When a loved one must be moved to a care facility, there are ways to leverage their property in order to afford the high cost.
Q: My father has Alzheimer’s and I have power of attorney over his home. Due to the past hurricane damage, the home is in need of major repairs, everything from a new roof to new plumbing, and electrical work. These repairs are estimated to cost $21,000.
The home has no mortgage and the property is worth about $60,000. Currently, my sister has been caring for my father, but it has become increasingly difficult on her. I was wondering if it was wise to have the home placed in my name and take out a mortgage on the property and use it for his care in a facility and to make some repairs over time.
A: As the power of attorney holder for your father, you have a duty to act in your father’s best interests. If you were to transfer the title to the home to your own name, that transfer could be viewed as self-dealing.
Think about it. You have the power of attorney and you transfer the home to yourself without paying your father for the home. While you may have his best interest in mind, the transfer raises a number of questions.
You didn’t mention whether your dad had homeowners’ insurance on the home and whether that insurance covers any of the repairs you might need to make for the home to be livable. If you do have insurance and the insurance company is willing to pay for the repairs, you could take care of the repairs without having to transfer title to the home.
We wondered whether the value of the home you mentioned would increase if you make the repairs to the home or whether the value for the property is mostly for the land. If the real value is in the land, your repairs may not increase the amount you get back from the sale of the property.
We suggest you talk to a couple of real estate agents in your area to determine what the land value is for the property. When you have those conversations, be sure to ask what the agents would expect the the value of the property would be once the home is repaired. In some instances, the land value is the same as the value of a property with a home. If that is the case, your instinct to make the repairs may change.
Now if the repairs are necessary to maintain the property’s value or to increase substantially the value of the real estate, you will need to go forward and make the repairs. The question then becomes how you pay for those repairs. You mentioned that you can’t get a mortgage but the question is whether you have tried. You may be able to get financing for these repairs by using your own credit and co-sign the loan for the repairs. This way you have not conveyed the property to yourself, you get the repairs done and the loan is repaid when you sell the property.
One thing you should keep in mind is that any conveyance or transfer of property out of the estate of your dad could cause you a real headache down the line. If your dad ends up needing care and that care is paid by Medicare, the government has the right to review the estate of your father for transfers of property for which your father didn’t get anything back in value. If assets were taken out of the estate, the government has the right to go after those assets and get the value back to pay for your dad’s care.
We think keeping the property in your dad’s name, researching the value of the property further, then deciding how to proceed with the property are your best course of action moving forward. If you sell the home once you have more information, you can use those proceeds to help your dad.