When a Co-Owner Has Dementia: What’s Ahead?

Do you co-own a home? Then you could one day be asking if your deed can be signed over to someone else if either co-owner develops dementia. You might even want to transfer the deed entirely, and move to a place that will be easier on one or both of you.

Let’s take a look at the issues that crop up in such cases — which, of course, are fairly common as baby boomers grow older.

Power of Attorney (POA) Should Be Assigned Early On

Someone could challenge the transfer of a deed by an owner who lacks full understanding. For this reason, do estate planning early. While each owner still has legal capacity and agrees, request guidance from a financial adviser or estate planning lawyer about setting up a POA. As owners get  older, having power of attorney in place will allow seamless decision-making, contract-signing, and deed transfers.

The most helpful holder of a POA is one who seeks guidance and makes strategically informed decisions. 

You may use a springing power of attorney. It could “spring” into effect when the owner is declared incapacitated, allowing an agent to step in.

Or you may use a durable power of attorney. It goes into effect on its stated date, and stays in effect during the deed holder’s life. (But there is a form for revoking it before death, if needed.)

Either way, the POA document can cover one home (identified by address and legal description), or all of a person’s assets. Be sure the signer initials each power being assigned.

You can use our Forms page to find your state and local law for POA document specifics.

Have you considered a life estate deed, so the home can bypass probate after both co-owners’ deaths? Ask a lawyer experienced in elder law to tell you if this is a viable option in your circumstances.

This is a good time to establish a medical power of attorney, too.

What Happens When Your Co-Owner Needs Assistance

If your co-owner’s incapacity has been confirmed, respect is the keyword. The general idea is sharing in decisions as far as possible, and acting in the co-owner’s best interest when it’s not possible.

From a practical standpoint, when there’s no longer capacity to make legally binding contracts, it’s too late for the deed holder to grant POA authority to someone else. No assets can be transferred or financed if an owner is suffering an incapacity.

Does this mean no decisions can be made at all?

No, but help is required, such as:

• A professional assessment, stating the co-owner’s incapacity to enter contracts and make legally binding decisions.

• Legal guidance on whether a medical declaration of incapacity is needed before a POA can be used in financing and deed transactions.

An estate or elder law attorney can guide you through the process and let you know if a guardian or conservator needs to be assigned.

This stage of making decisions for another can be financially, legally, and emotionally fraught. You might believe it’s simplest and best to transfer the deed into your name alone, to guard your co-owner’s estate. But understand that an authorized representative must sign on behalf of a deed holder unable to do it themselves.

Once a deed is transferred, there’s a five-year waiting period before eligibility for Medicaid. That said, with a relative living in the home, Medicaid might be barred from reaching home equity to pay for care. Medicaid recovery is a specialized area of law. Hire legal support accordingly.

A Final Word or Two on the Strength of the POA

With a POA, the designated representative can work with a lawyer or real estate agent to sell a home, draft a new deed to convey the home, and have the deed recorded in the county. An alert title company will want to review the POA document, to anticipate any potential challenges to the deed transfer. We discuss POA disputes here.

Ultimately, the POA is about caring, support, and relationships. Never underestimate the power of keeping loved ones in the loop.