She has a home worth about $325000 and owes $97000. She wants to refinance to borrow about $30,000 to pay for assisted living costs while waiting for the VA aid and attendance program to see if she is eligible for this. Can I be her co-signer on the loan and also be put on the deed as a co-owner? I am worried if she would need Medicaid in the coming years that I would have created a problem.
These are my best guesses. You need to consult an elder law attorney to see what would be the best plan.
If mom has you become co-owner of her 325k house, she in essence gifts you 50% of the property or $172,500k. That 172k would become a transfer penalty against mom’s Medicaid application & the 5 yr lookback starts the day she applies for Medicaid. So property value pegged at whatever assessor has it at when she applies. She would have to wait till March, 2023 to be beyond lookback as currently done.
The debt / mortgage owed is a whole other issue. Medicaid really doesn’t care about debts an applicant has. Medicaid is all about looking at their assets and income. That she owes basically 100k+, is of no concern to Medicaid. Medicaid expects them to have nonexempt assets down to 2k and have basically all their monthly income be paid to the facility as the required copay or SOC (share of cost). Due to SOC, mom will have no-none-nada of her $ to ever really pay on ANYTHING on that house anymore. All costs - taxes, mortgage, insurance, utilities, maintenance, etc - will fall to you or doesn’t get paid. There’s a mortgage so she has to have proper insurance on it and she must pay taxes. So can you easily afford house & from now till beyond her death? And paid on a property that you do not own?
If she has other debts, like credit cards, or insurance premiums, those too have to be paid by others (you), or they get defaulted on once on Medicaid.
If your state allows, mom can ask for a waiver of her SOC to pay her share of the mortgage IF property is for sale with a valid Realtor listing for a short initial period of time. So no for sale by owner nonsense. But otherwise all property costs fall onto you. Getting reimbursed will be sticky as mom cannot gift to you from her share proceeds of the sale.
And due to Medicaid’s required Recovery, does keeping the house make sense? Like are you - as the only heir - likely to qualify for an exemption or exclusion to MERP? To me, a house at 325k value -even if at 50% with no increase over time - will take it imo outside ever being able to use the 3k/10k guidelines for cost effectiveness of Recovery to get a MERP release even if you opened probate. So unless you have an exemption (& can clearly document whatever needed to establish this), MERP can do a lien or claim on mom’s share of ownership. Going drawn out probate route to deal with Recovery and property costs, probably not an option as mortgage agreement probably has a due on death clause.
To me, spending a dime or time on a property with outstanding mortgage with Medicaid anticipated does not ever make sense, & and with a parent planning on moving out of the house & into an AL, really does not make sense. I’d also be concerned that should her care level increase from AL to MC or NH, that the $ (abt $1500) from VA A&A won’t be enough to cover the care costs plus deal with house costs.
Why not sell house, pay off mortgage and whatever other debts she has??? & then have mom use the rest of the 200+k left to pay for her care?