I recently discovered my 83-yr-old dad refinanced his house for $286,000 and consolidated his credit card debt of $60,000. This makes for approx $305,000 he owes to the bank. The terms of the loan are set at a 30-yr-fixed rate. He paid over $6000.00 for the loan and his monthly payments are approx $1907.00 per month.
I know this information because I am his POA and had to sign the loan papers in order for the loan to go through. The lender and I had several phone discussions and email correspondences. She had told me it was for a home equity loan. I was thinking oh great, my dad is going to do some much needed updates to his home. I was thinking he was probably taking out maybe $20,000 home equity loan and didn’t ask any questions. Well, this was not at all the case or what I’ve been led to believe.
After a lengthy process, this loan was signed, sealed and dispersed at the end of September. When I was doing my filing and working in my office a few weeks ago, I sat and read through the loan papers enough to realize what had actually transpired and took place. I eventually asked my dad about the hefty loan out of concern that he might be being taken advantage of. He responded with a trembling voice, “I have $150,000 of that paid back already.” That was it. That was all he said. I thought to myself he must of had $150,000 buried in the backyard and why pay the excess loan costs if you can turn around and pay half of it off. I was stunned. I asked him if he cut up the credit cards and he said yes those were gone. What seems to be more disturbing, I am sure he did not realize I was going to get a copy of the loan agreement.
I am to be the heir of his house and carry on his legacy. However, it seems to be contingent on the agreement that I will be there to take care of him when the time comes. I’ve also mentioned to him that I will not be able to lift or transfer or bath him when that time comes. He is 4* my size. We will have to have in home care. Our relationship has mostly always been frail and I’ve figured out he is not always truthful with me about other matters. I explained to him briefly in our conversation that I would never be able to afford a monthly mortgage payment of $1907.86. Additionally, this does not include the food , utilities, HOA fees, healthcare or any fun money. And, as I sit and think this out further, if his plan is to pay the rest of the loan at the set amount, he is planning to live until he is 98-yrs-old. With his health, it’s hard to imagine that will be the case.
He chooses not to share any details about his current income or medical insurance; etc. which I guess is fine, but it would sure be nice to know so I could put things into perspective and make wise decisions for myself now. I don’t want to deal with a ring of fire later in my life dealing with his passing, debt ,a sale of his house (which is probably worth $700,000.)
If anyone has any advice or has experienced the same issues with your parents, I would love to hear how you dealt with it all. Thank you for taking your time in reading this. I truly appreciate it.
If your father is expecting you as POA to oversee his care in the future, you really need to know about his resources for accomplishing this. Are there additional assets set aside for this purpose? Or is his intention to use the remaining loan proceeds to provide this care? Does he have income and if so, how much?
It sounds like you plan to keep the house after his passing. You state you cannot afford the payments on the loan. I don't know whether you will be legally obligated to repay the loan after his death, and how your signing the loan documents might affect this, but it does seem to me that if you can't afford payments on a loan of 40% of its value, and for a house needing repairs, you can't afford this house. In this situation I would be planning to sell the house, either after his death or before, as needed to pay for his care. It's never a good idea to plan your future/retirement around an inheritance, and even less so when there are significant debts and uncertain care costs in the picture.
The one thing I am sure of is that you need competent professional advice. It might be a good idea for both of you to meet with the attorney to help your father understand the need to disclose his finances. Good luck to you.
You seem to be more concerned with what you get out of this not concern for your dad, in which case you are on wrong forum. If you have POA and have no idea what you signed your dad needs the lawyer to protect him from you.
If I had POA for a parent, I would not be signing off on any loan without being present for the application process with the banker, and the discussion of how much and what is was to be used for.
You still don't know exactly where that money went or how he is paying the new mortgage payment. You need access to this information! If he is not giving you the information, you need to use your POA to gain access to all bank accounts and statements in his name. Perhaps he wanted the extra money to be available for his care, and he knows he will not live long enough to pay it off. He was probably expecting you to be left with the balance after he dies. Or, could he have taken out a reverse mortgage loan? You need to get control of all his banking and bill paying. He could have been taken advantage of, and sent a large sum of money to a scammer. If that is the case, the scammer will not go away, they will continue to drain him of every last cent.
