Follow
Share

Mom has dementia. She knows me and my brother and her visitors. She can sit and talk with her oldest friend all about growing up. But, he short term memory is extremely bad.


Her house was put in my brother and I's name many years ago with her having a life tenancy (Life Estate). She is in a nursing home and it's medically necessary. I can't afford the taxes and operational costs of the house in the city. She won't be coming home. I explained that to her and she said it's sad to sell, but if you have to, do what you think is right. When I see her a few days later, I mention I've been doing a lot of work cleaning up the house so we can sell it. She doesn't say no, but she says I'd like to go for a ride and at least drive by and see it one last time, but you can do what you have to.


How do we go about selling the house with her having a life estate? Is she capable of signing it off? My only brother (no sisters) and I are the other names on the house. We are both totally disabled through SSDI and have been for 10+ years. How do we sell it? I know once it is sold, her share can be equally transferred to my brother and I without penalty because we are disabled. She always said she wanted us to have everything to be sure we were OK. The house is worth between $300,000 and $380,000. I just don't know how to go about selling it with her life estate even though she tells me it's ok. I am in Massachusetts.

Sled - I’d caution again that if Medicaid application is anticipated for your mom it needs to be sold at FMV. You have lots of interlocking parts for your mom’s situation & medicaid rules can be overlooked in the rush to get it sold. Realtors interest is getting it sold & commission paid.

There imo is a too TOO large of a gulf btw $379k valuation — $300k for it sell at $300k and be considered FMV by Medicaid.

I have a suggestion, get it appraised and you want as much as possible “conservative appraisal” route. You may need to get it inspected first then inspection report given to appraiser as inspection details flaws. Both licensed professionals for your state. The conservative appraisal you hold for any future Medicaid issues; it is not part of the Realtor packet, does not necessarily exist as far as listing is concerned. Comprende? It make actually read “not for mortgage lending”. These get done like for probate or undivided interest stuff. The Realtor may say “I can pull a valuation on the house based on comps sold for you for free” but this is not a true legal document like an appraisal is as appraiser has their seal on the document with state registration and licensing notated. It’s viewed as an independent unbiased valuation. Realtors isn’t as they get a commission from sale. You don’t want her Medicaid application to get stalled or declined due to FMV issues, so having an appraisal that say comes in at $312,770 helps deflect that concern. Comprende?

Is this atty going to shepherd your mom’s LTC Medicaid application?
You need to make sure that they look at all this from both her LTC NH Medicaid eligibility as well as you twos SSDI $ from unearned income allowed aspect. You have lots of interlocking parts with input / reviews from governmental entities, there’s gonna a cockup somewhere. Mom’s selling a $379,000.00 property is going to be a red flag and stall her Medicaid application or renewal. The atty needs to be in this for the long haul..... not just clear you & bro getting 50% of mom’s house sale $. They have got to do that plus deal with her LTC Medicaid application and any eligibility issues & likely first year renewal, plus deal with the determination of tenant / remainderman % and any IRS filing & taxes owed from each %. The good thing is you have 100k+ to pay all atty, CPA, etc costs.

I’m assuming in all this that your mom hasn’t yet filed a Medicaid application; that’s shes either still in post hospitalization rehab phase at the NH (MediCARE pays) or she’s private pay in spend-down mode. To me to lessen issues, you want to keep her private pay till house sold and $ fully distributed. AND that atty needs to do her Medicaid application and possibly the first year renewal (if your state does these).

Are taxes are paid & up to date? Usually taxes due in full end of January most places. Look for her tax bill, should have been received Oct/Nov. If you can’t pay it, ask the Realtor how that poses issues.... like buyers can sense there’s $ issues and shift closing & other costs onto seller. If the place is likely to be sold to a flipper/developer rather than a family getting a traditional mortgage, they will have already run a quick tax & lien search to see if its a vulnerable seller.

If cash flow issues, Mom may be able to do a small line of credit HELOC. There are online HELOC lenders which are more ahem “flexible” but higher interest than your local bank which will require her in person to do application. Not a RM (reverse mortgage) but a small HELOC.
Helpful Answer (1)
Reply to igloo572
Report

Renting can be a sticky.
Rent is income to owner, which - I think - is only mom at this point in time as it’s her LE. I think for LE as mom is alive the remainderman aren’t yet owners so no share of rent, I’m not 100% though. Plus there’s all those tax issues, insurance & codes on dealing with rental income.

