<p>I am trying to figure this out and am very confused. </p>
<p>long story longer.....</p>
<p>I am doing my fafsa for this year and have a problem with the mortgage issue.</p>
<p>My father had a sudden stroke about 3 years ago that eventually led to his being placed in a nursing home. With the help of an estate planner and my sister giving up any rights to anything I was able to save the family home, a small farm. </p>
<p>To do this however, I had to get a mortgage from my father for the remainder interest in the property. Basicially I am buying the right to have the property given to me at his death and have him retain life use all done within the three year medicaid window. </p>
<p>So the property is his until he dies but I am paying for the right to be given the property at that time. I moved from my home to his to care for him for a few months before his going to the Nursing home. I added an attached garage after the life estate so it had to be at my expense but it was for him so I could drive inside in the winter with a car and get him in the house. I are paying a mortgage on the garage addition too. </p>
<p>So I have my home which I am currently not living in, a mortgage on that home, a mortgage to my father and a mortgage for the garage on his house. </p>
<p>My question to any wise member is how is this documented in the fafsa? Remember that his home is technically his until the moment he dies. If his property is sold before he dies all funds go to Medicaid. Essentially I am paying a mortgage on a garage for my fathers house. I'm not talking huge numbers here all tolled the three mortgages I am paying total less than $800 a month. I just would like to be able to call all of them my 'mortgage'. </p>
<p>You would probably be better off posting this in the FA forum where you placed your other post. Some of the posters there are college FA officers.</p>
<p>Unfortunately in the FAFSA all they care about is how much you have in the bank, in stocks, mutual funds, etc. and how much you make. There is no accounting for what you are paying on.</p>
<p>The good news is that the FAFSA is just a form and a bunch of numbers. Call the financial aid folks at the school(s) and explain your situation. The schools are the ones who make the actual financial aid decisions (as in how much $$$).</p>
<ol>
<li><p>Your primary residence is your dad’s house…it’s almost like you are renting it. Then you have a secondary property…your old house that MUST be listed as an asset on the FAFSA. That is my guess since you are now living in that house but it’s not in your name.</p></li>
<li><p>If your dad’s house was placed in ANY kind of “trust” with you as the beneficiary (you will need to check to see)…you are required to list your value of the trust as an asset on the FAFSA. That may apply to you. If that is the case, this “farm” value would need to be listed.</p></li>
</ol>
<p>But really since you are living on the “farm”, it would seem that it would be your primary residence.</p>
<p>Regardless…you have two different pieces of property…one is clearly NOT your primary residence and that would need to be listed as an asset on the FAFSA.</p>
<p>This would be a good query to post in the financial aid section of this forum.</p>
<p>This is a reply to a private message that suggested I talk to an attorney and that the property has value to me.</p>
<p>As I stated it is my belief that the property has no value to me until the life estate is expired. </p>
<p>Read my reply to him:</p>
<p>In making your comments and applying your disclaimer, what do you base your comments on? I live in NY state. I understand different states have different rules. My attorney explained that the property is not mine until my father dies. There is no value. In the case of a divorce for example, he said the property is my fathers and my wife would not have claim to it as I have not received it. Similar to being named in someones will, you don’t have something until that person passes and the will is executed. Now on his part, no, he cannot sell the property because he has already locked it up with the life estate deal. Actually the way it is done here is the property is deeded to me now, the deed has the restriction on it that he maintains life estate. When he passes I take his death certificate to the county records department and they will remove that life estate notation. I guess there is really no formal way to handle this and each cases has to be investigated separately. Perhaps the best solution is to sit down with the attorney that set all this up and ask him. This has been a trying three years. At the time my my father had his stroke we expected him to pass soon. His quality of life is very poor and at 79 years old is stuck in a chair and doesn’t know where he is or much else. (he sometimes confuses me for his brother) The sad part about being in a nursing home is that he has the best diet and medical care he has had in his whole life. Too bad he is not in a condition to take advantage of it.</p>
<p>I posted this question here hoping to find someone that had been in this situation. I can’t believe that it is that unusual:</p>
<ol>
<li>Parent give property to child retaining life estate.</li>
<li>Parent becomes ill and moves to a nursing home.</li>
<li>Child moves to parents home but maintains own home until parent passes.</li>
<li>Child takes mortgage on parents home to make improvements.</li>
<li>Child has own children attending college.</li>
</ol>
