- September 27, 2023
- Posted by: legaleseblogger
- Category: Related News
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Taking over someone else’s mortgage is a significant decision with potential financial and legal implications. In this case, my father and grandmother approached me, urging me to assume responsibility for my grandmother’s mortgage. The outstanding balance on the mortgage stands at approximately $100,000, requiring monthly payments of $1400. However, I currently reside on the west coast, while my family is located on the opposite side of the country.
The primary reason for this proposal is that my father and uncles find themselves in an unfavorable financial position, rendering them unable to take over the mortgage. Consequently, as their next in line for inheritance, the responsibility falls on me. Moreover, there is a possibility that my grandmother might need to move into a nursing home in the near future. To address this concern, my family argues that by assuming the mortgage, the equity in the house would be protected from being seized by the federal government to cover Medicare costs. As a result, my grandmother would be able to utilize the funds that would have been allocated for mortgage payments to hire an in-home caretaker during the evenings until her health condition deteriorates further.
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Please get a consult with an elder law attorney in the state grandma lives. Because your family is mistaken on several fronts.
From what I remember is that these retirement homes can look back 4 or 5 years at all her assets and money.
Don’t just take over the mortgage, definitely get a deed. The problem will be that the bank will not let you continue to pay on her loan and will not approve a deed transfer, because the mortgage is in her name.
You may have to get your own mortgage.
If she sells you the house at less than market rate (aka in exchange for you assuming the mortgage) and she goes on Medicaid, they will claw back the difference between what you paid for the house and what it is worth. My husband bought his mom’s house and paid off her debts so she could afford to continue living in the house. Several years later, when she had to move into a nursing home, we had to prove that we had paid 100% of the market value for the house, or we would have been required to pay the difference for her to qualify for Medicaid.
Can you verify that it is Medicare that is going to recover against the property, or Medicaid? If itÔÇÖs the State, and not the federal government, then what you are looking at is called the Medicaid Estate Recovery Program, or MERP.
The laws differ by state, but you may find an exemption where the property will not be collected on as long as a direct family member (grandchild included) is actively occupying the residence.
However, so long as she is still alive, then she can transfer the deed to the house to you. The most logical one is a quit claim deed, but make sure to check the laws in her state for any penalties or special criteria. The mortgage wonÔÇÖt matter, but obviously she would need to refinance or sell the house to you so she is no longer responsible for paying back the loan and can afford nursing home costs.
There is a concern regarding eligibility. If she qualifies for Long Term Care (LTC), of which nursing home costs are categorized, based on her ownership of a property, then she may either be penalized or disqualified. Nursing homes can be very expensive, so you may need their assistance.
Since this would likely be a big change for you, you may wish to consult an attorney in your grandmotherÔÇÖs state (or the state the property is located in), and spend a couple hundred to get an honest breakdown of doÔÇÖs and donÔÇÖtÔÇÖs. You would want one who specializes in real estate with Medicaid recovery, or ones who specialize in special needs trusts.
In summary, most likely no immediate big issues but you may want to check on the fine print in every direction. Medicaid wonÔÇÖt sneak up on you, most of them have brochures that spell it out in plain language, but it can be overwhelming especially if this is your first time.
Hope this helps!
What exactly do they want you to do 1) take over paying the mortgage on behalf of your grandmother or 2) transfer the house to you and ÔÇ£refinanceÔÇØ the mortgage in your name? I donÔÇÖt know of a bank that would allow the house to be transferred to another owner without the mortgage being paid off. And I donÔÇÖt know of any banks who would lend money to a non owner of a home to refinance a loan.
Also, do you currently have your own mortgage? Qualifying for a mortgage on a second property either your grandmotherÔÇÖs home or your future home will be more difficult. If you already own your own home, this is less of a risk, but if you donÔÇÖt, you may not qualify for your own home.
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Not a lawyer, but I have some personal experience with this.
1) YOU MUST CONSULT A LAWYER before going through with this plan. A family and estate lawyer is who you need to talk to.
2) It sounds like they are trying to shield her assets from Medicaid. Sorry, but it’s already too late. Medicaid is ruthless when it comes to people attempting to hide/shield assets from them, and as a citizen I’m glad it is so hard for people to take advantage of this system.
Medicaid is only meant to be a backup, and your Grandma is expected to COMPLETELY exhaust her own financial resources before they will step in.
If you start making payments on the house, you will lose all that money once Medicaid enters the picture. Grandma still owns the house, and Medicaid seize and sell the house if they need to. You making the payments does not give you any legal right to the property.
I would get it in writing with a lawyer present
States vary *substantially* about what ÔÇ£countsÔÇØ for Medicaid Estate Recovery. Adding you as a JTROS or using a TOD deed could do as much in some states as a complex trust structure would in others – because these states offer transfer on death deeds or JTROS titles *and* prohibit Medicaid from reaching in to non-probate assets.
YouÔÇÖre also getting shitty advice above about being able to assume GrandmaÔÇÖs mortgage upon her passing and title transferring to you. YouÔÇÖre guaranteed the right to have any due on sale/transfer clauses waived as part of the Garn-St Germain Act, assuming youÔÇÖll occupy the house when you inherit it.
You need an estate and trust or elder law attorney in the state where she resides to advise you. This might be a great idea, or it might be a complete disaster, and itÔÇÖs going to depend on the state in question and possibly what you intend to do with the property upon receipt.
1400 sounds like a lot for a 100k loan but idk if that’s how it works when you owe less. I just got a mortgage and it was 205k and my monthly payment is 1260.
Probably MediCAID (poor people – can pay for long term care) not MediCARE (old people but not necessarily poor – does NOT pay for long term care)
If MediCAID pays for long term care, they generally go after the estate of the individual after they die. In other words, they take the house. So if you take over the payments, youÔÇÖll probably end up losing everything you pay in.
Talk to a lawyer in the relevant state, but this looks like a REALLY bad idea.
You want to look at the Medicaid and medicare look back rules.
Basically if she’s likely to go into care in the next 5 years, they could take the house from you if it was just given.
There are also challenges with taking over a mortgage. You would likely need to refinance unless it’s an assumable mortgage so your rate would probably be higher than hers.
Look at a life estate.
Taking over the mortgage does not put the house in your name. You would need a legal document giving you full or partial title to the house. Something like a reverse mortgage where you are paying a monthly fee to own the house.