All Income has to be reported if a Medicaid application or Medicaid eligibility is involved.
Plus Medicaid wants it rented at FMV, unless there is good reason as to why it’s shouldn't. Like caregiver lived in home prior to application. Or disabled heir / family is the tenant. I think JoAnn has insight on this.

Where I live, rent in desired areas are easily 2k-3k a mo. which would take a person over monthly income maximum for LTC Medicaid without even counting in their SS$.

Sled - when you speak with Realtors, clearly ask each what their DOM averages are. Days on Market. Some Realtors are real gunners and will be quite frank as to “priced to sell” vs. “priced to list” and won’t take priced to list properties. I’d suggest you look at mom’s checkbook to see what DOM of having a house to be market ready could likely cost.
Helpful Answer (1)
Reply to igloo572
Report
TheSledDogger Jan 3, 2019
Thank you. I have a lawyer now and we are going to check the court for the record of the trust. He said it isn't unusual for people to spell out in their life tenancy that if they go into a nursing home and won't be coming back it automatically reverts to the two remainders (sons) Both sons (My brother and I) are fully disabled via SSDI rules. So, transferring things to us is not problem as there is no look back. And the house, if it's set up that is reverts to my brother and I in the trust if she enters a Nursing home, that is pretty easy. If not, it's a little rougher but can be done.

So, I'm a little less stressed now.

As for DOM, the realtor said I could list it at the $379 that a couple others housed in the neighborhood listed for (and one sold and the other remains on the market). However they said I'd be smart to list is low at $300 for a very fast sale and in this neighborhood, they wouldn't be surprised at all if it turned into a bidding war and I'd end up with $320,000 or more. So, it won't be a cake walk but it seems to be turning out to be less stressful than I thought... at this point!
(0)
Report
If it looks like going on for a long time, you might want to consider renting out the house until your mother's death. That would at least give you some income and simplify the end requirements.
Helpful Answer (0)
Reply to MargaretMcKen
Report

Igloo has raised a good point about timing. On second thoughts, if I were acting for a purchaser, I would require the Life Interest to be cleared off the title first. Otherwise the purchaser’s lawyer/ conveyancer is also ‘guaranteeing’ that it has all been done correctly. This could take at least six months, so it is the first step, well before you get as far as preparing the house for sale. Please don’t rely on guesses – for example, a Life Interest does NOT mean that your mother owns a third of the property. It means that she has the right to live in it until she dies. You need a lawyer. Here, all lawyers can handle real estate matters including sales and registrations, but in case that is not the same where you are, please check that the lawyer you go to about the Life Interest can take it all the way through.
Helpful Answer (1)
Reply to MargaretMcKen
Report
igloo572 Dec 30, 2018
Margaret - regarding the quarantine of escrow or clearing of LE off title before Act of Sale, as a buyer I’d so want that done & all at sellers expense. We did our offer requiring title insurance & all closing at sellers cost. I don’t know if this is done other places, but where I am a lot of property have cloudy titles of all types due to Hurricane Katrina. Even a dz years + later. # of title companies / title insurance issuers willing to do underwriting for sales other than Warranty Deed housing mortgages are limited. Instead what buyers often do for Quit Claim Deed or LE or Tax Deed is go thru a Quiet Title Process, with notices in paper, certified mailings, etc. done... takes about 4-7 MONTHS. It’s not expensive per se but it’s speciality legal very time line driven with lots of CH filings and printed notices. Time needed usually queers most deals but buyers advantage.

SledDogger - you may find selling mom’s place is going to take much more time than ever anticipated. That means months of paying for maintenance, utilities, repairs, taxes, insurance and whatever else to have to it be “market ready” to be sold at Fair Market Value. Medicaid is going to want it sold at FMV / tax assessor value unless you can get legit appraisal coming in at less. if you would, please update us as to what happens, this should be interesting and we do all learn from each other.
(2)
Report
None of this is a DIY project. You need an elder law atty and a real estate / tax attorney imo for your moms interest. And a disability atty for you & your brother. And I’d suggest you meet with them BEFORE putting house on the market and getting a Realtor.

