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Monday, February 4, 2013

Mom's in a nursing home; can we sell her house and divide the money?

Do you believe that other people should be allowed to take your money away from you - and I'm talking hundreds of thousands of dollars - because you are old and they think you don't need it? Of course not! So why do so many people think they can help themselves to their parents' estates without permission before the parents even pass away?

Here is a note I recently received from a reader:

"My mother has just been panelled to a Nursing Home. We are 5 children and one is her POA, and executor. Her will says that the house is to be sold and divided between the 5 children. Is it not best to sell the house right away and divide the money between the children, rather than keep it in a seperate account till she passes?"

Would it be best to sell the house and divide the money right away? Best for whom? And why are you following the will of someone who isn't dead?

This is a subject that I've been asked about many times over the years, and I have to confess that it irritates me no end. Your mother's will says that the five of you are to inherit the proceeds of the sale of the house after she passes away.  That's what wills do; they talk about what happens to an estate after a person dies. She hasn't passed away. Therefore, no, you can't have the money.

The executor has zero power to do anything at all while your mother is alive. The will has no effect while your mother is alive. So nobody gets to act as her executor yet. Forget the executor and the will while your mother is still alive. I hope I've made this point clearly enough, not just for you but for all of the other readers who ask me this question repeatedly.

Now let's look at the attorney acting under the Power of Attorney (POA). Has the POA been brought into effect? Don't assume that because your mother is going to a nursing home that the POA is automatically in effect. Going into a home likely has no effect on it at all. The person named in the document should read it carefully to see what has to happen to spring it into effect. In many provinces that means having a doctor sign a declaration of incapacity.

Once the attorney under the POA has properly sprung the document into effect, the attorney has to do what is in the best interest of your mother. Maybe this means selling the house. If your mother is never going to be able to live there again, then perhaps that's the best thing to do financially. However - and this point is NOT to be overlooked - the sale proceeds of the house must be invested for your mother. The attorney under the POA does not have the legal right to distribute the funds to you five. He or she risks financial penalties, removal from the job of POA and perhaps even jail time for that, depending on the circumstances.

Rarely do posts move me to use quite as much underlining as I've used in this one, but this topic is so important. Over and over again, I see children with an over-inflated sense of entitlement taking money that doesn't belong to them on the philosophy that "one day it will be theirs". That day hasn't arrived yet.





16 comments:

  1. Very good post. I'd be interested to know how often people in the women's situation (that is, the mother) choose to divide up at least some of their assets before death so that the kids can benefit and mum can see how she's been able to help the kids while she's still alive.

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    1. Dividing up assets while you're still alive is an option, but not one that everyone can afford. The trick is making sure that you've kept enough of your assets to pay for your future care and a comfortable, secure lifestyle. In an awful lot of cases, a parent dies leaving little more than the home, contents and a small bank account.

      Lynne

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  2. Love your articles and they sure have been a great help in the estate case that I am involved in. One of them helped get a ruling. Thank you for the terrific information.

    I have a related question on home sales of this sort. A parent or relative is placed in a home and her executors (also two of 3 residual beneficiaries) are named POT for the sale of her family home. There was no mention to the remaining beneficiaries about the proceeds from the sale of the home until the estate had been contested and during discoveries executor stated that the elderly woman of declining health "gifted" the executor the money from the sale. There were no witnesses and very uncharacteristic of the elderly lady to do such a thing. Can an executor accept money like that without disclosing it to the other beneficiaries.

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    1. Interesting that it "helped get a ruling". Glad to hear it! Would love to know what specific issues or posts were involved.

      On to your question: The executorship is irrelevant to the receipt of the money, as the parent was alive at the time and therefore there was no executor.

      It's really common that a child of an elderly person claims that money was given to him or her. Sometimes it is; sometimes it's not. Yes, the POA can receive a gift without notifying anyone. You are not beneficiaries while the parent is alive. However, it's a complicated area of law, as a POA is not allowed to benefit from his or her position as POA. This is why gifting is claimed.

      Usually this kind of transaction is discovered, as you say, after the parent has died. The POA has a duty to report all transactions, including gifts, to the executor. Doesn't help much when it's all the same person.

      There may be a way to deal with all of this that's cleaner and clearer than getting bogged down in POA and executor's duties. Is the person who received the funds a child of the deceased? If so, he or she must have their inheritance decreased by the amount of the gits. This is the "presumption of advancement" and applies to all kids of the deceased, whether or not they are POAs or executors.

