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Aging Seniors Who Own Real Estate

So often when we receive a call from a child of an aging parent in crisis, it’s about the signs of declining mental and physical capabilities leading to the discovery of a financial crisis.  This decline in health and cognition usually means a decline in the ability to manage assets such as keeping track of finances and investments, paying the bills and susceptibility to fraud.

While some seniors have help such as trusted financial advisors and professional money managers, many do not and have done well with their “do it yourself” approach.  This becomes a problem, however, when the senior starts to slip cognitively and loses his or her way. 

The discovery by family members that everything is not OK can be jarring and we have seen situations where it has come after much of the nest egg has been lost.  This can be especially challenging in the case where the parent’s investments are in real estate.

Because real estate is not a passive investment, it must be actively managed.  Property managers can be hired to assist but we see more often than not that our clients manage their properties themselves.  In the case of rental properties, whether they be commercial or residential, keeping track of leases, real estate taxes, insurance, utilities, maintenance and repairs and keeping the properties as fully occupied as possible can be a full time job depending on how many properties one owns and the particulars of each property.

We have seen many clients do this successfully and generate more than enough income to live comfortably in retirement but when they start to falter cognitively, these properties won’t run on auto pilot.  Tenants may begin to make late rent payments or skip payments if they realize the landlord isn’t paying attention.  Bills may be missed such as taxes, utilities and insurance leading to interest and penalties or worse.  Property upkeep may falter as well, leading to a decline in the value of these properties.

When long term care becomes necessary, we often see these clients have very little liquid to pay for a $10,000 a month or higher long term care expense.  One or more properties may need to be sold or mortgaged to pay for care if a long term care asset protection plan has not been put into place.  Properties that are falling into disrepair will result in lower valuation for sale or mortgage purposes.

For these reasons, it is especially important that if you have an aging family member who fits this profile, every effort should be made to step in to help before substantial damage results.  Of course, it isn’t always that easy if the senior resists help but too much is at stake to not give it your best effort.