Personal Finance: Ask the Experts

Get advice on money matters from The Bee's Claudia Buck and a panel of local experts

August 21, 2013
Sibling questions a brother's changes on promissory note to elderly mother

Q: My brother borrowed $300,000 from my mother to buy an apartment building. He has made interest-only payments for the past three years. He recently brought a new promissory note and deed of trust for our mother to sign, reducing the principal balance of the note by $60,000 and reducing the interest rate from 7 percent to 3 percent. Mother is 94 years old and has been diagnosed with dementia and is under 24-hour care. My brother's wife is a notary and notarized the documents. Does any of this situation seem legal?

Wondering in Folsom

A: The Notary Public Handbook, published by the State of California, states that a notary public is not prohibited from notarizing for a relative, "unless doing so would provide a direct financial or beneficial interest to the notary public."

As to real property transactions, the handbook further states that a notary public would have a direct financial or beneficial interest in a transaction where the notary public is named, individually, as "a beneficiary, grantor, grantee, mortgagor, mortgagee, trustor, trustee, vendor, vendee, lessor, or lessee." If your sister-in-law is named as a beneficiary of the deed of trust, along with your brother, then she is prohibited from acting as a notary public in the transaction.

Assuming that is not the case, there are other factors to consider. A diagnosis of dementia, in and of itself, does not mean that an individual is considered to be without understanding of legal affairs. However, given that your mother is under 24-hour care, it certainly raises concerns about her understanding of this transaction.

In any situation where one is dealing with someone of your mother's age who has a diagnosis of dementia, careful consideration must be given to ensure that your mother has an understanding of any financial documents that may affect her. It is entirely possible that she did have a complete understanding of the transaction and, out of love and affection for your brother, she reduced the principal balance on the note and also reduced the interest rate. There may be perfectly good reasons to support such a decision.
However, if you have talked to your mother and she has no recollection of the transaction or she has expressed to you concern that she was pressured into signing the new documents, you may want to consult with an attorney.

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Meet Our Financial Experts

Claudia Buck

Claudia Buck is The Sacramento Bee's personal finance columnist. Read all her columns here. Contact her at cbuck@sacbee.com

Terri Carpenter

Terri Carpenter offers advice on job hunting, retraining and career counseling. Carpenter works at Sacramento Works Inc., the career and job training arm of the Sacramento Employment and Training Agency (SETA). With 15 years in the field, she has hands-on experience with everyone from first-time job seekers to career professionals seeking advice after a layoff or looking for a mid-career change. Ask her a question.

Carlena Tapella

Carlena Tapella is a partner in the law firm of Webb & Tapella Law Corp. in Sacramento. The firm specializes in estate planning and probate, such as estates, trusts, conservatorships and litigation. She is a past president of the Sacramento County Bar Association's Estate Planning & Probate Section. Ask her a question.

Kimberly Foss

Kimberly Foss, certified financial planner, is the founder of Empyrion Wealth Management in Roseville. With nearly 30 years in the financial industry, her clients include women in transition, small business owners, retirees and "pre-retirees." Ask her a question.

Jesse Weller

Gregory Burke, a CPA and tax expert with John Waddell & Co. in Sacramento since 1984, worked as an IRS tax auditor for six years. He’s a past chairman of the California Society of CPAs. Ask him a question.

Daniel Tahara

Daniel Tahara takes your questions about California taxes. Tahara, a spokesman for the state Franchise Tax Board, has 10 years of experience as a tax auditor. Ask him a question.



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