Spouse’s health problems can complicate home sale or refinance

The onset of memory-robbing Alzheimer’s disease or other serious medical problems can be compounded if the victim lacks the capacity to sell or refinance the family’s home.

Q. My wife and I hold title to our home as joint tenants with right of survivorship, which means her half-interest in our house will automatically pass to me if she dies first, and vice versa. She recently was diagnosed with Alzheimer’s, and the doctor says it’s almost inevitable that she’ll eventually need to move into a specialized nursing home. If that day comes, would we be able to sell our home to help pay for her medical care?

A. I’m so sorry to hear about your wife. The two of you are in a tough spot, both medically and emotionally, but taking quick action now could save even more heartache caused by our nation’s judicial system later.

Here’s the problem: The signatures of all joint tenants on a deed (or the similar “tenants by the entireties” option available in a handful of states) are required to sell or refinance a jointly held property.

If your wife’s health deteriorates to the point where she cannot understand that your current home would need to be sold to pay her medical bills, or simply can no longer sign her name to the sales contract and deed, you couldn’t legally transfer title without her signature. You would instead have to go to court and ask a judge to appoint an independent conservator to act in her own best interests. Compounding problems, some states specifically prohibit one spouse from being named conservator for the other.

You clearly need to seek the help of an attorney who specializes in family- and real-estate law, and perhaps also consult an estate planner. Do it now, while your spouse is still competent to make decisions for herself.

It’s quite likely that the lawyer or planner will suggest that you and your wife quickly create an inexpensive living trust, and then place the home and other major assets into it. Both of you would be named co-trustees while she’s still able to make decisions for herself. If the day comes that she can no longer do so, you automatically will become the “successor trustee” and will have the legal power to sign documents on her behalf — including the deed to sell the home in order to pay her medical bills.

No lengthy and expensive court proceedings likely would be required, and your wife could quickly get the long-term care she would need.

Q. We recently made the final mortgage payment on our home. Our lender always required us to pay for a homeowner’s insurance policy. Now that we have paid the loan off, can we drop our insurance?

A. Yes, you can cancel your policy, but it would be foolish to do so.

Banks always require their borrowers to pay for a homeowners’ insurance policy to protect the lender’s own financial stake in the property if it’s later damaged or destroyed. That legal obligation disappeared when you made the final payment on the loan.

Still, it would be silly to cancel your policy now. About two-thirds of a typical American’s net worth is wrapped up in their home, studies say. If your house is seriously damaged (or worse) but you were uninsured, the financial loss could be catastrophic and all that hard work you put in to dutifully pay off your loan in the past several years would be lost.

Q. We bought a new home and now are looking for a professional moving company to handle our cross-country relocation. We have received written bids from three movers and were shocked at the high prices they would charge, but all three would provide discounts if we delay the move for a month or so. What gives?

A. The summer months are the busiest for moving companies, largely because all the sales that were made during the prime spring home-buying season begin to close, and families want to move into their new home before the school year begins.

If you have some flexibility in your schedule, you can save a lot of money if you book the move for a week or more after Labor Day, Sept. 2 this year. Just make sure those cost savings won’t be offset by your mortgage expenses, or rent for a hotel and the storage cost of stashing your belongings for a few weeks if your buyers won’t agree to extend the deal’s closing deadline.

Generally speaking, the further you book in advance, the more money you’ll save. But even if you must move soon, you’ll likely trim your costs if you move in the middle of the week rather than on the always-busy weekends. Also note that many pros charge more for moves that take place in the first or last week of the month, because those are the times when most real estate deals close and rental leases expire, thus increasing demand for moving trucks and movers themselves.

Real estate trivia: The average rate on 30-year fixed mortgages is 4.6 percent, but recent records released by President Barack Obama’s staff say he and his wife are paying about 5.63 percent on their family’s home in the historic Hyde Park neighborhood of Chicago. Time to “refi,” Mr. President!

Ÿ For the booklet “Straight Talk About Living Trusts,” send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 4405, Culver City, CA 90231-4405.

© 2013, Cowles Syndicate Inc.