My parents put my brother onto the title of the home (Joint rights of survivorship) now, dad has passed away and brother refuses to sell. 3 weeks after dad passed away, mother fell and broke her hip. She is now ready to transition into an assisted living facility. Her monthly income along with savings will allow her to move in, however, her funds will not cover memory care. We anticipate she will need to move to memory care in 12 months, maybe more. The memory care at her current facility will be an additional $1500 per month, which she cannot afford. My brother is a scoundrel and refuses to sell the property in order to provide her with additional assets because he was counting on both of them dying and he plans to inherit the entire home which would sell for $150-$165K. The existing mortgage has a balance of $117K. Now that she realizes how little he cares for her welfare, she does not want him to get a dime from the house. She insists that despite the fact that she has never made a late payment in her life, she would like to default on the loan, as the bank would take the property back, leaving him with nothing.. My brother is on the deed only, the mortgage is only in her name. Is this the only way to prevent him from getting the equity in the home?
Since your brother's name is already on the title for the house, at least 1/2 of the house at this point in time or is he the only name on the Deed? When the time comes for him to sell, he might be strapped with Capital Gains Taxes as the basis used for profits will be how much did your parents pay for the house when they bought it. That is why I wish parents wouldn't add their grown children to their house deeds. It can create quite a quagmire.
There may be a way to rescind her action but I don't know how. This is definitely an issue for an attorney qualified in noncommercial real estate transactions. Although I worked in real estate law for years, I don't know how she can rescind her actions, unless she can convince him to quit claim his interest back to her. But that doesn't seem likely.
There's an issue with allowing the house to go to foreclosure though. First, she wouldn't be recovering any of her own equity, so she still wouldn't have money to fund her needed facility care.
Second, the difference between the actual mortgage amount less the amount for which it's sold at foreclosure would probably be reported as forgiven debt, or income for tax purposes, and she might get a 1099 (C, I think it is) which would be reported to IRS. That kind of income could put a severe strain on her tax situation, although there might still be some qualifications of debt forgiveness left over in statutes enacted to address the massive foreclosures during the real estate recession.
Igloo's more up to date on the issue of debt forgiveness than I, but this would in my opinion be a significant concern for your mother. So by allowing the house to go to foreclosure, she would be preventing him from gaining from the eventual benefit of selling it, but she would also be setting herself up for potential tax problems.
Not an easy situation. I really do think this requires the expertise of an attorney. Rescission of a vested interest is not an easy issue to deal with.
Just another thought. As opposed to allowing it to go to foreclosure, she could try bluffing and advising him she's going to contact the lender and ask to have the mortgage renegotiated to add him as a co-mortgagor (borrower). Then he'd be obligated under the mortgage. That might scare him.
Or there might be some way she could bind her share such as putting her 1/2 interest in a trust, although I don't know if that's even realistic.
I’d bet that the arrangement regarding house was done to compensate bro for his being there for them. (He could be the favorite son as well). Dad & mom & bro all agreed to this. That’s why he’s not on mortgage debt. Bro will have a pretty solid position that this was the agreement & the existing legal (mortgage & his fee holder status) backs his view. That it’s gone on for months or years establishes intent.
Parents could have included you on paperwork. BUT they didn’t.....
Mom can go into a facility that takes Medicaid & keep house as an allowable exempt asset. But someone other than mom will need to pay the mortgage & property costs as she is required by Medicaid to have her monthly income become the required copay or SOC (share of cost). Mortgage holder doesn’t care who pays unless its a Reverse Mortgage. If bro wants to stay in home, he pays mortgage. And if not, then house can be sold with $ 117k mortgage paid off and whatever left split 50/50 between bro & mom. At best, mom maybe gets $20K maybe $25k which is 2 - 5 months of PP NH or MC costs. To go balls out legal on this, it’s going to cost mom $$ paid upfront. If mom also is going into MC as PP, that’s $$ too. So does mom have $$$ right now to front all these costs?
And maybe paying mortgage as well so she doesn’t loose equity, IF bro won’t pay mortgage. I’m guessing mom does not have $$$, as you posted she’s $ 1500 short a mo to pay MC. So it’s on you to pay. So do you have 10k - 20k liquid to front all costs - mortgage, property upkeep, taxes, atty & court costs, MC - if need be?? Please pls realize that if you pay for any of this & mom ever has to apply for Medicaid, she cannot reimburse (from house sale $) you as it will be looked as as gifting by Medicaid. Can you get around this?.... well maybe by having a atty drawn up promissory note done way in advance of you ever paying a penny but she can’t pledge the house as an asset / collateral without bro or mortgage co allowing it. House would have to be owned outright with the PM or Agreement totally legit with notary & witnesses to ever even try to get through Medicaid is my experience.
His fee-holder status is there, he’s going to have to be a part of whatever is done... whether it’s Medicaid application document info or selling house or any other legal.
Try to put the mendacity aside, & work with bro to come up with a plan.
For mortgage 1099-c there has been mortgage forgiveness acts done by congress in 2007 and then reintroduced and extended. The last one done in 2012. I don’t think a new bill has passed since. If so whatever the 1099-c reads will be taxable income.
Owing $ to IRS for those getting SS income can be problematic as IRS has “supercreditor” status & can attach SS income. For those on NH Medicaid, as they are required to do a copay or SOC, it’s even more of a problem as they must be able to do the copay to stay medicaid compliant. If SS attached by IRS they become ineligible for Medicaid. Plus for more fun, if your state does an IRS match up for any “at need”program, the $ on the 1099-C is viewed as income & more than likely takes them over the “at need” financial limit.
To deal with it, you have to file 1040 and IRS 982 reduction form. It is not simple. It’s CPA or experienced tax pro work. If it’s dealing with mortgage, all those receipts for repairs will come in handy to do write downs in the 982.
So if the OP’s brother has been the record keeper on house. She’s going to need him to provide documents for the 982. Yet another reason to put the mendacity aside & work together.
Thanks to VegasLady on her prior posts regarding “supercreditor” info!