trust terms. That could create a problem, including with the RM mortgagee.
I think what you should do is contact the attorney who prepared the Trust (after you've studied it thoroughly) and ask for a meeting to discuss the Trust assets, how to manage them, and whether or not there are other issues that should be addressed.
It's hard for someone like those posting here to give concise advice w/o reading the Trust itself.
There may be a provision though that the Settlor (individual who creates the trust) or Trustee have to provide annual statements for anyone benefits from the Trust.
What really has to be done depends so much on the Trust and its assets.
It sounds like there needs to be one as it is sounding like Mom is uncertain what exists and how it is held.
Someone needs to help Mom now make a list of all her assets, her accounts, how they are held (in trust? in POD account? in her own account with POA handling account?).
All the files and papers and certainly the trust need to be gone through by the family with Mom, and arranged in file. If there is no financial POA then I suggest you decide who wants to do this and get it done in attorney office. Add the POA on the account. Give Mom a private spending account of her own (5,000 or so or whatever), and the rest, accounts and bills to be handled by whomever is POA.
In doing all this you will find this Trust paper. You will read it. If she has distributed everything held in that trust already then there is no trust. But it may surprise you to find that there is something, and you need to know.