attorney-in-fact for parents but property in trusts

[lufarm]

What is the name of your state (only U.S. law)? Illinois

My in-laws both have Alzheimer's and have been living in an assisted living center in northern Illinois since 2009. They put their house on the market a year ago and have finally gotten an offer on it.

In the past year, their cognitive skills have declined. They don't really understand money any more and can't comprehend complex documents. My mother-in-law is easily agitated and tries to control everything, even when she doesn't understand. My husband has Power of Attorney and would like to handle the sale, waiting until the sale is closed to inform his parents. He is afraid his mother will sabotage the sale and they might not get another offer. By the way, he is trying to handle all of this from out of state.

Through trust agreements, his parents put the property into 2 trusts (one in each of their names) in 2007. Against our advice, they listed each other as their trustees (one of them already had an Alzheimer's diagnosis) and my husband as successor trustee. There is a clause in the document that the Trustee can delegate any or all powers to another Trustee through a Power of Attorney. I can't find a specific clause in the Trust Agreements stating that my husband has to have his parents declared incompetent in order to take over as Trustee, but I do remember the lawyer discussing that when we all met with him in 2007.

In 2009, before moving into assisted living, my in-laws each updated their Power of Attorney documents. In their POAs, they grant my husband the power to act as their Attorney-in-Fact, effective as of the date of signing (there is no springing clause). In 3 separate clauses, they give him the power to sell their real estate. Their concern about selling the house was a motivating factor when drafting the revised POA documents with their lawyer.

Fastforward to 2011. My husband signed the sales contract on behalf of his parents, using his Power of Attorney. The house is now in escrow. In Illinois, you have to hire a lawyer to close the sale. My husband chose his parents' lawyer to handle the transaction. Now the lawyer is saying my husband has to have his parents declared legally incompetent for the sale to go through.

So, here are my questions:

1. What could be the lawyer's reasoning in stating that my in-laws have to be declared incompetent? Didn't they willingly give him the power to sell the property?

2. Or is the issue that my in-laws drafted their POAs as individuals, but their assets are held in their individual trusts?

3. Was the lawyer negligent in updating the POA without mentioning the trust and leaving the Trust in its 2007 form?

4. How best to proceed?

The last thing my husband wants to do is have his parents declared incompetent. They are having enough trouble coming to grips with having Alzheimer's. This would be a huge blow to them psychologically and would no doubt ruin my husband's relationship with them. Is it really necessary to go that route?What is the name of your state (only U.S. law)?

What is the name of your state (only U.S. law)?What is the name of your state (only U.S. law)?

 

[LdiJ]

What is the name of your state (only U.S. law)? Illinois

My in-laws both have Alzheimer's and have been living in an assisted living center in northern Illinois since 2009. They put their house on the market a year ago and have finally gotten an offer on it.

In the past year, their cognitive skills have declined. They don't really understand money any more and can't comprehend complex documents. My mother-in-law is easily agitated and tries to control everything, even when she doesn't understand. My husband has Power of Attorney and would like to handle the sale, waiting until the sale is closed to inform his parents. He is afraid his mother will sabotage the sale and they might not get another offer. By the way, he is trying to handle all of this from out of state.

Through trust agreements, his parents put the property into 2 trusts (one in each of their names) in 2007. Against our advice, they listed each other as their trustees (one of them already had an Alzheimer's diagnosis) and my husband as successor trustee. There is a clause in the document that the Trustee can delegate any or all powers to another Trustee through a Power of Attorney. I can't find a specific clause in the Trust Agreements stating that my husband has to have his parents declared incompetent in order to take over as Trustee, but I do remember the lawyer discussing that when we all met with him in 2007.

In 2009, before moving into assisted living, my in-laws each updated their Power of Attorney documents. In their POAs, they grant my husband the power to act as their Attorney-in-Fact, effective as of the date of signing (there is no springing clause). In 3 separate clauses, they give him the power to sell their real estate. Their concern about selling the house was a motivating factor when drafting the revised POA documents with their lawyer.