<p>Now, like I said originally, this may all be academic as we like many other working couples, have a very low (barely) 6 figure family income. We have only had this income level for a few years but at the same time this property thing came up with my father effective eating up the additional income. Even though we live biweekly pay to biweekly pay we are out of the income range that qualifies for any special fianacial aid.</p>
<p>I looked at the financial aid section but didn’t seem to see any place apropriate to post this issue. With the private message I received and the good nights sleep I can make my question more specific.</p>
<p>Can you suggest the correct section to post to?</p>
<p>spuddy,
may I advise that you take the advise of curmudgeon[ if that is who you are referring to] He is an attorney, and like many of us out there, has been through all the obtuse/ nonsensical rules with regard to how colleges look at property, when trying to obtain financial aid for our children. We both turned ourselves inside out in 2006 trying to get some college financial aid offices to “be reasonable”. It doesn’t really matter how YOU would interpret the rules- what matters is how the colleges interpret the rules and in some cases, how much they want your kid. They control the purse strings. Sucks, but there it is. To ignore his sage advice is to pull the wool over your own eyes. It won’t help you in the long run .</p>
<p>Spuddy, I replied to your questions on the financial aid forum.</p>
<p>One thing that you didn’t mention here on this thread…you said you bought out the “remaining interest” in the house to avoid having it taken by Medicaid for the father’s care. </p>
<p>You can’t have it both ways…you can’t decide you OWN it to avoid Medicaid taking it as an asset and at the same time say you do NOT own it for FAFSA purposes. </p>
<p>I’m not a lawyer but you bought the remaining interest in the house…that being the case…and since you clearly don’t want it to belong to GF for Medicaid purposes…it’s yours.</p>
<p>Thumper, I appreciate your input but you must understand what “remainder interest” is. You obviously do not as you are calling it “remaining interest”. The whole purpose of life estate and being a remainderman is to have it both ways. What this does is guarantee that a person will own their property while they are alive and have it go where they want at the moment they die. This can be a car, a house, or other property. This is often done with a donation to a charity too. By setting up this situation it locks that property to the designated party upon death, no matter what happens to the current owner. They may go bankrupt, be sued, owe unusual debts and when they pass that property can no longer be taken to settle their debts because instead of becoming a part of their estate that must be settled through probate (and execution of a will) the property goes to the remainderman at the instant of their death. </p>
<p>The part where I bought the remainder interest is due the the fact that in new your state, at the time I did it you had to have established a gift with life estate 3 years before applying for medicaid. The only way around the three year rule is for the property owner to sell the remainder interest before applying for medicaid for an amout determined by their age at that time. Also in my fathers case, we had hoped that he could come home but after 4 months of my caring for him at home his money was exhausted and so was I. We had hoped he would make more improvement so we might leave him home alone during the day but that did not happen. Every stroke is different. This is more personal information than is needed here but I think it explains the situation. Estate planning is something seniors often avoid like the plague. Most people think that if they have a will that is enough. Giving life estate after you turn 60 is a good idea. You can alway get it back if you decide to sell the house however you need to maintain a good relationship with your kids. It requires their approval, its not like changing your will. If you want to move to a new home and keep life estate there the clock starts all over again. So when you do give remainder interest and maintain life estate you really should be in the home in which you plan to be in until your death ( or the time you go to a nursing home). With nursing home expense running nearly $100,000.00 a year your savings can be eaten up quickly and giving remainder interest is the only sure way to guarantee an inheritance to your children. You must also understand that you can only do this if you own your home outright. If you have a mortgage, the whole bet is off (unless you can pay off the mortgage and get a new one in both parties names after the deal is done - but you need a cooperative banker here…)</p>
<p>So does anyone with experience with this situation have any input???</p>
<p>I am just wondering how this situation is viewed in financial aid offices.</p>
<p>tried to send a private messge to curmudgeon but his inbox is full so here it is for all to see:</p>
<p>I saw on a thread that you are an attorney. My understanding in being a remainderman is that it has no value now. It is not an interest in Real Estate as I will not own it until my father dies. Factually, the whole thing can be reversed at any time thru agreement between my father and I. Not going to happen but if it did I’d have nothing as the place would then be sold and the proceeds turned over to Social Services.</p>
