Dear Michael: I have an uncle who is in the nursing home. I have power of attorney for him. Before he went into the home, he had proposed a price of around $1800 an acre for me to buy his farm. Then he had a stroke and went into the nursing home. He only has about two months before he runs out of money to pay the home.
His two children have agreed that this was a fair price and are willing to sell it to me at the same price the uncle had agreed upon. However, since his stroke he has gotten forgetful, even forgetting the agreement to sell, and he has gotten ornery about owning his land. His children are hoping he will agree to this sale, but they do not think he will now agree to sell this property. What do I do now? – Between a Rock and a Hard Place.
Dear Between: This situation reminds me of a few things. My aunt developed Alzheimer’s in her later years, eventually succumbing to it. However, my mom – who had power of attorney – always fretted about making decisions for her and whether or not she should act without Auntie’s consent.
For people who have power of attorney, the reason you were given this power is because these people trusted you to make the right decision for them when they would be unable OR unwilling to make the right decision.
As I told my mom, if you are making the right decision for this person and/or for their family, then do not attempt to reason with someone who is beyond reasoning. Do your best to protect them but if you are not doing anything against their self-interest, then sleep well at night.
In fact, I told her that her failure to do what was necessary was the true betrayal of the powers vested in her. My aunt depended on her to do this when she made out the power of attorney. My mom sitting on her hands was not what my aunt had in mind and my mom not fulfilling her duties was not what Auntie wanted.
In the case of your uncle, if you have had a discussion of the price and the children – your cousins – agree to the price and terms for the land, then you may have to act in your uncle’s best interest.
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However, it is difficult for your cousins to explain to their dad that the farm has been sold. Right now, your uncle is grabbing onto any reality he can muster and owning land is something he thinks cannot be taken away from him.
That would be the wrong attitude because if he does not act on this agreement, Medicaid will come in and sell the ranch themselves.
But I can see where the children would be reticent to tell their father they “sold the farm” while he is in the home. As such, maybe there is a better method.
This method reminds me of the old saying “How do you eat an elephant?” Answer “One bite at a time.”
In this case, perhaps it would be better all-around if you simply moved one quarter at a time. This would amount to over $500,000 and should pay for uncle’s care for a long time. His kids can still tell him the farm is still there.
In case he is in there for a long time, you might use a life estate to avoid Medicaid attachment after five years. You have to have an agreement with the children that you can continue to buy this land over time at the agreed price, so things don’t change suddenly for you. Trust in God but everybody else – get it in writing.
If your uncle should die, your cousins get a stepped-up basis in the land and will not have to pay capital gains taxes on the sale. Your uncle will not have to pay capital gains as his long-term care costs are deductible (after seven percent of income) – something he will hit in two weeks or so in the home.
So, eat that elephant over time one bite at a time, and still accomplish what you and your uncle had agreed to.
Michael Baron provides estate planning guidance at Great Plains Diversified Services in Bismarck, North Dakota. Email him at KeeptheFamilyFarm@gmail.com.