SITUATION 1
Your mother is no longer able to get out on her own to do her banking. She is not computer-savvy enough to do her banking online. She asks you to help out and suggests putting you on as a signatory to her bank accounts. You agree that this is a good idea as it will save her a lot of worry to have you help her with her finances. She mentions it one day to your brother who asks you about it. Your brother wants the situation reversed immediately and threatens legal action.
SITUATION 2
Your sister has been helping your father out on a daily basis so that he can stay in his own home for as long as he is able to. She does not live with him but visits every day, drives him to his appointments, buys his groceries, does his laundry and helps with cleaning. Your father pays for her expenses including time spent, gas and mileage.
He has been thinking about how to deal with his estate and learns from his accountant that if the title to his home is in joint names with someone else, when he dies, the home will belong to that person who will have the right of survivorship.
Your father has your sister drive him to his lawyer’s office where he transfers his home from his own name into the names of himself and your sister. You know nothing about this until after your father dies and you find that his estate does not include his home, which was his primary asset. Your sister ends up with a property worth $1 million and you are given some family items from your father’s home which have only sentimental value.
RESULTING ISSUES
Neither of these two situations is out of the ordinary.
With the huge numbers of Baby Boomers moving into retirement and beyond, older parents often require assistance with their financial and personal affairs and are becoming ever more conscious of what will happen to their property when they die. What they may not be aware of is the potential fallout in the family of making these kinds of decisions without discussing it first with all of their adult children. They often feel that it is their decision to make and nobody else’s business; they feel no need to share this with other children either before, at the time of, or even after they make a decision and act on it. They already feel the loss of some of their former independence and resent having any of their children challenge their decisions just because they are older and more vulnerable.
Unfortunately, this desire to maintain independence can cause problems when they are in their 70s or 80s (or older), whereas no child would have dared to challenge the same decision made when they were in their 50s or 60s.
Depending on a parent’s health, mobility and mental capacity, these kinds of decisions can be challenged in the courts, often successfully, on a number of grounds, including:
- That the parent was unduly influenced by the child who benefits from the transfer of a parent’s asset into joint names,
- That the parent did not have the necessary mental capacity to make the decision or to execute the transfer,
- That the parent did not intend for the recipient child to have 100% ownership in the asset once the parent dies, but made the transfer only to facilitate management of the parent’s financial affairs or to avoid paying probate taxes on the property now in the parent’s estate, and/or
- That the parent had a moral duty to ensure that his or her assets were fairly divided amongst the surviving children and, whether on the basis of #1, 2 or 3, the parent failed to recognize that duty.
Often the surviving adult children will be able to come to an agreement on sharing the deceased parent’s assets more equitably in order to avoid court. However, the conflict and bad feelings created in the family will often last forever. This is rarely a parent’s intention.
Are there ways to avoid this kind of situation to the greatest extent possible?
Yes. Here are some suggestions. No doubt there are others – it just depends on the family’s willingness to be creative in the particular circumstances of their own situation:
- Have a family meeting with your parent(s), to discuss their intentions with respect to managing their financial and personal affairs. Have the family agree on who will be tasked with assisting your parent.
- Record the agreement in writing. It should be clear that your parent’s intention is not to prefer one child over another but simply to facilitate the assistance he or she needs now at this stage of life and that the remaining asset or assets involved will be shared equally among all children when the parent dies.
- If there is a transfer of property into joint names, create an agreement that makes it clear that until the parent dies, the children hold their interests in the property in trust for the parent and that no one owner can do anything in relation to the property without the agreement of the others.
What if you are the parent and you want to favour one child over another/the others, for your own reasons? Some suggestions:
- Obtain a doctor’s letter or report confirming your mental capacity to make such a decision. Ideally, the doctor should be experienced in geriatric medicine, and preferably a geriatric psychologist or psychiatrist. This will likely cost you a few hundred dollars but it should be worth it in the end to support your decision once you are gone or if your decision is challenged while you are still alive. Keep this with your will in a secure place.
- Write out a letter to your children explaining why you have made the decision you have and put this letter with your will.
- Include a statement in your will specifically outlining why you have chosen to exclude one or more children or why you have given one a greater share than another. Your lawyer can help you with how this should be worded.
There are no guarantees that an elderly parent’s decision will not be challenged at some point or that, if there is dysfunction in the family, any of the suggestions provided will be effective. However, if full and clear communication is possible, this is often the best route to take before the ‘pot’ boils over.
If you need advice about what you would like to do in situations like this, we can help. Contact us today.