This column first appeared in the San Antonio Express News and other Hearst newspapers on July 29, 2019.
Dear Mr. Premack: I came across your article about MERP and it seems exactly related to my situation. The seller of a house wants to sell the house to me, but he's worried they are going to go after him later for the proceeds so he's not sure. The house is in the estate of his mother who is still alive in a care facility, and they signed it over to him with a ladybird quitclaim deed 5 years ago and he has power of attorney. He recently got a claim letter from MERP stating that they can't sell the house until she is deceased, etc. Is it going to be a problem or is he protected by the ladybird deed? - DW
You say the son has a “lady bird quitclaim deed” from five years ago. Legally, there are “Lady Bird Deeds” and there are “Quitclaim Deeds”, but there is no such thing as a “lady bird quitclaim deed”. A Lady Bird Deed reserves life estate to the grantor for life, assigning the remainder interest to a named beneficiary. A Quitclaim Deed makes no claim of ownership in the grantor, and appears to give those rights to a grantee, but is very weak and hardly ever used in Texas.
You also say, “they signed it over to him”. If “they” are his parents, then his father’s rights must be considered. If his father is alive, both his father and mother would own life estate if there is a valid Lady Bird Deed. Hence, both parents’ participation in any transaction is required. If father is deceased, there is no legal answer to the question “who inherited his share when he died?” without examination of the Deed, of his Will, and of any legal proceedings that may have happened upon his death.
You say mom is in a care facility and MERP is involved. This means she has been approved for Medicaid’s assistance to pay the nursing home bill. Medicaid would not have approved her unless 1) she did not own the house (that is, it was completely legally transferred to son more than five years before she applied for Medicaid), or 2) she, and her husband if he is alive, treat it as homestead. If husband is alive when she dies, there is no MERP claim against the house. If he is already deceased, and if his interest was legally transferred to his wife, and if his wife signed a proper Lady Bird Deed to son, and if the Lady Bird Deed was disclosed to Medicaid, then after she dies there is no legal MERP claim against the house.
Finally, you say that the house is “in the estate of his mother who is still alive”. Do you mean “his mother owns the house”? If that is true, then son has only a remainder interest under the Lady Bird Deed. He cannot sell the house to you because he does not own it. While she is alive, the Lady Bird Deed does NOT give him the right to sell the house. He has no control on his own account until after she dies. Don’t pay him a penny since you would not be getting good title to the house.
If, on the other hand, son recognizes that the Lady Bird Deed gives mom the right to sell, and he has decided as her Agent under her proper, legal Durable Power of Attorney he will sell the house as her Agent, then you can buy the house so long as your legal counsel gives you approval after review of all the documents, and you buy title insurance with clearance from your Title Company. The Lady Bird Deed, if that is what mom signed, allows her to sell the property during her lifetime, and the Durable Power of Attorney, if prepared properly with the correct authorization, allows son to represent mom in the sale.
While it is not your concern, when the house is sold the money belongs to mom, not son. Son’s decision to sell for mom may be good for you – you get the house – but son should seek advice from an experienced Elder Law Attorney to better understand the impact of his choices and his legal constraints. Having the money instead of having the house disqualifies mom from Medicaid. The money would be spent on her nursing home care until it is consumed. She would then need to try to re-qualify for Medicaid. Son would not get the money and would not get the house.
Paul Premack is a San Antonio Certified Elder Law Attorney, handling Elder Law, Estate Planning, Wills, Living Trusts, and Probate. View past legal columns or submit free questions on these legal issues via www.Premack.com.