Fastforward to 2011. My husband signed the sales contract on behalf of his parents, using his Power of Attorney. The house is now in escrow. In Illinois, you have to hire a lawyer to close the sale. My husband chose his parents' lawyer to handle the transaction. Now the lawyer is saying my husband has to have his parents declared legally incompetent for the sale to go through.

So, here are my questions:

1. What could be the lawyer's reasoning in stating that my in-laws have to be declared incompetent? Didn't they willingly give him the power to sell the property?

2. Or is the issue that my in-laws drafted their POAs as individuals, but their assets are held in their individual trusts?

3. Was the lawyer negligent in updating the POA without mentioning the trust and leaving the Trust in its 2007 form?

4. How best to proceed?

The last thing my husband wants to do is have his parents declared incompetent. They are having enough trouble coming to grips with having Alzheimer's. This would be a huge blow to them psychologically and would no doubt ruin my husband's relationship with them. Is it really necessary to go that route?What is the name of your state (only U.S. law)?

What is the name of your state (only U.S. law)?What is the name of your state (only U.S. law)?

I suggest that your husband get a second opinion from another attorney.

 

[nextwife]

What does the title underwriter need to be comfortable insuring the sale? That is what matters most.

 

[tranquility]

Dad is a trustee. Powers of attorney generally don't give trustee powers. Who is the successor trustee?

 

[OHRoadwarrior]

Instead of having them declared incompetent, I suggest the trust be revised, making hubby the controlling trustee now.

 

[curb1]

Successor trustee should be handling the trust at this time.

 

[lufarm]

Thanks everyone.

To clarify, the house is owned by the "Mom Trust" and the "Dad Trust".
My husband is the Successor Trustee for both the Mom Trust and the Dad Trust. Mom is Dad's current Trustee. Dad is Mom's current Trustee.

I did find some clauses in the PoA that may be relevant. What do you think?

My Attorney-in-Fact is authorized:
...

5. To lease, sublet, let, sell, transfer, release, hire professional managers, convey and mortgage any real property owned by me, including my residence, or in which I have an interest upon such terms and conditions and under such covenants as my said attorney thinks fit, including the sale of my real estate and to sign, seal, execute and deliver deeds and conveyances therefore, including the right to describe such real estate by appropriate metes and bounds.

7. To execute, deliver, and acknowledge deeds, deeds of trust, covenants, indentures, agreements, mortgages, hypothecations, bills of lading, bills, bonds, notes, receipts, evidences of debts, releases and satisfactions of mortgage, judgment, ground rents and other debts.

22. To execute a deed of trust, designating one or more persons (including my attorney-in-fact) as original or successor trustees and transfer to the trust any property owned by me as my attorney-in-fact may decide...

24. To withdraw and receive the income or corpus of any trust over which I may have a right of withdrawal, and request and receive the income or corpus of any trust with respect to which the trustee thereof has the discretionary power to make distributions to or on my behalf, and to execute a receipt and release or such similar document for the property so received.

28. To renounce any fiduciary positions to which I have been or may be appointed, including, but not limited to, personal representative, trustee, guardian, attorney-in-fact, and officer or director of a corporation or political or governmental body, to resign such positions in which capacity I am presently serving, and to settle on a receipt and release or other informal method as my attorney-in-fact deems advisable.

And at the end of the document:

I understand that this power of attorney is an important legal document. Before executing this document, my attorney-in-fact explained to me the following: (1) This document provides my attorney-in-fact with broad powers to dispose, sell, convey and encumber my real and personal property....​

So, I think you can see our dilemma. The PoA seems to indicate to us that my in-laws fully intended for my husband to sell their house. They voluntarily gave him this power. Now their lawyer is saying my husband has to declare his parents incompetent. Doesn't the PoA give him all the powers he needs to sell the property without resorting to that?

Can he use the power listed in item 28 to remove each of his parents as each other's Trustee and then take over in his (my husband's) role as Successor Trustee? In that clause, how would he "renounce" their trustee roles and what is meant by a "receipt and release"?

