Q: I am trustee of my parents’ trust. The instructions are that I am to sell all the trust holdings, including real estate, and distribute everything equally to my siblings and myself. A potential buyer of the real estate has asked me to “carry back” a note for a portion of the sale. Interest on loans is so high right now and the buyer assures me that she will refinance and pay us off when rates come down. In any event, we would put a due date on the carry back loan. As trustee, is there anything I should be worried about in doing this deal?

A: Here are a few things to consider regarding a carry back when selling trust real estate. First, are your siblings in agreement with this loan? I recommend you have your attorney prepare what is called a “Notice of Proposed Action” and have it sent to your siblings. A NOPA is used in trusts anytime you, as trustee, are doing anything “out of the ordinary” or that is not specifically directed in the trust document. It informs beneficiaries of what you are planning to do and gives them an opportunity to agree or object.

The trust probably has some standard language that you can make loans, but to fully protect yourself, the NOPA should outline exactly what you are proposing to do and provide this information to your siblings. The information would include the amount of the carry back loan, interest rate, due date on the promissory note and include information such as the price you listed the house for and whether or not the buyer is paying full asking price. Also include how long the house has been listed (days on market) and confirm that it was fully exposed to potential buyers through the Multiple Listing Service. The NOPA provides your siblings 45 days in which they can either consent or object to your action. If they do not respond, then 45 days after the date you deliver the NOPA to them, you can assume they have consented.

Make sure you record your loan as a first deed of trust to fully secure the loan. Also, you will need to keep the trust open until the note is paid off. You could, ostensibly, distribute most of the trust’s assets but hold back a reserve in case you need to take legal action to collect the note. Finally, consider this: Most trustees, when selling real estate, prefer to do a “clean sale” since doing creative financing just ups the chances for possible problems.

Q: My employer is pushing me to put money into a Health Savings Account. I am healthy so I don’t really see the benefits. What am I missing?

A: Health Savings Accounts (HSA) are a great investment vehicle, and I encourage you to take advantage of this opportunity! If you are enrolled in a high-deductible health plan, you can set up an HSA and, depending on who you are covering in your health insurance plan and your age, the HSA can be funded with up to $10,600 annually. HSA funds can be used to pay health insurance deductibles or for medical expenses not covered by insurance. When you use the funds for health expenses, you are not required to pay income tax on the amounts used.

Like IRAs, your HSA is funded with pre-tax dollars and the investments grow income and capital gains tax free. Unlike IRAs, you are not required to withdraw funds year over year and, if you withdraw funds to pay health costs, you do not pay income tax on the withdrawals. Triple tax savings!

Another advantage of an HSA is the “retroactive claim” opportunity. Say you are growing your fund and have a medical expense that is not covered by insurance but, at the time, you decide to pay the expense out-of-pocket. Keep track of the paid expenses along with the receipts and, later in life, you can “cash in” these paid expenses — retroactively.

For example, say this year you have uncovered medical expenses of $3,000 and pay them out-of-pocket. Then, in the future, you have a medical bill for $5,000 which comes at a time when you are not quite so flush with cash. You can “cash-in” your $3,000 receipt and withdraw an additional $2,000 from the HSA to pay the $5,000 doctor’s bill. The plans allow you to make a retroactive claim on your account and, best of all, when the funds are used for medical bills, you pay zero income tax! I strongly encourage you to take advantage of this great opportunity.

Liza Horvath has over 30 years’ experience in the estate planning and trust fields and is a Licensed Professional Fiduciary. Liza currently serves as president of Monterey Trust Management. This is not intended to be legal, tax or investment advice. If you have a question call (831)646-5262 or email liza@montereytrust.com.