Family Issues

Scott, in most cases this sale is reported on your mother’s 2025 personal tax return, not on a trust return, as long as the Family Living Trust is a revocable grantor trust. The IRS still treats the home as owned by her for tax purposes. Your Power of Attorney and role as co-trustee do not change that.

The main tax issue is the capital gain.

If this was her primary residence, she may qualify for the $250,000 home sale exclusion. To qualify, she must have owned and lived in the home for at least 2 of the 5 years before the sale. Time spent in a memory care facility due to medical reasons does not automatically disqualify her. The IRS allows a taxpayer who becomes physically or mentally unable to care for themselves to still be treated as using the home, as long as the 2-out-of-5-year rule is met.

The gain is calculated as:

• Sale price
• Minus original purchase price
• Minus capital improvements
• Minus selling costs (commissions, closing fees)

If the gain is under $250,000, there may be no federal capital gains tax. If it is higher, only the excess is taxable.

What you should confirm now:

• Whether the trust was revocable at the time of sale.
• How long your mother lived in the home before entering memory care.
• The original purchase price and improvement records.
• The closing statement from the sale.

A separate trust return is only needed if the trust became irrevocable or had its own taxable income.

Handled correctly, many families owe little or no tax on this type of sale.

Good question.

First, to make sure I understand the facts, I’ll summarize the background. You’re saying that as a minor, you earned money in the past. Because you were a minor, your mother set up multiple bank accounts (in your name – not hers) at her bank and deposited your earnings in those accounts. Presumably, if there were any taxes to file and pay on your earnings, that was addressed annually, along the way. Now, you are an adult and wish to transfer money to a new bank account.

Based on the facts you stated, the money being transferred to a new bank account would not count as income. I imagine that you should have no trouble getting access to the funds in the old bank to transfer to the new bank because the multiple accounts at the old bank are all titled in your name. Even if it was the case that your mother was a joint owner on those accounts, you’d still full access because each of you is a joint owner (in my hypothetical).

Keep in mind, your fact pattern doesn’t specify what type of account is involved, so I assuming they’re just plain bank accounts, such as checking, savings, money market, or certificates of deposit. Depending on the type of account involved (such as a traditional IRA or Roth IRA), they answer might change.

I hope that helps.