Would this be a possible transaction?

Question

Hi BP,

Is it possible for the following to take place? Mary's attorney drafts a deed running to Mary's friend Mike and records it. Mike takes title to the property with no guarantee to clear title. However he did hire a title examiner and is aware there are liens on the property but plans to pay them off at a later date. In the abstract of title there were no mortgages found.

It was my understanding that title can transfer outside a closing table as long as the deed is a written instrument, has a legally competent grantor, the grantee is identifiable and alive, there is a recital of consideration, there is a granting and habendum clause, the deed has a legal description of the property, there is a valid grantor signature, it is notarized ( for recording purposes ), and there is delivery and acceptance.

If the deed was legally valid, could the transaction with Mary and Mike take place?

Russell Brazil · Answer

Its the government. They have her tax returns, they know what assets shes had in the last 5 years. There is no way to hide that.

Medicare/caid will simply take the asset back and the buyer will be left with nothing.

If medicaid feels there was an attempt on the buyer or seller to defraud medicaid, they may refer the case for prosecution.

Joe Villeneuve · Answer

Also, it is my understanding that if there is a lien on a property, which means the property is used as collateral on that lien, and a sale takes place of that property, which means the collateral is no longer in control of the person that put it up as collateral, doesn't the loan have to be paid off upon title transfer. Wouldn't this be like any other sale of a property with a lien on it?

Jeff Copeland · Answer

I'm not sure I understand your question, which basically amounts to "Can Mary sell her house to Mike?".

Of course she can.

Technically, Mary would not even need an attorney. You can download a quit claim deed online (I'm not saying it's advisable, but it can be done), and there's no reason an executed deed from Mary to Mike would be considered invalid.

Mike would then own the property, and be responsible for any liens associated with it. Mary generally would be off the hook, though she would still be responsible for any mortgages in her name (in fact, they would all likely become due on sale).

Joe Villeneuve · Answer

I would be surprised if they didn't. If the property is used as collateral, and if there is a lien on it I assume that is the source/reason for the lien, then why wouldn't their be a "due on sale"?

Russell Brazil · Answer

Now you are getting into a different arena that doesnt have to do with the sale of the property, but whether Mary has the right to actually sell the property.

Transfers of property/assets need to be transferred 5 years prior to entry of a care facility.

Rich Hupper · Answer

@Russell Brazil thanks for the great advice. This information is very useful.

Rich Hupper · Answer

@Russell Brazil when you say "take back" does that mean foreclose? I thought only property tax liens and mortgages liens could initiate a foreclosure?

Rich Hupper · Answer

@Joe Villeneuve that does make sense too but I do not know if medicaid liens have a due on sale clause like a mortgage.

@Russell Brazil Does the state typically audit a medicaid recipients personal residence at the registry of deeds to make sure title has not passed?

Russell Brazil · Answer

Correct. Medicaid and Medicare will drain the individuals assets for payment before they pay. Any asset not counted in their calculations needs to have been transferred out of their name 5 years prior to entering a care facility.

Would this be a possible transaction?

Would this be a possible transaction?

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