Sad and Odd Situation-Need Advice - Posted by Charles

Posted by Barbara (ME) on October 30, 1998 at 07:02:38:

Is there a time limit on setting up a house in a trust, i.e. does it have to be 3 years before?
Barbara (ME)

Sad and Odd Situation-Need Advice - Posted by Charles

Posted by Charles on October 28, 1998 at 19:44:45:

Heres the situation:

Grandparents own their home free and clear. Tax assessed at $44k. Value is undoubtably somewhat less due to needed updates and neglected maintenance (I’m not real familiar with the market in their particular area; a rural town in Virginia).

Both are in ill health; she has cancer and is bedridden, he has lung and heart problems and also needs full time care. She is currently cared for by my mother; he is temporarily in Fed care home. Neither is currently living in the home. They are in poor financial shape as well, as they have no other assets; not even enough liquitable assets to provide burial expenses, and no life insurance. Their only income is his VA and SSI checks. To further complicate matters, Medicare has told my mother that for him to stay in the care facility at gov’t expense, the house would have to be sold (provided his wife is not living in the home). Neither of them desires to sell the home, even though they will probably not live in it again. Even if it were sold, most of the proceeds would be used for pre-paid burial expenses anyway.

My mother would like to have a loan taken against the property (she has power of attorney) and used for prepaid expenses, but at the same time having the home remain in the family (she will inherit). Considering the financial and health condition of my grandparents, is there any loan product available? Asset-based?

I should add that my mother could not qualify as a guarantor, as she has no income due to caring for grandmother. I am assuming she would continue to pay the loan, or sell the property to repay at some point.

Any advice appreciated. Feel free to email.

Re: Sad and Odd Situation-Need Advice - Posted by Rob FL

Posted by Rob FL on October 29, 1998 at 17:10:39:

Sorry about you grandparents. God bless.

There is a type of mortgage that I DO NOT KNOW TOO MUCH ABOUT called a reverse mortgage. It allows you to receive payments from the bank somewhat like an annuity. You may want to look into this.

You have to advise your mother… - Posted by Soapymac

Posted by Soapymac on October 29, 1998 at 14:57:48:

that her power of attorney may not help the matter at all.

As an EX - insurance broker, I believe federal Medicare rules require a 36 month “look back”…in other words, the right to look at your grandparents financial condition to look back and see if they have transferred any assets out of their estate in the last 36 months…to avoid paying nursing home costs.

If that was done, then Medicare brings that asset back in the estate “for accounting purposes” and will not pick up health care costs until the equivalent amount of money has been spent by the individual on health care related expenses.

Further, Medicare will disallow any money paid to your mother by your grandparents AS A HEALTH CARE EXPENSE. The reason? Your mother is “family” and according to Medicare thinking, family doesn’t charge family for doing what a family should do. (Those are MY words for it.)

Candidly, that is just the FEDERAL aspect of this scenario. The STATE also has its rules, which, if my experience counts for anything, are even MORE RESTRICTIVE. Don’t be surprised if the state has not already attached an “informational lein” on the property stating that the state has FIRST POSITION for payoff in the event the property is sold.

Hate to be the bearer of bad tidings, but it appears the only way the family is going to keep that asset in the family is to buy it at the auction.


Re: Sad and Odd Situation-Need Advice - Posted by Kevin(OK)

Posted by Kevin(OK) on October 29, 1998 at 09:04:15:

First, let me say that I am sorry for the situation that your grandparents are in. However, from every bad situation, there comes some good. In this case, the good is a lesson about asset protection. If this house had been set up in a trust, Medicare would not be able to force a sale. It is a felony to transfer assets with the intent to “fool” Medicare. The transfer of assets must occur at least 2 years (I think) before Medicare is applied for. It is to late to save this asset now, unless the decendents want to buy the house at the sale. This is unfortunate. However, you can use this as a tool to help teach friends and relatives about asset protection. The idea is to leave this would with the appearance of being broke, but in actuality you are leaving a substantial amount to your heirs. Good luck to you and yours.


Re: Sad and Odd Situation-Need Advice - Posted by George Eller

Posted by George Eller on October 28, 1998 at 20:08:34:

Call your local bank, mortgage company, attorny, or realtor and ask for information on a REVERSE MORTGAGE.
A Reverse Mortgage in common here in the Midwest amd I assume it is possible there in Vir.

Re: Sad and Odd Situation-Need Advice - Posted by B.V. Hughes

Posted by B.V. Hughes on October 31, 1998 at 18:12:03:

Reverse-equity mortgages have a couple of conditions, because they are backed by the government. The good news is that you can get income in the form of a line of credit to pay for repairs, personal expenses, taxes, whatever. The bad news is that the owners must actually live in the house in order to avoid repaying the money borrowed. If they are not in the house, there may be a problem with getting the reverse mortgage. If your mother has joint title with rights of survivorship, then the mortgage could conceivably be issued to her. Upon her death, the money must be repaid. It would be worth-while to check it out. HUD has a free booklet on reverse mortgages.

Re: You have to advise your mother… - Posted by Charles

Posted by Charles on October 29, 1998 at 17:04:29:

Thanks for the response. My mother’s attorney has advised her as you stated concerning the 36 month look-back period. He did not mention any state issues, however.

It occurs to me that there may be some other avenue, though. Don’t know how feasible.
Perhaps I could contract to buy the house, seller (grandparents) financing, and then sell the note at closing for cash to them. The house would still be in the family, and I would allow my mother to rent, etc if she chooses, or keep “in the family” anyway. At this point, they would probably be willing to accept a contract at 70-80% FMV to have the cash. (Ultimately someone in the family will need the cash for burial expenses. Medicare allows pre-paid burial expenses to be excluded from asset accounting). Could make an attractive note to a note-buyer.

I am not sure of the legalities; whether could be done in a land trust ,etc.

Anyone interested in such a possibility, email.