DEAR BENNY: Seven years ago, when my mother was 80, my husband and I
purchased cooperative apartment shares in a senior complex for her to live in.
Since at least one of the tenants had to be over 55, we put her name on the
shares, as well as my name. The actual paperwork reads: ” ‘My Mother’s Name’ or
‘My Name’ as joint tenants with right of survivorship and not as tenants in
common.”

Any ideas? Are we safe in keeping this, selling it and keeping the
monies, or will Medicaid take it? –Penny

DEAR PENNY: This is a
complicated question and I am surprised that the senior law offices were unable
to assist. There are a number of “elder lawyers” throughout the country, and you
can locate them on the Web. I searched “elder lawyers” and found a number of Web
sites that should be of assistance to you.

Generally, however, Medicaid (which is administered by the state, with each state having its own rules) does
not “get possession” of property. But if your mother applies for Medicaid, I
assume she will need to disclose her interest in the co-op as an
asset.

It is possible that the state will take into account the fact that
she is not an “equitable” owner of the property (as she did not contribute to
the purchase price of the property) and simply disregard the asset. But even if
she is considered to be an owner for Medicaid purposes, the state may impose
only a lien on the property rather than require it be sold.

In fact, if the state considers the co-op interest an asset of your mother, it wouldn’t
require her to sell it, but could deny her benefits until her assets, including
her interest in the house, were spent down to whatever the threshold is in
Nevada.

Many states allow a number of exceptions. For example, if a
disabled family member (or a spouse, which I assume there is none) is living in
the property, the Medicaid applicant would qualify for benefits and a lien would
be imposed on the applicant’s share of the property in the amount of any
benefits paid — but the benefits would need to be reimbursed when the property
is sold or the disabled person or spouse dies.

This is a highly specialized area of law, and not all attorneys understand the rules or the law.

DEAR BENNY: I have a question about escrows for taxes and
insurance. Let’s say I am buying a home and last year’s tax bill was $1,200 (or
$100 per month). Can the lender set up escrow collecting $150 per month for
taxes? –Nate

DEAR NATE: My mathematical skills are limited, but the
answer to your question is no. According to the federal Real Estate Settlement
Procedures Act (commonly known as RESPA), a lender who collects money in escrow
for real estate taxes and insurance can have only a two months’ cushion on an
annual basis.

So, if the bank is collecting $150 per month, annually that
comes to $1,800. A two-month cushion allows you to collect only $1,400, or
$116.66 per month.

But depending on when settlement takes place, the
lender does have the right to collect sufficient funds (plus two months extra)
to make sure that it can pay the taxes and insurance when they become
due.

Let’s take this example: You settle (go to escrow) on May 15. The
tax bill in your jurisdiction must be paid by Sept. 30, 2010, but is applied
from January 2010 through December 2010. Because mortgage interest is calculated
in arrears, your first payment will due in July. (Note: The lender will charge
you interest at closing from May 15 to the end of that month.)

By the time the real estate tax bill has to be paid, you will have made three payments
in escrow (July, August and September). But the lender needs a full 12-month
payment. Accordingly, the lender has the right to charge you — at closing –
nine months’ escrow to collect all the money needed, plus two months’ cushion;
in other words, the lender can charge you at closing for 11 months’
escrow.

Here’s a consumer protection suggestion: Because too many lenders
often do not make the tax or insurance payments on a timely basis — or in some
cases do not make the payments at all — homeowners should send their lender a
demand letter, once a year right after the taxes or insurance payments are due,
requesting proof that those payments have, in fact, been made.

For those
jurisdictions where this information can be found online, you should learn how
to access this from your local government’s Web site.

Benny L. Kass is
a practicing attorney in Washington, D.C., and Maryland. No legal relationship
is created by this column.