Life Estate property is unique in that for your mom it has a current and a future interest. Should property be sold before her death, there will be “remainderman share / tenant interest” determination done which can be considered income the month the Act of Sale goes through and then an asset afterwards. (IRS has tables on this and it’s keyed into actuarial tables, usually the determination needs a certified tax attorney or CPA to do as they do a remainderman determination letter and do the tax filing needed.)

Having $150k+ each transferred to you and your brother without a review by or approval by both SSA & Medicaid imo will not happen. The $ will surface attached to your names and SS#s and eligibility will be reviewed.

If you are thinking that as SSDI is not “needs based”, any inheritance doesn’t matter. But it’s not an inheritance. She’s still alive so house sale $ is the sale of an asset that needs all “owners” to sign off on and that - my understanding is - will produce unearned income for each of you from brother & your remainderman interest PLUS gifting of $ from mom of her tenant % share to you & brother. It’s complicated and it could be for more fun...... taxable income as well. I’d suggest you need to clearly find out ahead of any listing:
- from the disability atty as to exactly what all this $ does to your & your brothers determination from SSA for each of your SSDI or SSI.
- if the $ from mom to you both can be considered gifting by LTC Medicaid program for her or if it has to be placed into a supplemental or special needs trust that is Medicaid compliant.
Its going to be a cascading of legal thats going to need to happen imo.

You all - the trio of mom, you & your brother - imo will need their own paperwork done by elder law, SSA savvy disability law and tax law attorneys to lessen any issues with Medicaid and taxes. $300 k - $380k is just too much $$$ to just assume can be transferred without repercussions. Not a DIY. The property can be put up as securitization to pay the attorneys.

Also for more extra fun in this, if you or bro are married that your spouses may have to sign off at the Act of Sale. So everybody has to agree to the buyers offer, terms of the sale and how divvied up. Please PLEASE reread Margaret’s post, she’s spot on that Life Tenancy can pose extra issues for the Realtors to get to the Act of Sale. We bought LE land (house destroyed) post Hurricane Katrina, our offer had all costs including Title insurance paid by seller. For LE shifting title cost to seller is just what’s done as each person on LE might have liens or judgements that elder (tenant) unaware of as it was the elders credit history that did the original now paid off mortgage. The sale was Mom & 3 grown kids; the caregiver son assumed 2 siblings would give their remainder % to mom; they refused and required at Act of Sale their each very own cashiers check with all closing costs paid from moms share. Bet there’s no big family Xmas for this group...

If you have been fronting property costs (like taxes), you should speak with the atty as to doing a Promissory Note with mom to reimbursed those costs as a separate item excluded from the end proceeds from the sale. Good luck with the attorneys.
Helpful Answer (4)
Reply to igloo572
Report

Is Mom still on the deed? If so selling will be the problem. She owns a third of the house. Is she private pay or Medicaid? If Medicaid did you explain about the house when applying?

You say she signed it over, then you say other names. I agree, you need to talk to a lawyer and one versed in Medicaid.
Helpful Answer (0)
Reply to JoAnn29
Report

My brother, mom, and I sold her home 5 years ago in MA. We are past the 5 year look back. You will need legal advice at the closing. You could kill 2 birds with one stone by searching for an Elder law attorney and ask if real estate closings can be included in the services if you feel that the real estate side will have no problems. You and your brother can also obtain legal advice concerning your disabilities and sheltering your assets under MA laws. I changed lawyers for my mom after the closing and found that her current attorney is able to do real estate closings.

There is a link somewhere on either the top or bottom of this page to help you find one
Helpful Answer (0)
Reply to MACinCT
Report

This is really tricky. You definitely need a lawyer, and probably her doctor as well to say that she is competent to sign whatever is required. It sounds as though she does understand this, even though she may not be 'competent' on other matters, and that is not easy to document. It's difficult - life tenancies were usually based on the assumption that the 'tenant' would die at home. I drafted one once that had provision for alternative housing being provided. It was unusual, but you should first check the will or other document that set up the life tenancy, just in case there is something similar. Details probably wouldn't be recorded on the property title. The chances of your mother challenging the title would be very low, but the purchaser may not be willing to take the risk. Indemnities might work, and you might need to quarantine the sale proceeds for a fixed time to back up the indemnity. Good luck!
Helpful Answer (1)
Reply to MargaretMcKen
Report

Ask a Question

Subscribe to
Our Newsletter