How to handle double Probates?

Question

I’m working with a guy and his girlfriend.

The girlfriend’s brother passed away last week who inherited a house from the mother who passed away 3 months ago. So both of the previous owners died back to back in the last few months.

When the brother took over the house from the mother when she passed, she owed about $110,000 to Medicaid.
The brother was trying to work with the probate case for the mother and also to get the Medicaid situation resolved but he passed away before it got anywhere.

The house is still in the mother’s name at the moment and now the sister doesn’t seem to know whether or not the probate process has to start over again since the brother died and also doesn’t know what to do about the $110,000 and if she’s going to have to pay it.

I went to the 952 sq ft house and it’ll need at least $55k in repairs. I didn’t even want to put the house under contract since it doesn’t even seem clear that the sister even has the ability or right to sell it.
Any thoughts on how to handle this??

Lynnette E. · Answer

I am not an attorney, but do have some experience in handling estates of relatives who have passed.

The mother's estate owes Medicaid.  If the mother's estate has the funds from bank accounts, valuables, vehicles, etc. that can be used to pay all of her bills, including the Medicaid bill (if the heir desires to keep the house).  However, if the mother's estate does not have the ability to pay for the Medicaid bill, then Medicaid can request that the house be sold, and Medicaid will take the first $110,000, after the mortgage, if any, is paid. The remaining funds would go to the brother's estate.   To be clear, Medicaid has an attachment only to the house, selling vehicles, etc to get the money from other assets in the estate if the heir desires is ok with Medicaid instead of selling the house.  But they can only demand the house equity.)

It is possible for the brother's estate to say they will themselves pay off the Medicaid bill to keep the house in the family, and Medicaid will allow  that, but that needs to be told to the attorney handling the mother's and brother's probate.

If the house is not worth enough to pay Medicaid, and there are no other assets to pay Medicaid, then Medicaid will drop the bill.  It is not passed on to the family or others as their responsibility.  Sometimes Medicaid passed on getting the bill paid anyways if the amount that is recoverable from the estate is too little to bother with, or if the Medicaid bill is too low to bother with.  And is seems (maybe just seems to me, no data here) that some states are aggressive in this recovery and other areas are not.

The sister should not assume that she will be the next in line to inherit from the brother.  Does the brother have a will giving it to her?  If not, then his will directs where his assets go.  Also, if there is not a will, his spouse and children would inherit before her.  Willless, she would only inherit if he has no spouse and no children, and his father has also passed.  Otherwise those folks would get the assets/house if he has no will.

Anyway, if his sister inherits, she would not have to deal with Medicaid.  That process will be completed with the mother's probate case.  If won't be passed on to the brother's probate case or onto his heirs.

Davido Davido · Answer

@Cassandra Sifford,  Correction.  There is case law in Delaware, to the effect that a landlord is not entitled to claim adverse possession.  Sorry to say.

Davido Davido · Answer

@Charles Willie Harris, Often in situations similar to this, the surviving relative does nothing and ends up losing the home in property tax foreclosure. One alternative would be to enter into an agreement with the sister to make a long term rental out of the house.  You could handle all the details and just offer her a percentage of the gross rents (10% to 30%) or perhaps a somewhat larger percentage of the net rents (after expenses) for a specified period of time 3 to 5 years.

Renting out a home that has not been through probate can work when the surviving relative is unable to to handle the probate, the debt, or the taxes on a home. The goal being to generate some income from the house for both the surviving relative and for you as the investor.  Before renting the house for her, I'd want her to sign a quit claim deed granting me all of her interest, if any, in the home, or at least majority interest -otherwise about the time you get it set up and running, she is likely to want to cut you out of any income from the home.

