My mom -to me- has dementia. No formal diagnosis. Lives on her own. No POA or anything that I am responsible for. She lives next door alone and "does not need a caregiver " (matter of opinion there). We own her home with a life estate reserved for her and she is demanding that we sign it over so she can sell and move. No problem except that she does not have a buyer yet nor does she have a place to go. I say that until those things are in place, I won't sign over deed...but I'm about ready to hand it over and let her cards where they may. She has threatened to sue me if I don't give it over immediately. I've never said she couldn't have it, just that certain criteria (like another home to live in) had to be met first. If I just hand it over regardless, can I be held liable for her safety?
Basically is it her money or yours. If you paid for it you don't owe it to her. If she paid for it and signed over tobget pastbthe 5 year look back, then I think it would be up to her compency. No POA? You aren't liable. Sounds like a doctor and lawyer are in order. Of course how does life estate read. I gave my husband life estate in a home I raised my daughter in, we now rent it. If I die he can live there, use the income but when he passes it goes to her.
And if she sells it and moves, hooray, hooray!
I can't see how you would have any liability, but since it worries you, take Cat's advice and run it by a lawyer.