<p>I think my best advice will come from my local attorney and the financial aid office at my daughters future college.</p>
<p>I don’t know about your state but here in New York, as it was explained to me, giving or selling the “remainder interest” and keeping Life estate is the only way to have things both ways. It can essentially lock one into his inheritance where with an ordinary will any set of circumstances that occur prior to ones death can negate a will. For example I can will my $10,000 savings account to my child but if I owe $20,000 in credit card bills at my death that $10,000 may be needed to settle my outstanding debts before I can give anything away. </p>
<p>I’d like to hear your side if I am wrong. Or if things are different in your state?</p>
<p>One more thing Thumper1. I understand everything you said in your last message above and do agree. However I do disagree with the “trust” statement. Because a trust is a trust. giving or selling remainder interest is not a trust. They are different. I am not a lawyer but I believe most trusts are pretty much fixed and do have value. Remainder interest with life estate is not the same. While they both are a future interest, I think they are treated way way differently. I am pretty sure that in relation to medicaid that a trust has to go back to the original owner where giving a remainder interest and keeping life estate does not. In a way the difference can be that with keeping life estate it would be like placing money in a trust but still having access to its use. You could still invest the money and reap the benefits of it. You could loan shark out your $100k savings making income of $50k a year on it but it would be locked in to your beneficiary at your death. I think generally once things are put into a trust, even property, the rules on what you can do with it are very strict. I don’t know, not a lawyer but do know that as much as these two things seem the same they are really different.</p>
<p>To obcess even more. In reply to Menloparkmom. I really don’t expect any financial aid. The limit may be access to loans. I’d like to think of us as bubble parents. In the fall of 2011 we will have two daughters in college but we still have family income over $100k that has grown from 75K in the last 4 or 5 years. Unfortunately we, like many others, have other expenses that have grown in that time.</p>
<p>But I am willing to accept that we just want access to loans. my daughter was lucky enough to be offered what amounts to a 40% scholarship. We expect a few thousand more from local scholarships and in the end the cost of a private college will be competative with the cost of public education.</p>
<p>I just want to get the fafsa and college financial aid form right to get on to the loans. </p>
<p>Access to loans is the key to my daughter going to college and we need the fafsa for that.</p>
<p>I have no knowledge on this subject so I cannot give an opinion one way or the other. You are right. You need to consult an attorney but my suggestion is that you consult an attorney who has experience in college planning and elder law. A local attorney may not be well versed in the nuances of such a law. Not an easy combination to find, in which case I would go to some one with estate planning and elder law experience who can tell you exactly where you stand.</p>
<p>Be aware that schools FA office may or may not know much about this subject and you may have to educate them and so meeting the lawyer would be the first step.</p>
<p>Yes D has merit aid. No, probably doesn’t really matter in long run but like I say, we may be bubble people as we will have two in college come this August.</p>
<p>This is my first post after several years of lurking on the various CC parent forums. Your original post made me go dig out my log in info so I could respond. I am an elder law attorney, and know alot about Medicaid eligibility and the interplay with tax law, parents in nursing homes, life estates and remainder interests, mortgages, etc. I unfortunately do not know as much about financial aid rules. Based on several things you wrote in your original question and your follow up responses to other posters, I am concerned that you may not fully understand the transaction you have entered into, and the consequences of that transaction both during your dad’s life and after. Buying a remainder interest is different than just being given one for free. I strongly encourage you to make an appt to meet with your dad’s attorney (or your own if you had one) to review what has been done to date (and to see whether there are other things that can be done now). If your dad’s attorney was not an elder law attorney, you should definitely find one and meet with him/her instead. If you want help finding someone near where you live, you can PM me. Good luck – with your dad, and with your FAFSA form.</p>
<p>FWIW, the Charles Schwab person we spoke with said that in the 10 years she’s been there, NONE of the people she had as clients were ever able to make themselves poor enough to qualify for Medicaid while they were alive, despite spending some significant $$$ & jumping through a lot of hoops. It IS important to work with a good professional so everyone understands what is being recommended, what is being done and WHY. </p>
<p>It seems it is becoming increasingly more complicated, as our federal & state governments are broke and will carefully scrutininze ALL transactions before allowing anyone to be eligible for Medicaid, especially if they ever held significant assets.</p>