A surprise probate

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Paul A. Brule

Legal Corner by Paul A. Brule

We were recently helping an individual plan for how to deal with potential future nursing home costs.  And as we often times say, don’t assume it is too late to save assets from the loss for payment of nursing home expenses.  In any event, in helping this client, we came across a surprise.  We found a need for a probate court case, in order to provide clear title to a child’s property.

Many of our readers might wonder how does such a situation arise.  Such an inquiry is not just idle curiosity, but is helpful in making sure that the client can prevent such a situation from arising with them.  Well, as Paul Harvey used to say, here is “the rest of the story”.

Mom and dad sold some real estate to their child.  Rather than the child getting a mortgage from the bank, all of them went to a lawyer, who prepared documents, so that the parents held the mortgage. Thereafter, the child made monthly payments to the parents and all went well.

Unfortunately, sometime later, one of the parents passed away.  Nonetheless, the child continued to make the monthly payments to the surviving parent, and once again, all went well.  Eventually, it was paid in full.

It was the survivor of the two parents who sought our assistance regarding her potential future nursing home expenses.  As part of the process of discussing her assets, our client informed us about the mortgage and that the mortgage had, by now, been fully paid.  Therefore, in order to clear the title to the child’s property, documentation known as a “mortgage discharge” or a “mortgage release” would need to be signed and recorded.  As a result of our inquiry, we learned that such final step was never taken.  And that’s when the problem surfaced.

Could the survivor of the two parents sign a mortgage discharge or a mortgage release on behalf of both?  If the mortgage was held as joint tenants or tenants by the entirety, the answer is yes.  But if neither of the above are true, then the answer is no.

To make a long story short, the answer was no.  Why it was no, or how it came about, is a whole different story, and something that we had nothing to do with.  But in the end, the answer was no.

So, what effect does that have for the child?  Does that mean that title to the child’s property will never be clear?

No, that is not the result.  But it does mean the need for a probate court case to appoint someone with authority, such as an executor or administrator, who can sign the mortgage discharge or the mortgage release on behalf of the deceased parent.  We were able to do that for her, and for the benefit of her child and his wife.  Thankfully, by catching it as early as we did, we avoided having to do the second probate that would have been necessary if our client had passed away before the issue had surfaced.

So what is the moral of the above story?  Probably two of them.  First, is that even things that seem simple can really be quite complicated.  Second, as we always say, be certain to work with trained and experienced professionals.

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