Question about paying off dad's mortgage...

[pb4uski]

If you do pay it off, what you could do is make a $80,000 mortgage loan to the trust, secured by the house and the trust uses that $80,000 to pay off the 7.15% mortgage loan. That way, if you need to sell the house then you'll have a legal claim to the proceeds from the sale. Also, if you should predecease your dad, your husband would get the $80k and no part of the $80k would go to your niece.

 

[CindyBlue]

Wow, CindyBlue. It really has been a rough couple of years for you. I don’t have any advice to offer. But I would like to offer you my condolences. I hope smoother sailing is ahead for you and yours!

Gremlin, thank you so much. It has been rough, but I know others have it rougher so I haven't complained too much (my hubby might tell you differently though (smile!)) The family issues combined with disasters disrupting our workplace for four months a couple of years ago, and then again last year, and now the pandemic...yeah, it's been rough. But I have my sweetie, we are in good health, and because of a lot of hard work and saving on my small salary, I have (so far, anyway!) the money to deal with what's been happening (lawyers and MediCaid advisors aren't cheap but from personal experience in this case, worth every penny!!) It's not what I'd envisioned retirement to be, that's for sure, but we are making the best of it.
I repeat - thank goodness for this forum. The knowledgable and generous people here are very caring and willing to help. I understand the limitations of asking on a forum - but this one is a gem.

 

[CindyBlue]

If you do pay it off, what you could do is make a $80,000 mortgage loan to the trust, secured by the house and the trust uses that $80,000 to pay off the 7.15% mortgage loan. That way, if you need to sell the house then you'll have a legal claim to the proceeds from the sale. Also, if you should predecease your dad, your husband would get the $80k and no part of the $80k would go to your niece.

Wow, this is way over my head...and I'm going to go look it up right away!!

I have a legal claim anyway, right? Since I am the beneficiary, and the trust states that all my expenses are taken off the top of the value of the property before I disburse the required money to my sister? I guess the question is does that payment count as "my expenses? Hmm...

 

[ivinsfan]

"I assume that you are the sole beneficiary of the trust once he passes so in effect the house is yours. I'm just wondering if there might be any risk that another party could come along and lay claim to the house or the trust... I suspect not but you never know. Have you discussed this idea of paying off the mortgage with your lawyer or the lawyer that set up the trust?"

Thank you for thinking of this. I am the beneficiary of the trust, with the stipulation that I must give 1/6th the assessed value of the property to my sister (and also 1/6 would have gone to my brother, but he's passed and the trust specifically states that nothing goes to his heir (one daughter) unless I die before dad does...weird, I know, and my attorney thought it was weird, too, but that's what it says. We'll deal with that when the time comes, I guess.

Yep, discussed paying it off with my attorney, but he basically says it's my decision. He wouldn't give his opinion on that, and I understand. He did say that if we really needed the money back, we can sell the house, and recover our expenses (i.e., the $80,0000) and then the rest of the money has to stay in the trust to "indirectly benefit" dad until he passes.

Ok with these details about your siblings and heirs...do not pay off this house ,just don't do it.

 

[CindyBlue]

Ok with these details about your siblings and heirs...do not pay off this house ,just don't do it.

Why, ivinsfan?

 

[ivinsfan]

Why, ivinsfan?

Well if for any reason your sister and niece are not happy with the results of the trust they can contest it for several reasons. Don't risk having your own money combined with your Dads...

paying off his house is not an expense... and if I'm correct you are getting 5/6 th your DS 1/6 and your niece nothing...a recipe for trouble IMO

 

[Montecfo]

There are a lot of seemingly random facts here.

I would tend to not pay off the mortgage as I would be worried your trust is flawed and because the property is not in your name.

I would get your inherited cash earning something.

 

[Janet H]

Can you refinance that mortgage at a lower rate?

 

[pb4uski]

Wow, this is way over my head...and I'm going to go look it up right away!!

I have a legal claim anyway, right? Since I am the beneficiary, and the trust states that all my expenses are taken off the top of the value of the property before I disburse the required money to my sister? I guess the question is does that payment count as "my expenses? Hmm...

Let me elaborate. Let's say that you pay off the $80k mortgage so the trust owns the house free and clear. Would you rather have an IOU for $80k from the trust or a mortgage note that makes it clear that the trust owes you $80k.

If your sister were to challenge your management of the trust, a mortgage would be more authoritative than an IOU. If I were lending $80k to a trust that had other beneficiaries, I would want more documentation than an IOU. 9 times out of 10 an IOU might be fine, but what about that 1 other time?

The other thing, if you have a mortgage note then if the trust sells the house and your dad is still alive you can get your $80k back earlier.... the provision for you to get your expenses probably applies after your dad passes and the trust is disbursed which could be years after the sale of the house.

