Aging Parents And Real Estate Investments

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For aging parents who had a measure of financial success, real estate investments are not unusual. Their portfolios can include single family rental homes, apartment buildings or commercial entities. When they were younger, many of these seniors took pride in managing these investments themselves. But time can take its toll. We are seeing age-related problems eroding the elders’ property management abilities at AgingParents.com, where their worried adult children are seeking advice.

The adult child is concerned that the aging parent refuses help and does not realize or denies that anything is wrong.  The real estate, a valuable asset they may one day inherit is decreasing in value because the aging parent is just not able to manage it. Usually it is the patriarch who is having the issue, though it could be any older relative in charge. What they tell us is that Mom or Dad used to stay on top of rents, maintenance and repairs on the property and that it has increased in value over time but now it’s in trouble. They describe that the aging parent has memory problems and is neglecting the needed maintenance or has failed to pay property taxes. They are not sure that mortgage payments and insurance are being paid. Things are going downhill.  When a property manager is involved, they suspect that their aging parents are being manipulated or that rents are not keeping pace with the marketplace.  In some extreme cases, rent money is being diverted, skimmed or not paid at all by some tenants.  No one evicts the non-paying tenant. Those involved see the elder’s vulnerability and take easy advantage. Property managers who have been in place for years are not accountable to anyone.

Typically the family reports that the aging parent has been showing signs of cognitive decline over the prior year or two. He forgets his own bills or loses track of them. He can’t remember what he thought he needed to do about a certain rental but no one can get him to act. He gets belligerent when confronted and the adult child backs off, fearful of the parent’s wrath.

Dementia is a factor in most of these cases. The aging parent demonstrated cognitive challenges for some time but the family members tell themselves it isn’t that bad or it comes and goes or some other myth. Meanwhile a rental home can become uninhabitable, and neighbors may report serious neglect to the local housing authority. Buildings fall into disrepair and become hazardous or un-rentable. Some simply sit vacant, and become wasting assets, with loss of any potential rental income.

No one wants to truly face the reality that the aging parent is impaired and should not be handling real estate matters independently or at all. What should the adult children do?

In many instances the real estate is held in the family trust. In some families, we see success in a series of family meetings in which the adult children and others persuade the patriarch or matriarch to resign from being the trustee. The appointed successor then takes over control.  In other cases, the family elder stubbornly clings to power, triggering efforts on the part of the adult children to have him removed as trustee, which requires the help of one or more doctors and an attorney. In extreme cases, guardianship is a last resort.

The takeaway here is that any family with an aging parent who has investment real estate must consider that the elder’s ability to manage it may slip over time. Competency to do the necessary tasks can be damaged by dementia or other health problems. This applies to the most modest investment of a single-family house or the most complex commercial property.

Adult children or other loved ones need to do the following:

Get access to any accounts into which rental income would normally be deposited and analyze what is going on. Monitor deposits and expenditures. Review all leases.

Arrange for or do inspections of the properties. Determine any needed repair or maintenance. Keep a list and approach the aging parent about the problems you see.

If your aging parent is “slipping” cognitively, offer to help. If your help is refused, review the family trust and find out whether your aging parent can be persuaded to resign as trustee. If not, seek legal advice about the terms of the trust that allow an incapacitated trustee to be removed.

Protect your own potential inheritance by preventing the erosion of value in any real estate owned by aging parents who are too impaired to manage it. Always offer to allow their input into decisions but proceed anyway if they refuse.

No one likes to face the issue of an aging parent’s decline. If you are proactive you can keep them safer and keep any real estate assets from a loss of value due to neglect.

Source: forbes.com