Dear Mr. Miller: Introduction: My parents live in
Southern California. My Dad is bedridden. In fact, he has no idea
what is going on–advanced dementia. My Mom is taking care of my Dad.
She does everything for him. They own a $600,000 house and have
about $150,000 in the bank.
It won’t be long until Mom can no longer take care of Dad. In fact,
his physician has told us that he really needs a skilled nursing
facility. I have checked into the cost. For what he is going to need
it is going to be $15,000 a month. Their income is $5000 per month.
I’m willing to help to the extent I can, but I don’t have an extra
$10,000 to give them each month. I’m still trying to get my daughter
through her last two years of college and provide for my own
They do not have a Living Trust but a few years ago, I printed power
of attorney forms off the internet for them. They signed them
authorizing me to act for them, but I am worried how effective those
forms will be. What are the options?–Nervous Daughter
Dear Nervous: Your parents’ situation is, indeed, dire. And
if you try to pick up the financial slack, so will be yours.
the Authority: There are actually a number of options. But I am
going to preface that with what I have had to tell far too many
people: I have the solution, but I don’t have anyone in the family
with the authority to carry out the solution. That very well may be
the situation with your parents. And if so, it will probably require
an expensive court solution.
Life Expectancy: First and
foremost, you are going to have to come up with an operational
assumption as to how long you think Dad will be around. The
physicians probably aren’t going to give you a “number,” they
probably don’t know themselves. So you are going to have to take all
the information and simply come up with a guestimate. Right or
wrong, that becomes your assumption under which you are going to
operate and create a strategy. If it is only a few months, then the
financial problem is somewhat limited but, if for a number of years,
then the problem is a whole different ball game.
Term Care Insurance and Reverse Mortgage: As to options to get
the money, I assume there is no long term care insurance in
existence. Or maybe life insurance with a payout feature if long
term care is necessary. If there is then you need to contact the
insurance company or agent. Assuming there is none or the monthly
payout is too small, a reverse mortgage is a possibility. The
maximum amount, depending on the lender and the value of the house,
is in the $600,000 range. But if your parents are going to run
$10,000 in the hole each month, $600,000 will only last 5 years, and
that doesn’t count any living expenses for your Mom.
Medi-Cal: Another option is Medi-Cal
(Medicaid outside of California). It will pay for the facility and
care above and beyond your parents’ monthly income (and much of that
income will be exempt from having to be used).
Net Worth Limit: But here’s
catch #1: your parents’ have too much. Their net worth, not counting
the house, is $150,000. They can only have $117,920 between them. So
they are about $30,000 over the limit. They can give that to you and
if they do it “right” they will not be disqualified from Medi-Cal
for a number of months.
Loan Not a Gift: So here’s cath
#2: Medi-Cal is a loan, it is not a gift. That means that when both
your parents pass, they will want to be repaid from your
inheritance. After 5 years of Medi-Cal paying out $600,000, the
house will go to Medi-Cal, not to you. I can almost guarantee that
when your Mom finds this calamity out she is going to be heartbroken
and, unless a solution is found, she is going to worry herself
sick–right into the bed next to your Dad. Fortunately, there is a
solution, transfer the house to a QMap Trust. That will prevent Medi-Cal
from getting the house when your parents’ die.
Mom Does Not Have
Authority: Ok, so we have solutions, now here’s the problem. Who
is going to sign the deed to transfer the house to the QMap Trust or
sign the mortgage papers to get the reverse mortgage? Certainly not
your Dad as, from your description, he is obviously incompetent.
And, although it may come as a surprise to some of our readers, your
Mom does not have the power to sign for your Dad without some sort
of legal document (beyond the marriage certificate). So now we are
left with relying on the power of attorney to authorize someone to
sign for him.
Statutory Powers of
Attorney: How extensive are these powers of attorney? From your
description, it seems as if they are “statutory powers of attorney.”
There are two types. The short form simply refers to various
“powers” by the power’s name and references the California Probate
code for what each power entails. The long form contains the same
powers but sets forth the complete probate code sections rather than
just refer to them. They are both very basic unless custom powers
have been added. In my experience, custom powers are rarely the
case, especially if no attorney has been involved.
Gift Giving and
Self Dealing Power: Without custom language, it is doubtful that
the lender will allow the power holder to sign the reverse mortgage
papers. And with no custom gift giving authority you can’t give the
house to yourself (and that is what you are going to need to do in
their situation to transfer the house to you or to a QVap Trust).
Further, under California law, a holder of the power of attorney
(you) cannot give anything to himself without specific language
authorizing the power holder to do so. Because it is highly unlikely
that these two powers appear in your parents’ documents, you don’t
have the necessary authority to act.
Court Action: When we want to take
action and we don’t have anything granting the authority, the only
way to get the authority is by getting a court to grant it.
Typically, we would need to have a conservatorship (called a
guardianship in some states) created for your Dad. Given that we
have one parent who is competent, there is a simplified court
procedure that avoids the ongoing expense of a conservatorship. But
don’t be misled, although it is simplified compared to a
conservatorship, it is not simple and it is not inexpensive.
Further, there is no guarantee that a court will approve the
Obviously, you need to consult an attorney immediately. Make sure it
is someone who has experience with these types of cases, not just
the biggest ad in the phone book.
Moral and Conclusion: The
moral of the story for our other readers is to make sure parents
(and everyone) sees an attorney periodically (every three years or
so) to assess the person’s situation and update documents. And if
the person is getting elderly or is infirm, then make sure that
attorney is experienced in not just basic estate planning but also
“elder law,” i.e. Medi-Cal and other issues that affect those
getting along in years. Doing it yourself to avoid the attorney fee
can be a very costly approach.