Melissa Negrin-Weiner’s insights were recently featured in a Newsday article titled “Wills, Trusts, Sales: How Long Island Parents Pass Houses to Kids”. To read the full article click here.
“Parents often were in the home for a long time,” said Melissa Negrin-Wiener, senior partner at Cona Elder Law, in Melville, adding that, if there is still a mortgage, “sometimes it’s a small amount and they choose to pay it off before they make the transfer.”
When a property is transferred out of somebody’s name, the bank or mortgage holder can demand the mortgage be satisfied immediately.
“You can’t transfer the mortgage from one person to another,” Negrin-Wiener added. “It’s common practice for the mortgage holder to continue to pay the mortgage.”
Negrin-Wiener said the mortgage holder, typically the parent or parents, may continue to pay. But she noted the mortgage still can be called in if the property is transferred and does not want to imply that paying the mortgage will prevent that.
If the mortgage holder calls in the mortgage, that can mean greater expenses, especially with current interest rates. “They would not be able to preserve the lower rate,” she continued. If people continue payments, banks don’t necessarily call in mortgages, although there should be a record of the deed transfer, experts said. And in most cases, mortgages aren’t factors.
Negrin-Wiener said when houses remain in parents’ names while alive, there can be a potential issue for Medicaid and other liability. Medicaid could determine someone is ineligible for benefits for long-term care, for instance, if the house is in the applicant’s name, no spouse is living in it and the applicant’s equity exceeds the current $1.071 million limit in 2024.
Medicaid could still pay for long-term care even if someone owns a house (under that limit) and otherwise qualifies, but can seek to recoup money from the Medicaid recipient’s estate when they die.
This can lead to situations where children who inherit the house find themselves responsible for reimbursing expensive bills after a parent’s death through the house’s sale.
“What if you need to go to a nursing home? Your house is vulnerable,” she said of people who obtain Medicaid benefits. “People don’t have the protection, because they don’t realize Medicaid is going to come back later.”
Negrin-Wiener said trusts also can avoid probating wills. “People will put assets into a trust, so the family doesn’t have to go through the probate process,” she said.
The difference between sale price and full market value is treated as a gift. “Make sure it’s done for fair market value,” Negrin-Wiener added, regarding the impact on Medicaid.
“I usually recommend people have two trustees,” Negrin-Wiener said. “They worry about leaving somebody out or making somebody feel bad.”
Some pick trustees based on age, but competence and trustworthiness may be better reasons to select those charged with administering estates or trusts. “Let’s talk about what they will have to do,” Negrin-Wiener added. “Are they going to be on the same page as you?”
Ability to handle finances and real estate are crucial. “You want somebody savvy to some degree,” she said. “Or savvy enough to know they have to hire somebody to help like an accountant or a financial adviser.”
Trustees can be entitled to compensation, but most don’t take it for houses, she added. “When there’s just a house in the trust, there’s nothing for them to be paid from,” Negrin-Wiener said. “When there is a lot of money in a trust, the trustee could have to do a lot of work, as far as investing and keeping up with the financial side, filing tax returns. They’re entitled to compensation from the trust.”
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