My wife, her grandmother and I moved in together about 13 years ago and bought the home. All three names are on the deed. She gave durable POA to her son. She now lives in an assisted living facility. We are refinancing our home for updates and repairs, but lender is not accepting durable POA for loan. Choices are higher rate or taking her off of the deed. What are the ramifications for her if she is taken off of the deed? She has about 3 years left of self pay care before applying to Medicaid.
1. How the deed titled? You, your wife and your GM, with joint tenancy or survivorship rights? What's the specific wording?
2. Does your GM have a trust or will, conveying her portion on death to her son or other heirs?
3. Given that GM has dementia, is she able to understand the transaction you propose? This is critical.
4. If she is "taken off the deed", I assume you're considering extinguishing her share entirely? Did she share in the purchase price? Will you be compensating her for that amount, prorated based on current value of the home?
5. If GM can't get Medicare for 3 years.. well, that confuses me if GM is 84, so I'm assuming you mean Medicaid?
6. I doubt any good lender would accept someone's POA, especially if it's not a durable one, as authority for execution of a loan modification or new loan.
7. This is definitely an issue for an attorney, so that it's clear GM's share was extinguished, AND compensated, and wasn't any kind of gift or donation, nor was she deprived of any contribution she made.
On another issue, I'm wondering if you could just get a HELOC for the upgrades to the home? The issue of your GM's rights would still apply, but you might not have to go through a whole refinancing. I don't know the going rates for either from good lenders, though, so this is just a random thought.
You really need to consult with an EC atty, to ensure all i's are dotted and all t's are crossed. Hopefully there is documentation for what her share was in the original purchase. Keep good records for all the transactions, past, present and future, and get good advice from an EC atty before moving forward.
NOTE: We were not on mom's deed, but the EC atty had set up mom's condo as a Life Estate. Personally I wouldn't recommend this unless the person has a limited time left AND can remain in the home as long as possible. It does cut down on cap gains, IF the person can stay until or near the end of life. In mom's case, she needed to move to MC, and it made the whole process more difficult. You are not in that situation, but I suspect once you iron out the issues for compensating grandma legally, and can move forward with the closing, there are MANY documents that will need to be signed. The EC atty can advise you as to which ones she may need to sign. In our case, the atty said I could sign ALL documents as POA EXCEPT the deed itself. Despite dementia, he said she must sign and it had to be notarized. Thankfully her facility had a notary. I inquired as to whether she needed to confirm mom knew what she was doing or just witness, and she said she just had to witness it. I had previously had to get mom to sign tax returns, etc and she trusted me, so I passed it off as some kind of insurance paperwork. I didn't want to mention the condo, as by this time she'd forgotten the condo and was focused on the home they owned 25+ years previously! Let that sleeping dog sleep!!! I don't know your grandmother's status with dementia, but if she needs to sign anything, hopefully you can get it done!
If grandma paid anything towards the house, she needs to be bought out. Meaning an appraisal and she gets 1/3rd of the equity and value of the house.
If you don't do it correctly, in 3 years you may be bringing her back into the home to care for her until the Medicaid penalty period is over. Because they will not look the other way if this transaction falls in their look back period.
Medicare will not pay for any long term facility care. She could be covered for short stays of rehabilitation, after hospitalization but, not her living arrangement.
The POA is a representative. His POA may not allow him to take out loans for grandmom. Especially since she is now in care. If she goes on Medicaid she will not have money to pay off the loan if you don't pay. Her SS cannot be garnished.
Why do you want to give lender POA instead of taking her down there? Take her to lender and let her sign documents - or - take the documents to her. Keep things the way they are because it doesn't look like you're going to have 5 more years to get out of the 'look back' period of time.
See comment by disgustedtoo - that is an alternative. Buy g'ma out of her part of the house. Then she legitimately stays longer at the current facility, Medicaid will see that she was paid for her part of house, used the funds for assisted living care, exhausted the money and can apply for NH Medicaid without penalty.