“Come Unto Me All Ye That Labor And Are Heavy Laden, And I Will Give You Rest.” Matthew 11:28
Labor Day Letters
(Fix The Spelling Or Grammar? Too Laborious!) Not Legal Advice Neither
You Load 16 Tons, What Do You Get? Another Day Older And Deeper In Debt
How do I lend a family member a substantial amount of money and secure the loan?
My elderly family member owns his home but is running out of cash. He has asked me to lend him $25,000 and pay interest only until his death or he has to move from the home at which time the house would sale and I would be paid in full. Can I ask to be put on the title of the home or somehow put a lean on the home to secure payment?
Saint Peter Don’t Ya Call Me
Cause I Can’t Go
I Owe My Soul To The Company Store
Everybody knows that you can keep your house, even if you are on Medicaid for long- term care. Homestead is Protected! So they say. The reality is that there is no money for taxes, insurance, maintenance, or utilities, because all your income is going to the nursing home. Sure, the kids will help out. Our experience is that the kids will help out for about 2 years maximum. Then they’re done. Every spring we get notice after notice of delinquent taxes and government tax foreclosures on homesteads of our nursing home resident clients whose kids just ran out of patience, concern, or ability to pay.
Also very common is the Good Child (or Niece or Nephew) who does not want mom or dad to receive the government level basic care. The Good Child is willing to pay the private room rate or for other extras. Until the Good Child’s spouse decides that enough is enough and charity starts at home. So then your house goes to the government for taxes and you’re stuck with a roommate who thinks he’s the reincarnation of Stan Laurel. Or Bela Legosi. Or Rock Hudson.
Our letter writer is really onto a great idea here! What if we could loan the money to the loved one in their hour of need. Then, when the Hour of Need has passed away (along with the loved one) the Good Child gets paid back! And when there is a homestead, we can make sure six ways to Sunday that the generous Good Child will get back every penny. Plus interest.
It shouldn’t come as a surprise to faithful readers that we have been doing this for over 30 years when conscientious family members are helping out mom and dad with the bills. And it’s not just for long-term care anymore!
Imagine: Your folks are doing poorly, healthwise. The in-home care is ruinously expensive (because you didn’t listen to The Michigan Elder Law Reporter about the PACE program). You want to help. You approach your Life Parter, Helpmeet, Love of Your Life.
The conversation goes like this:
You: Mom and Dad’s in-home care is terribly expensive.
LOYL: Yeah, so?
You: I’d like to help them out.
LOYL: Charity starts at home. Plus you already raided the Vacation Fund for their water heater. Their plumbing leak depleted our New Car Reserve. And Little Johnny is going to Whasamatta U because his college savings were sacrificed for their HVAC system.
Enough is enough.
You: But yeah, when they die, we’ll get the house.
LOYL: You and your 4 brothers and 3 sisters. And you’re the only one who has contributed more than a plug nickel. Tell it to the Marines!
You: Uh, uh, uh…
Now Mom and Dad get the care equivalent of government cheese. And you feel bad.
But the conversation could have gone like this:
You: Mom and Dad’s in-home care is terribly expensive.
LOYL: Yeah, so?
You: I’d like to help them out. So, we are going to get a first lien on the old homestead. And all that money we have already laid out for their water heater, plumbing, and HVAC is going to be rolled into a promissory note, secured by the house, at 8% interest.
LOYL: Eight percent! None of our investments give 8%. Tell me more!
You: Mom and Dad are house rich but cash poor. They need a way to unlock the equity in their home to get the care they need.
LOYL: So let them get a Reverse Mortgage. Tom Selleck says “They’re great!”
You: But if Mom and Dad go to residential care, the bank can foreclose on the Reverse Mortgage! And if they pay us back now, they may never qualify for the Medicaid benefits they’ve earned because the State will say the payback is just a gift and divestment.
LOYL: (Thoughtfully): Hmmm. Why don’t they go to the bank or put your name on the title to the house?
You: They’ll never qualify at the bank for a Home Equity Line Of Credit (“HELOC”). Their income is too small and it’s all Social Security anyway. And if they put my name on the deed, they’ll be giving me the house, and disqualify themselves through divestment for their hard-earned, easily-lost Medicaid benefits.
You: But if we act as the “bank” and give Mom and Dad a HELOC secured by the house, we won’t get paid until after they die and the house sells, but we’ll be earning 8% interest the whole time. And my brothers and sisters won’t have a thing to say about it!
LOYL: My Hero!
Which conversation would you rather have?
You don’t want to be on the title to the home. Instead, let’s create the equivalent of a bank lending money under a Home Equity Line Of Credit (“HELOC”). M&D could get one from the bank if they were credit-worthy or could afford the payments. BUT with a big difference: You are the bank. You are the lender. And let’s not get started about Reverse Mortgages!
Here’s how it works:
1. M&D agree to borrow money from you and you agree to loan money to them. At a relatively high rate of interest. Usually, they make no payments, although you could have them pay interest. You have the right to demand full payment after death.
