DEAR BENNY: Seven years ago, when my mother was 80, my husband and I purchased cooperative apartment shares in a senior complex for her to live in. Since at least one of the tenants had to be over 55, we put her name on the shares, as well as my name. The actual paperwork reads: " ‘My Mother’s Name’ or ‘My Name’ as joint tenants with right of survivorship and not as tenants in common."
If my mother needs to move to assisted living or a nursing home, will Medicaid try to get possession of this apartment? I’ve called the co-op’s attorney, senior law offices here in Reno, Nev., and I’ve called private attorneys. No one can give me an answer.
One office suggested I call the Medicaid office. As much as I would like to, I think that might give Medicaid an opportunity to take what isn’t hers. We used equity in our home to purchase this apartment. My mom lives on Social Security and could never afford this apartment.
One lawyer suggested the co-op "reconvey" the share back to my name, but their bylaws require that whoever is on the deed live there.
Any ideas? Are we safe in keeping this, selling it and keeping the monies, or will Medicaid take it? –Penny
DEAR PENNY: This is a complicated question and I am surprised that the senior law offices were unable to assist. There are a number of "elder lawyers" throughout the country, and you can locate them on the Web. I searched "elder lawyers" and found a number of Web sites that should be of assistance to you.
Generally, however, Medicaid (which is administered by the state, with each state having its own rules) does not "get possession" of property. But if your mother applies for Medicaid, I assume she will need to disclose her interest in the co-op as an asset.
It is possible that the state will take into account the fact that she is not an "equitable" owner of the property (as she did not contribute to the purchase price of the property) and simply disregard the asset. But even if she is considered to be an owner for Medicaid purposes, the state may impose only a lien on the property rather than require it be sold.
In fact, if the state considers the co-op interest an asset of your mother, it wouldn’t require her to sell it, but could deny her benefits until her assets, including her interest in the house, were spent down to whatever the threshold is in Nevada.
Many states allow a number of exceptions. For example, if a disabled family member (or a spouse, which I assume there is none) is living in the property, the Medicaid applicant would qualify for benefits and a lien would be imposed on the applicant’s share of the property in the amount of any benefits paid — but the benefits would need to be reimbursed when the property is sold or the disabled person or spouse dies.
This is a highly specialized area of law, and not all attorneys understand the rules or the law.
DEAR BENNY: We are buying a home and our home inspection revealed the presence of moisture and a somewhat significant amount of toxic mold. The remediation work will cost about 5-7 percent of the purchase price. Would you advise that we: 1) insist the seller pay for all the work to be done prior to close of escrow, 2) ask for a price reduction to cover the costs and do the work ourselves as part of a larger remodel plan, or 3) ask for an escrow holdback until the work is finished and costs are determined?
We are concerned that the seller may skimp on the remediation and moisture work and the problem will recur. If we take on the responsibility, we have reason to believe that the costs may escalate due to hidden problems — and a negotiated price reduction may not cover it. Do you see any issues for future resale if we can certify the mold was removed? How can we best protect our interests, or is this a property we should walk away from? –Malia
DEAR MALIA: In law school, students are told that real estate is unique. From my many years practicing law, I have learned that this is not always true.
Unless this is the house that you absolutely have to have, I would walk away. Not all mold is toxic, but unfortunately the media has blown this way out of proportion. Nevertheless, it is (or can be) a significant health hazard. …CONTINUED
If you really want to buy this house, I do not recommend you agree to have the seller make the repairs and the remediation. Too often, a seller (who may not have the monies necessary to do a competent job) will hire "cheapo contractors."
Accordingly, I recommend that you get three estimates from reliable, licensed contractors. You will also need to obtain a professional mold inspector to review the house in its current as-is condition, and then again to inspect after all of the work is done.
How should you approach the seller? While a price reduction sounds attractive now, it may come back to bite you when you ultimately sell the house.
Currently, our tax laws allow an exclusion of gain for principal residences (i.e., up to $500,000 if you are married and file a joint tax return, or up to $250,000 if you file a separate return), but there is no guarantee that these favorable tax laws will remain on the books forever. You may end up paying a heavy capital gains tax down the road.
So I would demand that the seller escrow money with the settlement attorney (or escrow company) in an amount that is double the average of the three contractors. A written escrow agreement should be entered into between buyer and seller, spelling out that you have full authority to use the escrow monies to make the remediation.
The seller should, however, have the right to review your expenditures, so as to satisfy himself that you are not using those funds for other purposes. Your lender will have to approve the escrow.
Bottom line: I would walk away.
DEAR BENNY: I have a question about escrows for taxes and insurance. Let’s say I am buying a home and last year’s tax bill was $1,200 (or $100 per month). Can the lender set up escrow collecting $150 per month for taxes? –Nate
DEAR NATE: My mathematical skills are limited, but the answer to your question is no. According to the federal Real Estate Settlement Procedures Act (commonly known as RESPA), a lender who collects money in escrow for real estate taxes and insurance can have only a two months’ cushion on an annual basis.
So, if the bank is collecting $150 per month, annually that comes to $1,800. A two-month cushion allows you to collect only $1,400, or $116.66 per month.
But depending on when settlement takes place, the lender does have the right to collect sufficient funds (plus two months extra) to make sure that it can pay the taxes and insurance when they become due.
Let’s take this example: You settle (go to escrow) on May 15. The tax bill in your jurisdiction must be paid by Sept. 30, 2010, but is applied from January 2010 through December 2010. Because mortgage interest is calculated in arrears, your first payment will due in July. (Note: The lender will charge you interest at closing from May 15 to the end of that month.)
By the time the real estate tax bill has to be paid, you will have made three payments in escrow (July, August and September). But the lender needs a full 12-month payment. Accordingly, the lender has the right to charge you — at closing — nine months’ escrow to collect all the money needed, plus two months’ cushion; in other words, the lender can charge you at closing for 11 months’ escrow.
Here’s a consumer protection suggestion: Because too many lenders often do not make the tax or insurance payments on a timely basis — or in some cases do not make the payments at all — homeowners should send their lender a demand letter, once a year right after the taxes or insurance payments are due, requesting proof that those payments have, in fact, been made.
For those jurisdictions where this information can be found online, you should learn how to access this from your local government’s Web site.
Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to email@example.com.
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