It may be technically true that neither of you are lawful owner's of the home. However, no one is likely to complain and Medicare seldom forecloses for what they are owed. Unless there exists a relative with a superior interest to the surviving sister, there is little danger. Still I'd take care to be scrupulously truthful in your rental agreement about who the owner of record is. An example of a rental agreement that I use when renting abandoned homes in which I have no ownership, nor permission from the owner, can be found at;
https://www.biggerpockets.com/member-blogs/12388/86773-renting-real-estate-without-the-owners-consent-isn-t-that-fraud

Renting a non-probated home is a long term play, generally requiring over 5 years in Iowa to eventually acquire title by filing a Quiet Title action in court and then claiming the home as yours under the Iowa Adverse Possession statute. In some instances, a Quit Claim Deed from the surviving relative makes it possible to Quiet Title even sooner by claiming that the Quit Claim Deed gave you color of title. Iowa Code 560

If the home is in such disrepair that it is essentially unlivable, then just rent it as a lot with a currently unlivable home. See the link to the rental agreement I use above. You can generally offer a lot with power, water, and sewer for half the rent the home would bring. A surprising number of people will pay that just for a place to camp, or park their RV or Motorhome. I'd then make clear that XX% of the rent paid to can be used for materials needed to improve the home -if the renter provides the labor needed to do repairs. Advertise it as a handyman's special in a Craigslist, Facebook, or Offerup post. At half rent, you'll get more people interested than you can rent to. Choose wisely, most responder's make claims and promises that they don't keep.

The result of this plan is that, once the home is livable, it produces a monthly income for both you and the surviving relative while paying all its expenses, and maintenance, taxes. And this plan to rent the home costs you little to nothing out of pocket, but in 5 to 6 years, you can expect to own it free and clear. The Medicare Lien will be subject to your state's statute of limitations. Depending on how old it is now, it is likely to get wiped off the title when you do the the Quiet Title /Adverse Possession action.

Cassandra Sifford · Answer

@Davido Davido Thank you for checking into it! I found that info as well, but was hoping there's some other way around it.  I guess it it were, there would be less vacant properties smh

Davido Davido · Answer

@Cassandra Sifford,   If the vacant property you are considering has not gone through probate and remains unused, then I encourage you to look into it.  While Delaware does require 20 years of possession before granting an adverse possessor title, 20 years of low but steady monthly rental income is often worth the effort.

The rest of Delaware's Adverse Possession requirements are pretty much the same as other States.  You should be aware that the Delaware requirements that: 1) There must be actual possession: the trespasser must be physically present on the land, treating it as his or her own; 2) There must be open and notorious possession: the act of trespassing cannot be secret; and 3) There must be exclusive and continuous possession: the trespasser cannot share possession with others, and must be in possession of the land for an uninterrupted period of time; -those requirements are all met if you act as a landlord who rents the property to another person.

I understand, that such a statement appears to be at odds with the law because renting an abandoned property to another person is apparently contrary to the precepts that "the trespasser must be physically present on the land" and "the trespasser cannot share possession with others", however, in every state, a landlord who rents a property still qualifies as being the person who is in actual possession of the property, and as being in open and notorious possession of the property, and as being in exclusive and continuous possession of the property.  It is the landlord who the court's recognize as the person in possession, not the tenant.

If you seek advice on question's of Adverse Possession, it is important that you locate an Attorney who is familiar with that specific area of your State Law.   Adverse Possession is a rarely used area of the law that most attorney's, even Real Estate attorney's are unfamiliar with.  An example from my own experience of a Real Estate Attorney giving incorrect advice on the effect of owner abandonment (or death) and on adverse possession can be found here,

https://www.biggerpockets.com/member-blogs/12388/86731-abandoned-real-estate-legalities-there-are-two-sides-to-every-storyBest Wishes,

Cassandra Sifford · Answer

@Davido Davido  Your comment has piqued my interest in a local vacant property where the owner passed away about 2 years ago.  I've been trying to get in contact with the family, but no one is calling me back.  My last step is to stop by the property of his daughter to see what's up with the property.  I looked up the Adverse Possession Law in DE, but I don't feel that it will work in my favor as there are quite a few requirements that would not work in my favor. I'll reach out to my RE attorney and get her thoughts.  Thank you so much for the comment and for getting my hamster wheel churning down another avenue!

@Charles Willie Harris  Thank you for the post!

Joshua Parr · Answer

If you want to work with them to figure out this deal, I would suggest all of you go to an experienced probate attorney and explain everything. It may not be worth the hassle for any of you to worry about the house. She shouldn't have to pay Medicaid. However, Medicaid can file to take the home to pay off the bills. It's a complicated scenario and like I said, consult a good attorney. I don't know all the details (and I'm not an attorney) so I will leave it at that. Best of luck!

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