BTW, the lawyer is not returning my husband's calls, so the only info we have was his brief voice mail from 5 days ago about the declaration of incompetence. I appreciate all of you taking the time to comment; we are very stressed out by this situation.

 

[tranquility]

The POA does not give the attorney in fact the right to act as trustee.

You must have a new trustee declared for the trust, a successor trustee.

Most trusts, in this situation, would require the incompetent trustee be adjudged such before a successor can take his place as dad is not competent to resign as trustee.

Dad must be declared incompetent so the successor trustee can sell the house.

 

[lufarm]

The POA does not give the attorney in fact the right to act as trustee.

You must have a new trustee declared for the trust, a successor trustee.

Most trusts, in this situation, would require the incompetent trustee be adjudged such before a successor can take his place as dad is not competent to resign as trustee.

Dad must be declared incompetent so the successor trustee can sell the house.

OK, I've looked back over the Trust documents, and I mis-stated the situation. Each trust lists both Mom and Dad, acting together or singly, as the Trustee. The first successor trustee is the surviving spouse. The second successor trustee is my husband. Does this mean both Mom and Dad have to be declared incompetent for my husband to become trustee?

And I still don't see the point in creating a PoA that gives my husband the power to sell their house, when the house has been in a trust for 4 years now and he's not the trustee.

My husband spoke to his parents' physician about writing a declaration of incompetence, which he says he will do. My husband finally got back in touch with the lawyer, who says that in addition to the doctor's letters, my husband also has to write letters stating that in his opinion his parents are incompetent. Why is that necessary? My husband is not a medical professional. If a second opinion is required, shouldn't it be from a doctor?

 

[tranquility]

OK, I've looked back over the Trust documents, and I mis-stated the situation. Each trust lists both Mom and Dad, acting together or singly, as the Trustee. The first successor trustee is the surviving spouse. The second successor trustee is my husband. Does this mean both Mom and Dad have to be declared incompetent for my husband to become trustee?

Yes.

And I still don't see the point in creating a PoA that gives my husband the power to sell their house, when the house has been in a trust for 4 years now and he's not the trustee.

I don't either. If the attorney was made aware of the fact the property was in a trust and that the sole purpose of the POA was to sell the house from the trust and he still prepared the document, I'd say there is a potential of malpractice. Your damages would be the amount paid to prepare the POA for the task it cannot accomplish.

My husband spoke to his parents' physician about writing a declaration of incompetence, which he says he will do. My husband finally got back in touch with the lawyer, who says that in addition to the doctor's letters, my husband also has to write letters stating that in his opinion his parents are incompetent. Why is that necessary? My husband is not a medical professional. If a second opinion is required, shouldn't it be from a doctor?

Ask him. There may be differing requirements to declare a trustee incompetent within the meaning of a trust or in a springing power of attorney and having a person be declared incompetent in court. The trust/springing power will have specific requirements, in the court it will be a matter of proof. Maybe judges would prefer an expert AND a person who personally knows the target person rather than two experts.

 

[TrustUser]

isnt there a section in the trust that defines what is needed to define a person as incompetent ?

typically, opinions from 2 doctors ?

 

[lufarm]

Thanks for the responses.

Here is a clause from the Trust documents:

4) F. : Each Trustee may, by written revocable power of attorney delegate to any other trustee the complete exercise of all, or any one or more, of the powers and discretions herein conferred upon the trustees jointly.​

I think this is what my in-laws were trying to do when updating their Powers of Attorney. So, in essence, their lawyer made the mistake of writing the PoA as if they and my husband were individuals and not as if they were Trustees.

I did also find the section regarding declaring incompetency in the Trust document. Not sure how I missed it before. It states that it can be done either (a) through the courts or (b) by written certificate executed by their physician plus a majority of their children. My husband has a brother, so would they both need to sign the certificate? 50% is not a majority after all.

It really sucks that the lawyer messed this up!

 

[curb1]

Do "Mom" and "Dad" wish to have your husband as Trustee? Why not just amend the trust and place husband as Trustee?

 

[TrustUser]

from what i understand, they are not competent enough to amend the trust.

i would say that if there are just 2 children, they would both need to sign.