October 22nd, 2018 at 2:58 pm

Question: My client’s name is Donna. Her mother, Marcy, owns a home in Marcy’s name only. Marcy is elderly. She has permanently moved to a nursing home, and she will need to sell her house at some point. I’m not sure about Marcy’s current mental or health status. Donna has 2 somewhat estranged siblings who Donna expects will fight over her mother’s assets if she passes away. Donna and Marcy will be consulting with an attorney about how to handle Marcy’s situation. But can you go over their options with me? 

Answer: Yes, of course. This type of situation is becoming increasingly more common these days, given the general increase of our elderly population. Here’s a highly generalized summary of some options, but see also the disclaimer at the bottom:

  1. Owner as Seller: If Marcy is currently of sound mind (to be determined by the attorney, not by us), she can just sign all listing and sales documents herself. She may need a mobile notary public to go to the nursing home when she signs the grant deed. If, however, Marcy’s health is failing quickly, this might not be a viable option. Given that the property is in Marcy’s individual name, if she becomes incapacitated or dies, the property may have to be sold through the conservatorship or probate court process which takes time and money. This is true even if Marcy leaves a will.
  2. Power of Attorney (POA): If Marcy is of sound mind, but she does not want to sign all the listing and sales documents, she can give a POA to Donna to sign on Marcy’s behalf. The POA must be notarized if it will be used for the signing of the grant deed, in which case, get a copy of the signed and notarized POA over to the title company immediately to make sure that it satisfies their requirements. The POA will remain valid even if Marcy later becomes incapacitated, but not if Marcy dies. So if Marcy’s health is failing quickly, a POA might not be a good idea.
  3. Trust: If Marcy is of sound mind, she can create a trust and transfer her assets over to the trust. Marcy can be the trustee of her trust, and make Donna and/or someone else her successor trustee(s) if Marcy becomes incapacitated or dies. Having a property in the name of a trust avoids probate. Another advantage is that Marcy can minimize family conflicts by, for example, appointing Donna only as her successor trustee and dictating that, if Marcy dies, her home must be sold and the proceeds distributed equally to her 3 children. The disadvantages include the cost of hiring an attorney to set up a trust, and all the paperwork (e.g., transferring all the assets over to the trust).
  4. Conservatorship: If Marcy is not of sound mind, she may not be able to sign any legal documents, regardless of whether they are sales documents, trust documents, or a POA. In this situation, Donna would generally petition to become a court-appointed conservator to handle Marcy’s affairs. The sale of the home under a conservatorship is likely to be a drawn-out process, which will generally involve a court-confirmed sale (similar to a probate situation). The conservatorship generally terminates upon Marcy’s death.
  5. Transfer on Death (TOD) Deed: Marcy can avoid both probate and setting up a trust by signing and recording a revocable TOD deed that will transfer title of her home upon her death. The TOD deed is a good idea for people who have a home as essentially their only asset, and it can be used in conjunction with, for example, item #1 or #2 above. The TOD deed is also better than simply adding Donna on title as a joint tenant because the TOD deed avoids the problems with unintended homeownership (e.g., taxes, insurance, judgment liens, etc.). One problem, however, with a TOD deed is that, if Marcy leaves the house to Donna only, as an example, Marcy has to rely on Donna to disburse the sales proceeds to Marcy’s 2 other children. Alternatively, if Marcy leaves the house to all 3 children who do not get along with each other, they may never agree on what to do once they all own the house together.

Chart Available: Helping the Elderly Sell Their Homes is available as reference chart that summarizes the above options.

Disclaimer: In addition to the above options, there are other possible ways to facilitate sales for elderly loved ones. Moreover, the above list does not address many of the other concerns pertaining to the elderly and selling their home, such as, but not limited to, financial concerns, title issues, mortgage loans (including reverse mortgages), taxes, insurance, utilities, bank accounts, personal property, other assets and debts, health care, long-term care, health care directives, social security, Medi-Cal eligibility, testamentary concerns, and liability and elder abuse issues.

-Thank you to Rick Page (Santa Monica Office) for suggesting this week’s legal tip.

Copyright© 2018 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of October 22, 2018. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals.

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