If I become a trustee for a trust that names my disabled sister as a beneficiary, will I personally be taxed?

Question

Will I have any liablities with a trust like this? For income tax purposes, do I 'sort of' acquire the house and have to pay income or other taxes on it? What if my sister cannot pay her household bills? Do they default to me? Also, if this is the case can we do a reverse mortgage on the house for her benefit? Thanks for any legal understanding.

Answer 1

This a legal question that should have an attorney consult by you.

Anyway, you as a trustee will have fiduciary responsibility in operating the trust. This means that you have to act in your sisters best interest, invest in a prudent manner and preserve the assets as much as possible.
The only tax consequence to you would be if you take a trustee fee for your services each year. You would pay income tax on this amount but not self-employment tax.
I think the only way for bills of the trust to fall to you would be if a creditor could prove that you acted in a manner that caused them a loss. Otherwise your assets would not be able to be attached. If the trust nor your sister can't pay her bills then she would be bankrupt and welfare would have to be made available for her benefit.