2. M&D’s borrowings are secured by a first lien on the homestead.
3. The HELOC documents allow you to make further advances of additional cash to M&D or for their benefit. These additional advances of cash become part of the loan secured by the homestead.
4. You keep track of the advances you make to M&D. Guard those receipts and bank records with your life! Or as you would other important papers.
5. When M&D both pass (die) and the house sells, you are first in line to be paid back. All the money you laid out comes home to roost. Along with the interest that has been compounding nicely all these years.
6. In almost all states, the government will attach a lien to the homestead to get back the Medicaid dollars that were paid out for your parents. The government doesn’t care that M&D paid for the Medicaid with their taxes in the first place. Ho Ho NO! They do not care. But since you have a first lien on the property, which you put in place BEFORE M&D applied for Medicaid, you get your money first.
7. WARNING: Michigan is not one of the states that does the Medicaid Mortgage thing. Yet. Currently, Michigan waits until the house goes through probate before glomming on to its “share.” How long will it be before Michigan goes down the Medicaid Mortgage road? Don’t know. But now you do know that it is coming…
Some folks loan money counting on the inheritance to get paid back. This sort of thinking is what started the feud between the Hatfields and McCoys. Do not depend on being paid back by your share of the inheritance.
If M&D wind up in a long-term care facility, chance are that the house will be sold and the proceeds long gone. Sure, it’s possible that your siblings will recognize your contribution and generously allow you to be repaid before anyone else gets a share. And monkeys might fly out of my butt.
What if the Medicaid application is screwed up, Medicaid doesn’t pay and now M & D will get sued? There goes the house and you get bupkis!
Conclusion: Be a Hero. To Mom. To Dad. To the Love Of Your Life. To your siblings who are grateful to get their shares of the remainder. You CAN do well by doing GOOD.
Up In The Morning Out On The Job Work Like The Devil For My Pay
Is there an easier way, other than conservatorship, to manage an elder parent’s home?
My father owned a home with his significant other, JTWROS. Her son and adult grand kids moved in years ago, against my father’s wishes. No lease agreement or rent paid. He has tried to get them out but she would always let them come back. She passed away in March. They think they are entitled to the house. My father has moved in with me as he is 90 with dementia. Her son would verbally abuse both elders and took advantage of them financially. The police were called many times but she would always cover up. An ER doctor even called me a year ago and made a referral to adult protective services for elder abuse that was covered up. They are all working and did nothing to care for the elders. My dad wants them out of his house. I am a signor on his bank account and have medical power of attorney, not durable POA. The house is his only asset.
Because of his diminished capacity, he expects me to get things handled. What is the easiest way to get control of the house? Can he do it with dementia?
While That Lucky Old Sun Has Nothing To Do
But Roll Around Heaven All Day
Get a general durable power of attorney with strong real estate management rights and throw the baggage out! Kick ’em to the curb. Let the hellcats freeze. And etc.
Sounds like Dad may be of diminished capacity, but he still knows who he is, where he is, when (generally speaking) it is… Is he competent to sign a general durable power of attorney? Unbiased observers might note that, despite his diminished capacity, your Dad is probably more qualified to make momentous decisions than many of his contemporaries. Folks with no axe to grind would most likely conclude that your Dad is plenty qualified, for example, to be First Magistrate of the Greatest Nation on Earth, judging from the demonstrated capabilities of the current occupant of that office. But I digress…
With a reasonably drafted Power of Attorney, you can begin eviction proceedings against Freddy the Freeloader and his noxious progeny without further delay. Get the POA and get ’em on out! In the past, they got the bum’s rush out the front door, but gullible stepmother let them in the by the back. Not anymore. Nowadays, the backdoor is closed, locked, and buried.
Be aware however, that you cannot use “self- help” in this process. Cavalier references to immediate defenestration notwithstanding, the law insists on strict compliance. Hard as it may be to believe, these jokers enjoy the rights of tenants, and your Dad is fettered with the responsibilities of a landlord. Give them their 30-day Notice of Termination of Tenancy. File for Summary Proceedings. Get the Writ of Eviction. Serve it properly. You cannot just take their stuff and put it by the curb, you must get that as part of the judgment.
Be aware too, that what Dad giveth, Dad can taketh away!
Dad gave you the Power of Attorney. What if this verbally abusive gang of advantage- takers prevails upon him to revoke the power? What if they induce Dad to name one of this confederation of dunces as the replacement attorney- in-fact? You have to be sure that these jerks don’t unduly influence Dad while they still reside in the home. It may be appropriate to seek a protective order against them, if the verbal abuse continues.
Always a good idea in these situations to alert your local Adult Protective Services again. There’s already been a file opened, so add your side to it. Let them know that you are concerned that the terrible tenants may further coerce Dad. Ounce of prevention worth a pound of cure.
Finally, you should definitely consult with a local elder law attorney. A conservatorship may be required if Dad lacks capacity to make a Power of Attorney. You don’t want to go to court on the eviction, only to find that Dad has revoked your Power and appointed yo-yo head in your place.
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