Q: I have power of attorney for my 96-year-old great grandma who is suffering from dementia and is no longer able to live in her home. She has a vacant home in Bakersfield. I am wondering if I should leave the home vacant until she passes or would there be benefits to selling it while she is still alive? -- Linda, Fair Oaks, CA
A: There are two types of durable powers of attorney - one that is effective immediately, and one that is effective only upon a person's incapacity (sometimes called a "springing" durable power of attorney). If your great-grandmother's power of attorney is the springing type, you need proof of her incapacity (usually a doctor's certification but check the document) before you can act using her power of attorney.
If the power of attorney is effective now, there are a number of issues to consider regarding whether to sell the house. First, if she is receiving certain types of state or federal benefits, the proceeds from the sale of the house could affect her continued eligibility for these benefits.
Also, depending on the house's value and her cost basis in the house, there could also be adverse tax consequences to selling the house now. If the house would sell for more than the cost basis, there could be capital gain tax to pay. She may qualify for the $250,000 exemption from capital gain tax on the sale of a principal residence, but if the gain is more than $250,000 there would be capital gain tax on the amount over that.
On the other hand, there are costs associated with keeping the house to consider as well - upkeep, property taxes, repairs, etc.
I would recommend consulting with your great-grandmother's estate planning attorney and/or accountant if you have questions about whether to keep the house. The answer depends on your great-grandmother's specific situation, and an experienced attorney or accountant can help you analyze the benefits and drawbacks of the sale in her case.
Finally, if the house is held in a trust, you may be not able to sell it using the durable power of attorney. The trustee manages the assets inside the trust, so the trustee would be the person who would handle issues related to the house.
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