Deductions & credits

Now that I have a few minutes, let me dig into the issues for you.

If "trust fund" does not mean an initiation fee or deposit or enrollment fee for memory care, but means something else, then the answer below may be wrong and we need to know more about exactly what the "trust fund" is. 

Can you claim your mother as a tax dependent?  To claim your mother as a tax dependent, you must pay more than 50% of her total living expenses, and she must have less than $4200 of taxable income.  If she receives social security, that is not taxable income, but it does count as support she provides herself.   Other taxable income might include investments or a pension.   If you did not provide more than half her support yourself, but you and your siblings together paid more than half her support, then one sibling could claim her as a tax dependent, if all the siblings (who paid at least 10% of her support) sign a multiple support agreement, where the siblings agree which sibling will claim mom as a tax dependent and it must also state that the other siblings agree not to claim her as a dependent.

https://www.irs.gov/forms-pubs/about-publication-501

Can you take a tax deduction for your mother's medical expenses? You can deduct medical expenses paid for your mother's care if you claim her as a tax dependent.  You can also deduct medical expenses you pay if the only reason she does not qualify as your tax dependent is that she has more than $4200 of taxable income. In the case where you did not provide more than 50% of your mother's support, you would need the same multiple support agreement before you could deduct her medical expenses under this rule. 

Is memory care a deductible medical expense?  Normally, deductible medical expenses are doctor and nursing care, medications and so on.  Expenses for room and board, housecleaning, laundry and companionship are not deductible.  (Nursing care includes the kinds of care provided by a nurse but does not have to be provided by an actual nurse.)  There is a special rule for people with a chronic illness.  All of her memory care expenses are deductible medical expenses if you meet all these tests:

1. your mother has a chronic illness that is certified by a doctor to last at least one year or lead to death
2. your mother requires assistance with 2 or more activities of daily living, OR requires constant care due to a cognitive impairment to prevent her from becoming a danger to herself or others.  Activites of daily living are eating, bathing, toileting, dressing, transferring, and continence.
3. her care is being provided according to a written care plan developed by a qualified professional that is reviewed and updated at least once a year.  Most memory care facilities will have a nurse, doctor or social worker on staff who can develop qualifying written care plans for their residents. 

If you don't have a written care plan, then only actual medical costs are deductible, and the facility can give you a breakdown of what is medical and what is not.  And obviously you should get a written care plan so you can deduct the expenses in the future. 

If you must pay an entrance or initiation fee to the care facility, that is also a qualified medical expense if the three tests are met.  However, if any part of the fee is refunded when she dies or is transferred out to another facility, and you took a tax deduction before, the refunded portion may be taxable income since it is a reimbursement of a previous deduction.

In summary: One sibling would be allowed to claim your mother as a dependent and deduct the part of her medical expenses that sibling paid, if all siblings sign a multiple support agreement.

Also note that the circumstances must be re-evaluated each year.  If together, all the siblings paid more than half her support in 2020 because of the initiation fee, but no one pays more than half her expenses in 2021 because the initiation fee and her social security covers her costs, then no one can claim her as a dependent or deduct her expenses in 2021.  You have to review the situation each year.