Legal Question in Elder Law in California

Lending to beneficiaries

My Father recently passed away and my brother and I, who are beneficiaries in my Mom's living trust, discovered my Mom has an excessive amount of nearly non-interest bearing cash in her accounts. If she were to payoff my brother and my home mortgages we could raise her returns (and ultimately her estate value) by paying her market mortgage rates. Is there any ''arms length'' problems doing this and still allowing us to take the tax deductible interest against our taxes? What would we need to do to keep this legal and protect all concerned?


Asked on 2/27/02, 7:36 am

1 Answer from Attorneys
Chris Johnson Christopher B. Johnson, Attorney at Law

Re: Lending to beneficiaries

If your mother is competent, then there shouldn't be a problem as long as the deal is structured like an arms-length transaction would be--prevailing interest rate, secured by the real estate.

If your mother is not competent, her trustee, agent or conservator (other than you) would have to make the deal, and it is up to that person to decide whether such a deal is in her best interest.

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Answered on 2/27/02, 11:02 am


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