      Lynne

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  3. Lynne, I stumbled about the obligation for French (France) children to help in paying the costs of a nursing home in the case the parents' income and state's subsidies are not enough. Is this the same thing in Canada by law?

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  4. My brother, myself and my sister are POAs of Property for my mother, who is in a nursing home. She has not been deemed incapacitated although she has some dementia.
    My brother is also on the deed for her house to save on probate taxes. He wants the house to be put up for sale and the contents sold or distributed to family while our mother is in long-term care - since she will never be returning to the house.
    It is my understanding that Mother considers the house as part of her estate. But her Will, which has the estate being divided up equally among 7 children, does not list specifically her house. Should mother see her lawyer to correct this omission before the son pushes through this sale?

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    1. People like your brother irritate the heck out of me. Where on earth does he get the notion that he can sell another person's home just because he wants to? Sure, he is on the POA but you have said it is not in effect. Nobody can use that POA until it is properly brought into effect. I'm guessing by the wording of your question that the POA doesn't come into effect without a declaration of incapacity.

      Supposing that in the future that declaration of incapacity is made, it might be a good financial decision to sell the home. However, if you or your brother or anyone else takes the proceeds of the sale, they are stealing. The proceeds of the sale of the home MUST be invested in your mother's name.

      Having your mother change her will is probably not going to help matters. You and your sister need to refuse too distribute the proceeds of the sale, and explain the law to your greedy brother.

      Lynne

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  5. Lynne, how could the brother be stealing from a legal perspective when anonymous has already stated that the brother is on the deed of the property? It is my understanding that he is legally part owner of the property and that cannot be disputed unless the brother signs a quit claim deed to volunteer in removing his name off the deed; which of course is unlikely. After the sale of the property, mother and brother would have to split the proceeds 50/50.

    ReplyDelete
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    1. The brother is on the title but he does not have beneficial ownership of the home. If the home was sold, he would not get 50% because he was on title solely to save on probate costs, and not because the mother wanted him to inherit the property. The court would find that this was not a true joint ownership, and that the brother was a trustee of half of the property on behalf of the mother. This has been the law in Canada since 2007. People who put their kids on their titles like this are just asking for legal problems, and usually they get them.

      Lynne

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    2. Hello Lynne, I have some questions regarding similar situation within our family. Could I email you privately? I don't want to post this with my name..thanks

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    3. Yes, you can email me at estatelawcanada@gmail.com.

      Lynne

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  6. Thanks Ms Butler..I will email tonight.

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  7. Great article! So glad I found it.

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  8. Our dad is in a long term care facility since early this year. He has early onset dementia although he can converse very well at times. His mobility is the real issue..he is a high fall risk therefore he cannot be in his home. He requested his house be sold and it was and he also requested the proceeds be given to his children who are also POAs. He has enough savings and the children look after his investments to make sure they continue on he also receives sizeable pensions. Can this be done? Thank you.

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    1. In my opinion, no.

      The first issue is whether your father has the mental capacity to give away his money. You said he has dementia, which is an indicator of lack of capacity to deal with financial matters, though not always.

      The second issue is that of Power of Attorney. You also mention that the children "are POAs". You don't actually say that they are acting under the POA, but I think that's what you mean.

      If your father has someone making decisions for him, then I think we can agree that he doesn't have mental capacity to make his own financial decisions. So we know he can't give the instructions you mentioned to share out the money. That leads us to what the children can do using the POA.

      They can sell the house and they can invest the money in your father's name. They cannot share the money among the kids, as POAs cannot give away funds to people who are not dependents. Secondly, POAs cannot benefit themselves (or their spouses, kids) using the funds they are looking after.

      A lot of people in your situation just can't see the harm in it, so they go ahead anyway. Just keep in mind that it only takes one person to get his/her nose (or his/her spouse's nose) out of joint and raise a fuss, and all of a sudden there's legal trouble.

      Lynne

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    2. Thank you. His children, they are grown, adults, grandparents themselves, are the POAs. It was their dad's wish to sell the house and gift them the proceeds. He has a sizable sum in the bank and receives a sizeable pensions. He is well looked after financially even without the proceeds of the home and his children take care of him also. They visit every day or every 2 days.His children also have no argument or disagreement with each other, they get along. Also, in his will it is indicated to split evenly, but he wants them to have this now due to his situation.

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