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Tuesday, October 6, 2015

Can someone under POA move into the house rent-free?

The only thing that seems more confusing to people than how to be an executor is probably how to act under a Power of Attorney. It's not surprising, really, since there is not much reliable information out there on which specific things a person can or cannot do, unless the person consults a lawyer. A reader recently asked me a question about Powers of Attorney that I've heard a number of times before. The question and my comments follow:

"On a home owned by a surviving parent (suffering from Dementia), can one of 3 children (who was been named POA) take it upon himself to move in rent-free to avail himself of his own debts and financial obligations? Presume that the other two siblings object to this. All three are named as equal beneficiaries when the homeowner passes away."

In situations such as this, lines are not always clear. Issues, questions, emotions, legal rights, moral obligations and personal agendas all overlap. It can be difficult to untangle them from each other to determine who can do what.

Here are two of the factors that would go into your question:

- Does the parent still reside in the home? While this would not on its own be a deciding factor, it does make a difference. For example, if the parent resides in a long-term care facility and is not expected to return to live independently in his or her home, it would probably be a good idea to sell the home, or at least rent it out, with all proceeds being invested for the parent or used to pay the care facility's bills. That way, the parent's asset would be maximized for the benefit of the parent. It would be the job of the person under the POA to sell the home, not to move into it. That situation is much different than a case where the parent still lives in the home, and the addition of one person to the household does not have an enormous effect on the parent's finances.

- Has the power of attorney be activated? It's one thing to be named under a POA that is not yet in use, and quite another to be acting under the document. Since you said that the parent has dementia, I'm going to assume that we are talking about a properly activated document. It's problematic for a person acting under a POA to gain financially from his position, as he  is a fiduciary who is bound to act in the interest of the donor (the parent) and not himself.

You can see how these two factors can combine in different ways, to much different legal effect. You could have a person who will one day - but not yet - act as his parent's POA being invited to live there by the parent to save money.

The other end of the spectrum is a person currently acting under a POA and seeing the opportunity to live in a house for free rather than do his legal duty and sell it. I can only assume this latter scenario to be your case, as it would explain why the other siblings object to the arrangement. If that is the case, the person acting under the POA does not have the right to use the parent's home as his own because a) it does not benefit the parent, and b) it's an abuse of his fiduciary role under the POA to take financial benefits from the parent for himself.

Unfortunately, if the other two siblings have verbalized their objection to no avail, they are stuck with using the courts to protect their parent's rights. While they do have some standing with the court as future beneficiaries of the property, the real issue at hand is not their rights but the parent's rights. The offending POA could be removed from the role, or the court could order other arrangements such as the payment of rent, the sale of the property, etc, based on the facts of the case. As the court system can be slow and expensive, the three siblings might consider mediation to hammer out how they will carry on from here.


5 comments:

  1. Hi Lynne,

    Thanks for this blog, it's helping me get clarification on my current situation. However, in my situation, I am not, and will not be the POA. My aunt recently passed away, leaving my grandmother in charge of her estate (POA). My grandmother has proposed I live there until she decides to sell it. Is there anything wrong with me living there (paying the condo fees and appropriate insurance)?

    Thank you

    ReplyDelete
    Replies
    1. If your aunt has passed away, your grandmother is not using a POA. At least, not legally. She can only be in charge of the estate if she was named as executor under a valid will. A POA becomes invalid and revoked the minute the person dies. So before going any further, make sure that your grandmother actually does have the legal authority to do what she's saying.

      Is there anything wrong with you living there? That depends. Are you a beneficiary of the estate? Are you the only beneficiary or are there others who may not want you to live there rent-free? Is the executor not aware that she is supposed to charge rent in order to maximize the estate? Why does she want to wait so long to sell it? Does she realize that she may be creating a tax liability by holding onto the condo while it's in the name of the estate?

      Generally speaking, nothing good happens when an executor delays selling an estate asset for no good reason, and on top of that allows someone to use the asset for free.

      These are the general rules and considerations for someone in this situation. I hope this addresses your question. If not, you're welcome to phone me at 709-221-5511 to discuss your case in detail. I charge $250 for a consultation.

      Lynne

      Delete
  2. I wonder why there are so many changes going on concerning estate planning lately. It makes it a bit difficult to keep up with. It makes me want to get a lawyer to help me with planning these things so I don't miss anything I didn't know about.. kirkland law firm

    ReplyDelete
    Replies
    1. I don't object to firms such as yours posting these little blurbs to get your firm's name in front of my readers. However, since this is a Canadian blog, the vast majority of my readers are from Canada, so you might be better off posting on American blogs.

      Lynne

      Delete
  3. What if the person was already living in the house? I've lived with my mother my entire life(50 years) and she recently became terminally ill and is in the hospital. I'm POA. The living arrangement was one that I paid a nominal monthly rent and then took care of larger needs of the house, such as replacing windows, toilet, new furniture. Do I have any rights on the house for having lived here so long? I know it wouldn't be squatter's rights, but is there something similar for my circumstances? I don't make enough money to buy the house. I have five siblings in which I'll need to split the estate with. It doesn't seem right that I could lose my home after all this time.

    ReplyDelete

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