Dear Mr. Premack: My mother owns several rent houses and has managed them herself for years. She is now in her 80’s and does not have the energy to handle the leasing, collecting the rent, and maintaining the properties. Actually, I fear that her forgetfulness is a symptom of a deeper issue. I am wondering if there is a way that I can act as her assistant, taking some of the management burden off her shoulders. Her insurance company will not talk to me about the rent houses, so I know that I need some type of legal powers. Can you suggest a way that I can legally help her? – H.D.
As the owner of the rental properties, your mother is the sole person with legal authority to lease, buy, sell, and repair her properties. Her reduced energy and increased forgetfulness, however, are a threat to efficient business-like management of her properties. You perceive a need to assist her, but the more operative legal question is whether she will or can authorize you to assist her.
If she still retains legal capacity, there are two voluntary techniques that she could utilize which will allow you to legally assist her. The voluntary techniques are 1) use of a proper Durable Power of Attorney, or 2) use of a revocable Living Trust. If your mother becomes legally incapacitated before she uses one of the voluntary techniques, then the only way for you to gain legal authority to manage the rent houses is to seek to become her court appointed guardian. Guardianship is slow, expensive and intrusive. Even the mention of guardianship should motivate her to visit her Certified Elder Law Attorney to start one of the voluntary techniques.
To expand: Assume that she has legal capacity and wants you to assist, but desires to retain a great deal of control. She can consult with her attorney to draft a Durable Power of Attorney which designates you as her agent. She can include the powers specified in section 752.102 of the Texas Estates Code, so you would be authorized to perform a wide variety of tasks on her behalf. These would include, for instance, power to sell or buy real property, power to insure property against loss like fire, power to initiate eviction of a tenant in breach of the lease, power to pay her real estate taxes, power to make repairs to the properties, and power to lease the properties.
The Durable Power of Attorney can be written to include a variety of other powers, like filing her tax return with the IRS on her behalf and receiving her bank statements to keep her books balanced. Your mother can, however, still do all of those activities herself (she loses no authority by naming you as agent) and can at any time revoke the authority that she has given to you. Also, upon her death all of your powers end and the properties would pass to the devisees named in her probated Will.
On the other hand, if she has legal capacity, wants your assistance, and is not concerned about retaining control, then she can establish a revocable Living Trust in which she names you as the Trustee. All of her properties would then be deeded from her to the Trust with the help of her attorney. You would manage the properties for the Trust, and have the same authority over the properties which she had while she was the owner.
When her attorney writes the proper Trust, your mother would be designated as the sole beneficiary for her entire lifetime (so all of your activities are for her best interests and she has all economic benefits from the Trust until her death). The Trust should specify alternate beneficiaries who will become owners of the properties upon her death. Your powers as Trustee continue beyond her death so that probate of the rent houses can be avoided.
Discuss these options with your mother, and encourage her to seek legal counsel from a qualified attorney. Emphasize that she will save a great deal of time and money by taking action while she is still capable instead of procrastinating until voluntary action is no longer an option.
Paul Premack is a Certified Elder Law Attorney practicing estate planning and probate law in San Antonio. His firm has offices in Texas and Washington, and handles business entity formation issues. Submit estate, probate, elder law and LLC questions at www.Premack.com, or go there to view the archive of past legal columns.
Original Publication: San Antonio Express-News, May 27, 2014