Sometimes, a home must be sold, but the homeowner is no longer able to sign a listing or sale agreement due to cognitive impairment, confusion, advanced dementia or severe and persistent addiction issues (i.e., Wernicke-Korsakoff syndrome), or new onset dementia after recovering from COVID-19. https://www.msn.com/en-us/health/medical/covid-19-pneumonia-increases-risk-of-dementia-study-says/ar-AAWpSwY, Others may be temporarily incapacitated due to cardiac issues, surgery, or severe illness. These conditions can prevent an adult from being temporarily or permanently able to make important financial, medical or legal decisions. Adults who can no longer make decisions may be incapacitated. And in real estate bubble with many residential properties reaching their peak value, it’s critical to act fast to accept the best home sale offer.
Unfortunately, incapacitated adults are unable to enter into a binding contract, such as an agreement to list or sell the home. When this happens, one option may be to use a general durable power of attorney or a real estate power of attorney to sell the home. But that can only be successful where there is already a valid general durable power of attorney or real estate power of attorney in place. If there is a power of attorney, and the homeowner is able to make decisions, the home cannot be sold through a power of attorney without the homeowner’s consent to the sale. Giving a power of attorney to a trusted adult child or friend is like giving them an extra set of keys to the car. You can always take back the keys when you wish.
More to the point, a power of attorney is an important legal document by which the principal (i.e., the person signing the power of attorney) gives authority to an agent to carry out the affairs of the principal. The catch-22 is that in order to make a power of attorney, the principal must have legal capacity. Unfortunately, there are many incapacitated persons who never bothered to obtain a power of attorney before they lost capacity. Another risk is that there may be a valid power of attorney, but the agent named may be deceased, very ill, or no longer available to serve. Once again, there is no one with legal authority to sign the home sale agreement and the house cannot be sold even if there is a buyer.
The solution is to seek a court order for authority to sell the home. This involves filing a lawsuit in the Superior Court for a judgment of incapacitation and award of guardianship. The guardianship process is not a simple one. There are several different types of guardianships and the correct type must be selected. Various court rules, required information and forms must be complied with.
The guardianship process requires doctor’s reports and an investigation into the finances and health of the alleged incapacitated person. As part of the process, the Superior Court judge appoints an independent attorney to investigate these matters and to write a report. This attorney is referred to as the court-appointed attorney. Often, that attorney’s report carries great weight with the court. Testimony by the doctors may be waived, or if the guardianship is disputed, there may be an adversarial hearing. If the evidence, any testimony and the court-appointed attorney’s report indicates that the alleged incapacitated person cannot make any significant decisions as to his person or property, then a plenary guardianship may be awarded.
But this is only the first step in obtaining court-authority to sell the home of the incapacitated person, who may urgently need the anticipated net home sale proceeds to pay for long-term care. The next step is to file a motion with the court to sell the home through the guardianship. The court can potentially award the requested order. Only when such an order is in place, can the home be legally sold.
Not surprisingly, this process requires additional legal work and documentation. The guardian must show that the proposed sale is fair and reasonable and in the “best interests” of the incapacitated person. In deciding whether this standard is satisfied, the judge may consider whether the incapacitated person will ever be able to return to the home to live there independently or with the assistance of paid caregivers, provided there are sufficient funds. The fair market value and the tax-assessed value of the home will also be considered, as will the outcome of any prior attempts to sell the property, the cost of continued homeownership, and whether the anticipated net house sale proceeds are needed to pay for long-term care. In many cases, the home must be sold as a condition of Medicaid eligibility for the former homeowner in a nursing home.
This process takes time. In limited cases where the safety of the alleged incapacitated person is endangered, or a very good purchase offer may be lost without swift court approval, the guardianship process can be expedited in New Jersey.
The bottom line, is that when capacity is in issue, selling the home a general durable power of attorney or a real estate power of attorney is much more efficient than through a guardianship. However, selling the home through a guardianship can be done in the difficult cases where there is no legal authority in place to sell the home.
Questions, or if you need help clearing title to sell a home through a guardianship? Let Jane know.