I started a Reverse Mortgage a while ago for a client who is 92 years old and his property is in Trust. No problem. I have done lots of loans where the property is in Trust.
Got to the end of the Transaction and the bank called and told us that they could not do the loan the way the Trust was currently. Mrs. passed away 6 years ago and no one took care of the Trust Administration.
So we met with a Trust Adviser and he told us the steps that we have to do to get everything OK. The first thing was that taxes had to be filed since the time of death- IRS form 1041. The client did that and the Enrolled Agent broke down an A & B Trust Asset Allocation.
After this work was done we called the Trust expert and he had left for vacation - any situation that could slow this transaction down happened. Now, we are working with a Trust Attorney who teaches Trust Law to attorneys. Instead of doing the "routine paperwork" she has found many errors with the trust and she is not sure they can be corrected.
The client wrote this Trust more than 25 years ago and it was never looked at over the years. When we originally obtained the Trust we tried to reach the attorney who wrote it up but he is long gone and cannot be found. We had hoped he would do the required Trust work.
What is the lesson in all of this? Years ago, the client used a Trust Attorney who made some technical mistakes and when the clients wife passed away no one Administered the Trust work that was required. Now, when the client wants and needs a loan (Reverse Mortgage) there is a half opened can of worms. The lesson: If you have a Trust--REVIEW it with a competent Trust expert; especially if the Trust work was done many years ago.
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