My father has dementia and will be going from the hospital to rehab and then to skilled nursing. Had many falls and confusion. My mom is frail, has frequent falls and mis manages her pain, xanax and sleeping pills. They are not safe to live on their own and I live out of state.
I'm applying for medicaid for mom so she can be with dad. They have a home mortgage that has been refinanced many times so they do not own the home. There is approx $20k in equity. Is it my responsibility to put the home on the market and sell it? There will be no money from my parents to pay the mortgage while the home is for sale. Can I just let their loan default? My brother would like to by the house 'as is' as it's in really bad condition. I am doing everything without help so one last thing to do would be helpful.
Thank you for any info!
I would first get the most current tax assessor bill to see what the property is viewed as being worth. When you apply for dad, the caseworker may ask for this document. Or they can get it on-line. The tax assessor $ amount will be your benchmark on house. It may or may not be at all what the mortgage was.
You mention no $ anymore once they go into a facility. So is letting the mortgage default and go into foreclosure the plan? You need to review your parents mortgage agreement as to the terms. Usually it's 4 - 6 months of a flurry of letters on the house, then they start foreclosure proceedings. Foreclosure can totally make sense but can have some unexpected consequences. When a mortgage is foreclosed, the balance due on the mortgage and all its various fees are written off by the mortgage holder. They will issue your parents a 1099-C Cancellation of debt for this amount. It is taxable income. Totally phantom income but totally taxable. For those on Medicaid, it poses an problem because if your state does a match up with IRS, that 1099C $ will take them over the asset limit for Medicaid. You have to file taxes for the year they get the 1099C and do a Form 982 impoverishment worksheet for them - - yeah total butt rash. You can't ignore the 1099C as taxes are due on it and if taxes aren't paid or impoverishment established, the IRS can seize their SS. IRS is a super-creditor and one of the few things that can take SS $. Your parents have to pay their SS to the NH to be in compliance for Medicaid for their co-pay/share of cost.
Brother buying the house too has all sorts of issues. Until the mortgage is paid off, your parents cannot sell the house. They don't own it. So he would need to pay whatever the balance is at a minimum to get beyond that part. You as DPOA can contact the mortgage holder to see what the settlement costs on the house will be so you have a figure on this.
If brother buys it for the costs to clear the mortgage it will probably be for less than the tax assessor value, Medicaid will view it as being sold for less than fair market value. This triggers a transfer penalty inquiry by Medicaid. Transfer penalties are super sticky to deal with, you all will need lots of documentation from professionals with licenses registered however they need be for your state to back up the lower value. Home inspection is done by sq ft so a 1000 sq ft will run about $ 275/300.
If there are structural issues, you may need a residential structural engineers report as well. Then an appraisal, that too is based on sq ft and seems a bit more than the inspector. You want to get the basic home inspection done first as that report is given to the other two. No need to recreate the wheel. I'd allow for about $ 1,200 to get these 3 done. You as the DPOA pay for this from your parents funds. Brother should not get the inspector, etc.
If the house is worth little and brother want to pay off the mortgage and the transfer penalty is small, selling the house to him could work. You as the DPOA need to put figures together to see just what it all shakes done to. Transfer penalty varies by state as it is based on what your state pays the NH for daily room & board costs.
Like for TX, r&b is about $ 155 a day. So a house sold for 10K under FMV will incur a transfer penalty of 64 days. Private pay for 64 days at the NH could be worthwhile if brother really wants the property. There is no way getting around the transfer penalty as all real property ownership and value is in the states database.
People walk away from homes all the time. If your pretty underwater, it makes total sense and often is the best financial move. But for your parents as Medicaid is involved, it is going to be complicated. If you are overwhelmed by all this, what about hiring a elder law attorney to do all this for you. You don't want to make a cost mistake and have your parents declined coverage by Medicaid!