You cannot have the responsibility of POA and not know about his finances. Being POA gives you the authority to get bank statements, or even better, online access to manage his funds.
Or, relinquish POA responsibility and leave Dad to his own life management, and let it lead him where it may.
If you are hoping someone can offer you some magic words you can use to get your Dad to be completely honest with you and tell you everything, I can tell you there is nothing that will make that happen. He either doesn't know, is confused, or is withholding information to protect his own privacy and secrets.
As his POA, you should have been aware of what the loan he was taking out entailed, and denied it if it was more than he would comfortably be able to pay back. As JoAnn pointed out, are you sure you signed this loan paperwork as POA, and not as a co-signer/co-borrower?
Is the loan a HELOC (home equity line of credit), which means he can take out money gradually as he needs it up to $286,000, or a home equity LOAN, which means he got $286,000 in cash? If the latter, where is the cash? Has he spent any or all of it? As POA you should be on his bank accounts and monitoring what he does or has done with that money. Is he making the monthly payments on the credit card consolidation loan? If he hasn't spent the $286,000 yet, you should probably pay off the consolidation loan, unless there is a prepayment penalty (and even if there is, it still might be less expensive to just pay it off, depending on the interest rates of each loan.
To protect both your father AND YOURSELF, have your dad give you access to his accounts so you can see how much he actually has and how much he actually owes. Take your POA and the loan documents and meet with an Elder Law attorney, who will explain what you can do, what you can't do, and what you need to do. Then take the same info, plus the bank account balances, and meet with a financial advisor to figure out the best approach to getting your dad's financial situation under control -- again, for your protection as well as his. (Pay for both the attorney and the advisor with your dad's money since it regards his finances.
Going forward, monitor your dad's accounts and take over paying his bills for him. Under His POA, you aren't responsible for physically caring for him yourself, but you do need to manage the finances of paying for in-home caregivers or placement in assisted living, memory care, or skilled nursing, should he need that kind of care in the future.
I know it's all a big deal to have it dumped on you, but working with the professionals to clarify everything will I hope give you peace of mind and secure guidance going forward. Let us know how things go.
DPOA does not make you obligated to care for someone. Its taking care of his finances. Making sure his bills get paid from his money. Paying for his care out of his money. You never use your own money. Your POA is revoked at time of death. The Executor of the Will then takes over. If you are that person, then you follow the rules of Probate. If as a beneficiary of his house and can't afford it, then you sell. The mortgage gets paid at time of sale if you put the house back into the estate which is what my brother did with my Moms Will when he inherited the house. Beneficiaries get what remains.
I am with Alva, you need a lawyer to explain what POA means.
Secondly. This is all very problematic and very uniquely detailed. YOU NEED AN ATTORNEY. The very sad thing is that you needed one some time ago because you don't understand being the POA for executive function for your father. You are signing things as a fully powered POA, and yet you don't understand what you are signing and you aren't involving attorneys to protect both your Dad and yourself.
You are both dabbling in deals that involve 100s of 1000s of dollars, and neither of you seems to know what is happening at all. These things matter greatly, especially should your dad in future need care or need governmental assistance of ANY kind.
I welcome you, but know that none of us are financial experts. You would do better with bogleheads.org forum on this one for certain. Barb here often recommends them. But what you really need is an attorney and ASAP. Your POA pays for that. If your Dad is no longer financially competent, no longer able to do executive functions well, and it sounds like he can't, then YOU AND ONLY YOU need to be in charge of all that. That means records, files, diaries, attorneys, discussions with Dad and all of that.
SEE AN ATTORNEY RIGHT AWAY. Start at an elder law specialist fully certified, but be ready to be referred to financial experts.
You have no way of knowing what he'll do next! See a lawyer and find out your options with the goal being to be in charge of his money. You're already his POA, so that should simplify things.
As for his health, his PCP needs to know about this behavior and will be able to recommend what your dad needs healthwise. I'm glad you're taking all of this seriously, and good luck.