Dear Liza,  The only asset funding my Mother’s Trust is her primary residence. However, she recently moved from CA to live with me in WA. My sister would like to purchase the home but doesn’t have the full amount. She would pay a down payment of $150,000 which would assist with my Mother’s caregivers and in-home health care. The balance approx. $150,000-$200,000 would be recorded as a Deed of Trust naming the Trustee of the Trust as the beneficiary.  Would this affect  or invalidate the Trust in any way? I have to give you a sort of lawyerly answer on this one: probably this is just fine, but you should have an attorney take a look at the trust to make sure that your mother, as the grantor of the trust and current trustee of the trust, has the power to sell trust assets and the power to loan trust assets.  A well-drafted trust would certainly permit this, but I’ve seen trusts that aren’t well drafted to be sure. Also, sales of assets between family members should be for fair market value (in other words, your sister should be willing to pay what a third-party buyer would be willing to pay). Otherwise,  your mother would be making a taxable gift to your sister of the difference between that fair market value and the price she actually paid.  Your mother should get the house appraised to document this value before the sale occurs. Finally, the interest rate on the loan must be at least the applicable federal rate (AFR) for loans of that sort in the month the loan is made (this is published monthly by the IRS.) If the loan’s interest is too low, the difference between that rate and the AFR is also considered a taxable gift from your mother to your sister.