But anyway, check with your lawyer... if he doesn't think a mortgage or some formal note is needed then it probably isn't needed.

 

[Sunset]

If you do pay it off, what you could do is make a $80,000 mortgage loan to the trust, secured by the house and the trust uses that $80,000 to pay off the 7.15% mortgage loan. That way, if you need to sell the house then you'll have a legal claim to the proceeds from the sale. Also, if you should predecease your dad, your husband would get the $80k and no part of the $80k would go to your niece.

+1
This is probably the safest way to pay off the house and make sure OP has a claim to the money, in case relatives get greedy and invalidate the trust.

 

[CindyBlue]

Wow, pb4ski, taking out a mortgage to the trust is something I'd never thought of before you wrote about it. I wonder how complicated that would be?
You've given me another option - and a LOT to think about!!
Thank you!!

 

[CindyBlue]

Can you refinance that mortgage at a lower rate?

We'd thought about that...and think thought it is a viable option, we aren't sure we want to go that way. We'd really rather not have that monthly payment at all if possible. Thank you!

 

[CindyBlue]

Well if for any reason your sister and niece are not happy with the results of the trust they can contest it for several reasons. Don't risk having your own money combined with your Dads...

paying off his house is not an expense... and if I'm correct you are getting 5/6 th your DS 1/6 and your niece nothing...a recipe for trouble IMO

Interesting idea not to combine our many with the trust's money...I'd never thought of that. So many things I hadn't thought of!! Thank you!

DS is on board, because we've paid into this place for 20 years (we paid for our granny unit to be built and shared all the property expenses, well, septic, etc.) and there's a part in the trust that says that if she contests it, she gets nothing. And she agrees also because we took care of dad and his wife throughout the years of their decline. The niece, however, has suddenly turned out - to our utter surprise, since I helped pay for her college! - to be a real pain, and a worry. She is the only one who might contest it. My lawyer said she can contest it because anyone can contest anything, but that she won't get anything - I hope he is right.

 

[CardsFan]

DS is on board, because we've paid into this place for 20 years (we paid for our granny unit to be built and shared all the property expenses, well, septic, etc.) and there's a part in the trust that says that if she contests it, she gets nothing. And she agrees also because we took care of dad and his wife throughout the years of their decline. The niece, however, has suddenly turned out - to our utter surprise, since I helped pay for her college! - to be a real pain, and a worry. She is the only one who might contest it. My lawyer said she can contest it because anyone can contest anything, but that she won't get anything - I hope he is right.

IANAL, and don't play one on TV. I know little to nothing about Medicaid and Trusts.

I DO know I would never put my money into something that I know nothing about, and that someone could tie up in court for years.

That said, I am not sure your lawyers are correct. The claw back by Medicaid may not be swift, but I have heard it is certain.

Tread carefully, and DO NOT co-mingle your money with your dad',.

JMHO.

 

[CindyBlue]

CardsFan, yours is a valuable opinion. Thank you! I am hoping that my lawyer is right, but who knows? He is a MediCaid specialist, so should know what he is doing, and since the property was in a revocable trust before the switch to the irrevocable trust, and since both are protected from Medicaid claw back, it should be good. But you are right, who knows?
We are going to have to pay the loan, whether by monthly payments or by paying it all off at once, so our money will be commingled. We have no choice. It's how to do it...sigh...
I've got a lot to think about!

 

[street]

I would find a different place to live/buy and not get involved with paying off the mortgage with your own money. Pay as you go with SS and let the system work as it does when people eventually run out of money and are in a home.

I would be very careful playing this game with Medicaid and mixing money in this scenario.
If nothing else I would be getting a second or even a third opinion from different counsel.

 

[Sunset]

CardsFan, yours is a valuable opinion. Thank you! I am hoping that my lawyer is right, but who knows? He is a MediCaid specialist, so should know what he is doing, and since the property was in a revocable trust before the switch to the irrevocable trust, and since both are protected from Medicaid claw back, it should be good. But you are right, who knows?
We are going to have to pay the loan, whether by monthly payments or by paying it all off at once, so our money will be commingled. We have no choice. It's how to do it...sigh...
I've got a lot to think about!

My experience with lawyers has been, while they tell you the truth as far as they know it. Sometimes they lead you down the garden path, and when someone sues you, they help you (for a fee).

But had they been a little more informative, or more careful with advice, you wouldn't need the fee help .

As I see it, pb4uski had excellent advice, as it stops the monthly payments of interest, but does not fatten up the trust property with extra value, which would make it more attractive to contest.

 

[CardsFan]

As I see it, pb4uski had excellent advice, as it stops the monthly payments of interest, but does not fatten up the trust property with extra value, which would make it more attractive to contest.

This sounds the the best advice to me, as well.

