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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.

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