Dear Harry,
I am the trustee of my parents’ trust. My sister and I, out of six children, have also been the sole caregivers for both parents. They are both dead now. I was able to keep them in their house due to a little money my dad had saved. Neither my sister nor I took any fees during the time they were alive as we all wanted to be able to keep them in their house. I have also expressed interest in wanting to purchase their home over the years. Now that all is said and done, my siblings want to sell the house at the highest market value possible. My sister is not happy, and is saying “pay me for my fees if you want to jack the house price up.”
It would be nice if my siblings were a bit more understanding of the five years we put in for 24/7 care and agreed to lower the price of the house some. As the trustee, can I pay my sister for her services out of the small amount of money I have in the trust?
Dear reader.
The situation you describe where one or more children take care of aging parents and then hope to be compensated for their sacrifice is not so unusual. Unfortunately, that does not mean that there’s an easy or standard solution.
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Often, the children who step into the breach do so to satisfy an immediate need with no idea that this will end up being a five-year commitment. The other children who either cannot or will not make a similar effort may feel a mix of relief and guilt that they can continue on with their lives.
Second-guessing is also very common. The nonactive family members may wonder why so much care is necessary, why other resources aren’t used, why the parents are still at home rather than in a facility, or why no one took advantage of public benefits such as Medicaid. Sometimes these are good questions, but just as often the family members who are not present have an unrealistic picture of both the need and available alternatives.
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There’s also a huge difference between making decisions on the spot, grappling with the day-to-day, and Monday-morning quarterbacking. Maybe everyone would agree that they would have done things differently had they known in advance the course the illness and need for care would progress. But that’s not very useful when decisions have to be made with no clear picture of the future.
All of that said, you and your sister probably deserve some compensation. But how much and whether you have the legal power to make distributions from the trust for this purpose are more difficult questions. Whether you may pay your sister from the trust will depend at least in part on the terms of the trust, whether it can pay for services for your parents after they have died.
Whatever claim you and your sister may have to be paid for the services you provided to your parents is probably only against their estates, not against their trust. Such claims against their estates would be in the form of quantum merriut. They may or may not be time barred against one or both estates depending on when they died. Whether the trust itself has any obligation to cover estate debts depends on its terms.
You, unlike your sister, may have a claim against the trust itself for unpaid trustee fees. All trustees are entitled to reasonable compensation. What’s “reasonable” when a family member has served as trustee can often be a contentious issue, especially when they request retroactive payment. But that right and potentially a claim you and your sister may have for services provided your parents may be bargaining chips you could use with your other siblings.
Ultimately, you as trustee have a fiduciary duty to all your siblings and, absent an agreement to the contrary, you will need to seek the highest price you can for the house. You have something of a conflict of interest since you have a duty to get the highest price possible for the house and your own interest in purchasing it for somewhat less.
That said, you can seek a lower price and compensate both your sister and yourself if all the trust beneficiaries agree. The best resolution is probably to come to a compromise that gives everyone some of what they want – some compensation to your sister and yourself, though perhaps less than you “earned,” a lower price for the house than fair market value (perhaps since you won’t need to pay a commission to a Realtor or spend money getting the house ready to put on the market), but not as low as you might want. You may want to seek a family mediator to come to this resolution.