 

[ivinsfan]

OP what is your Dad's state of health? If he is liable to live a long time you might do what Mr P suggests and make it a totally hands off transaction. Otherwise just continue to pay the 800 a month and consider the 400 interest and fees rent on the house until it becomes yours...

This can work out several ways for you...the trust is uncontested and you get 5/6th of the house. Your DN contests wins and you get 2/3 of the house minus legal fees or your DS decides to join your DN and you get 1/3 of the house. Just be mindful of these possibilities.

 

[CindyBlue]

OP what is your Dad's state of health? If he is liable to live a long time you might do what Mr P suggests and make it a totally hands off transaction. Otherwise just continue to pay the 800 a month and consider the 400 interest and fees rent on the house until it becomes yours...

This can work out several ways for you...the trust is uncontested and you get 5/6th of the house. Your DN contests wins and you get 2/3 of the house minus legal fees or your DS decides to join your DN and you get 1/3 of the house. Just be mindful of these possibilities.

Thank you for your thoughts!
No idea how long dad might live...there is longevity on his side of the family, so if could be 12-15 years or more.

Yep, I've thought of "notD"N contesting, too, but there's nothing I can do about that, so I'll wait to see what happens (wry smile!) Sister won't join in - she's as disgusted with her as we are.

I'm beginning to lean heavily toward not paying it off...I've done more research and it seems like it's not the best option. But paying dad's Medicaid "share of cost" to the nursing home becomes very complicated if we don't, due to the loan payment being automatically paid from his account (which is in another trust), which is also the account that the social security check automatically is deposited into...and he can't show assets of over $2000, which will happen if we put our money into that account in order to pay the loan payment so there is enough from his SS (after the loan payment is made) to pay the Medicaid "share of cost"...not sure what the rules are about how the payment must be made, from his account (to show that his SS specifically is being used to pay the share of cost) or can I move the leftover SS money to my account and pay his share of cost from there...sigh...

I have a call in to my attorney...it's going to be a long day...

 

[street]

My advice is do not mix funds, keep them separate. You want a very good legit paper trail of where and how expenses are paid.

 

[ivinsfan]

Thank you for your thoughts!
No idea how long dad might live...there is longevity on his side of the family, so if could be 12-15 years or more.

Yep, I've thought of "notD"N contesting, too, but there's nothing I can do about that, so I'll wait to see what happens (wry smile!) Sister won't join in - she's as disgusted with her as we are.

I'm beginning to lean heavily toward not paying it off...I've done more research and it seems like it's not the best option. But paying dad's Medicaid "share of cost" to the nursing home becomes very complicated if we don't, due to the loan payment being automatically paid from his account (which is in another trust), which is also the account that the social security check automatically is deposited into...and he can't show assets of over $2000, which will happen if we put our money into that account in order to pay the loan payment so there is enough from his SS (after the loan payment is made) to pay the Medicaid "share of cost"...not sure what the rules are about how the payment must be made, from his account (to show that his SS specifically is being used to pay the share of cost) or can I move the leftover SS money to my account and pay his share of cost from there...sigh...

I have a call in to my attorney...it's going to be a long day...

Yes you need to call to get some specifics, good luck....please lets us know how you work it out someone might learn something from your hassles.

If you are saying you put money directly in your Dad's account to pay his payment that's probably not a good plan for the long term..

 

[Brat]

I would explore renegotiating the mortgage. The complication might be documenting the source of income to pay it. No harm in talking to a bank. Evidently you are making the mortgage payments now so it may not be an issue.

 

[Vinnygret]

I'm in the same state of mind as you are without the financial liabilities. So I know how you feel and you need to vent. With a loan against the house (mortage, home equity loan, whtever it is) at 7.5% your money couldn't earn anywhere near the interest you are paying. Can you refinance the loan at a lower rate? Especially if you could pay a chunk of money vs. the whole amount due and retain some of your ready assets. As you have noticed, in this economy, houses will be selling like cold cakes. I took a wonderful course in wills and estates at our local community college. I then consulted with the attorney who taught the class. It was very helpful. My father's house (he is in assisted living) costs him money (maintenance, taxes, utilities) , but I refuse to sell it at a cut rate price. But I don't live there. You have some heavy decisions to make. I have a brother, but he is less than no help. He is minus help. Hang in there and do your best. In the end, everything will work out. That's what I tell myself anyway. LOL, my dad is 94 and going strong, but declining cognitively. Best of luck.

 

[veganbetty]

Can the title be changed?

If you're not concerned with your sister contesting, maybe you should just see if you can change the title to your name especially as your dad is still alive and he and she both agree. Is he coherent enough to sign papers? You are POA so you have a lot of power here. The hard part would be getting a notary into an assisted living facility. I would try to get everything transferred while he's still alive. It will be so much easier to deal with than a trust when he passes. And yes, so sorry for your loss. My papa died from Covid in April and it's been rough.