3 tips for jointly owned property and dementia problems
Difficulties of jointly owned property and mental capacity
When one of the owners of jointly owned property loses mental capacity it can present problems. It’s very common for couples who live together to own their property jointly. Unfortunately, if one partner loses mental capacity the other co-owner can run up against difficulties if he or she wants to sell the property.
Let’s look at some examples of the kinds of difficulties that might occur in relation to jointly owned property.
Case Study: Selling jointly owned property after one owner loses mental capacity
Daphne and John live in a four bedroom detached property that they own jointly. There’s an interest-only mortgage on the property. John was diagnosed with dementia two years ago and his health is getting worse. He no longer has the mental capacity to make decisions about his property or money.
John made a Lasting Power of Attorney shortly after he was told he had dementia. He appointed Daphne to be his attorney. Daphne and John had planned to sell their property when they retired, pay off the mortgage and move somewhere smaller.
Daphne decides she must sell the property now but she is told by her solicitor that she can’t sell the property on her own. The sale documents need two signatures and Daphne can’t sign on behalf of John even though he gave her power of attorney. A joint owner of a property can’t delegate their authority to the other co-owner to sell or transfer a jointly owned property. This is the case even if they own as joint tenants in equity rather than joint tenants in common.
Solution: Daphne will have to appoint a new trustee of the property who can then sign the sale documents with her.
You may also experience problems if you have jointly owned property and your co-owner needs local authority funded care. If you continue to live in your jointly owned property after your partner moves into a care home, the property value will be disregarded. The local authority must not take into account the value of your partner’s share in any means-testing. So far, so good but what if you subsequently want to move to another property? Let’s take Daphne and John’s situation again…
Case Study: Selling a jointly owned property and means-testing for social care
Daphne successfully manages to sell the property after appointing another trustee. By the time the sale completes John has had to move to a care home. Daphne finds a smaller property to buy close to John’s care home. The problem is that John’s share of their previous property has now been converted into cash. He will be means-tested on that capital. Furthermore, Daphne needs some of John’s share of the sale proceeds to enable her to afford to buy the new property she wants.
Solution: Local authorities have the discretion to allow the sale proceeds of a jointly owned property to be used to help a spouse buy a replacement property. The council will, however, place a charge on the replacement property. This means the council gets its money when the replacement property is sold, later on.
Can care planning help avoid problems with jointly owned property?
The earlier you start to look at these issues the more likely it is you will be able to avoid or reduce problems relating to jointly owned property and mental capacity. Property is usually the most valuable asset most people own. If you take advice early on about the options available there’s a better chance of avoiding major difficulties.
3 tips on jointly owned property
Here are 3 things you can do to avoid problems with jointly owned property if one of the co-owners loses mental capacity:
- Make sure your Lasting Power of Attorney appoints someone who can act on your behalf in a sale of your jointly owned property;
- Find out if your partner’s half share of your joint property is going to be enough to pay for a replacement property, in case he/she needs to move;
- Don’t leave it too late to take legal and financial advice about planning for later life care.
To find out more about care planning look at our Care and Disability Services.