The importance of a proper estate planning

Dear Len & Rosie,

My mother is 85 and has Alzheimer’s disease. Her condition isn’t that good. She doesn’t recognize me. I could be any one of four people to her. A few years ago I prepared a power of attorney form and sent it to her. My daughter was supposed to get it signed and notarized, but she never got around to doing it. I have been paying my mother’s bills from her bank accounts, which are in both of our names. My problem is that I now need to sell her home to pay for her care, but I don’t know how to do it.

Terry

Dear Terry,

You are in an unfortunate situation, a real failure of estate planning. If your mother had executed a durable general power of attorney when she retained the ability to make decisions, you would be able to sell her home. With a properly drafted power of attorney, you could create a trust to avoid probate or even an irrevocable trust to shelter the home from the cost of her medical care. It would have been a fairly easy paperwork drill.

Now you have a problem. You do not have the legal authority to act on your mother’s behalf. It was OK for you to pay her bills out of the joint tenancy bank accounts, because you legally have access to this money, but you can’t sell her home without going to court.

You will need to hire a lawyer in the county where your mother lives and file a petition asking the court to appoint you as the conservator of your mother’s person (for medical decision) and her estate (her home and other assets). If you are the only child, and there’s no spouse, you have the highest priority to appointment. A conservatorship petition requires 30 days notice, but you can be appointed as temporary conservator on an emergency basis if there’s an immediate need to get things done.

Conservatorships tend to be much more expensive in relation to trusts and durable powers of attorney. On top of the court filing fee and probate investigator fee, you will have to hire a bookkeeper to prepare an accounting one year after your appointment as conservator, and every other year thereafter. This means you will have to keep meticulous records of everything you do on your mother’s behalf. You will also need to ask the court’s permission to sell your mother’s home.

It’s a lost opportunity for you, but if your mother had given you a power of attorney, and if she had created a trust to avoid probate, selling her home would have been a lot easier. You could replace her as trustee with one or two doctor letters instead of a court order, depending on the terms of the trust, and your lawyer could have prepared an Affidavit of Change of Trustee to transfer title of her home to you as trustee so you could sell it.

If you fail to plan you plan to fail. Don’t blame your daughter for this. The young do not frequently face the prospect of a death in the family, so they think they have plenty of time to deal with things like this when in reality they do not. In your case, with a conservatorship, you will be able to get things done, but you’re on a much tougher road because you didn’t help your mother create a proper estate plan.

Len & Rosie

Being fair to all your children

Dear Len & Rosie,

We have a home, fully paid for, in Sonoma. Both our adult children live in other towns with their families. Both our children were raised in Sonoma and they already foresee the desire to return to Sonoma for their own retirement years. Is there a way to divide the property between them in such a manner as to prevent misunderstandings, hurt feelings, division between them as they attempt to use the one property?

Alan

Dear Alan,

It would be nice to pass your home to your children, especially as they can inherit it without a reassessment under Proposition 13. They can receive the home from you and pay the same property taxes you’ve enjoyed under Prop. 13.

But the devil is in the details. What you are asking for can be difficult to pull off. We are reminded of Solomon offering to cut a baby in half to resolve a custody dispute. If you leave the home to both children, there are plenty of opportunities for conflict.

It’s not so likely that they’ll want to live together after a lifetime of living independently without you telling them to split up and go to their rooms when they argue. If you leave the home to both children, but only one lives there with his or her spouse, then your other child will not receive any actual benefit from what is likely to be the largest portion of their inheritance. If both children want the home and they don’t want to own it together, then there are some things you can do.

You could pick a favorite and leave the home to only one child. Your trust could allocate the home to the share of one child, while leaving the other child cash or other investments. If the home is worth more than half, then the child receiving the home could have the option to buy out your other child, so each of them gets an equal share. You can specify an appraiser, such as the California Probate Referee, to avoid potential disputes concerning the value of the home upon your deaths.

If you don’t want to play favorites, you can offer the home to the child willing to pay the most money, specifying as a minimum price the date of death value as established by an appraisal. If you think that it will be contentious, then you may want a third party trustee such as a professional fiduciary so that neither child will be in a position of power over the other. You could even specify that a neutral trustee shall put the property up for sale on the open market if your children can’t close a deal within a certain time, say six months after your deaths. If either child still wants to buy it, then he or she will have to be the highest bidder.

Despite all this, the very first thing you should do is to talk to your two children. You may not actually have a problem. While they may want to move back to Sonoma, they may not want to live in your home at all.

Len & Rosie