Death in Family... How to protect my mother's assets?

[aaskybabe]

I was all set to file BK for my mother... after my father passed away(just happened in October2011). (She lives in Florida.)

This is the situation...
1. my mother had a loss of retirement income (loss of 45% due to father's death)

2. mortgage on the house is $192,000, fair market value of home is $119,000 (or just slightly less).

3. I find out now my father had about $78,000 in a savings account, which is now my mothers (joint ownership, right of survivorship)

I already knew my mother would not be able to afford the mortgage payment ($1550) with her "new" retirement income. (it's more than 35% of her monthly income) I had figured we would file BK after my father's death to get her out from under the mortgage.

But with the savings account, she can afford the mortgage payment for 4 years before she is out of money...

So... is there any way to file BK and keep the money in the savings account ?

I am under the assumption that if we go to foreclosure on the house the mortgage lender will sue for the difference becasue of the money in savings...

Any suggestions would be appreciated. Thanks.

[kornellred]

Just stop paying the mortgage and let it go into foreclosure. Forget about bankruptcy. Find your mother another place to live.

There is no way you can keep $78,000 and declare bankruptcy. Your mother can give the money to you, and you can distribute it to her on an as-needed basis. This way she gets to keep it, it will be beyond the reach of any lawsuit filed in response to foreclosure, and transfer of assets is only impermissible in a bankruptcy context.

[LadyInTheRed]

Mom may not like the idea of giving up control of her finances. Also, to keep the money from the hands of a judgement creditor, I'm pretty sure mom would have to give an unconditional gift or perjur herself in a debtor's exam by not disclosing the money being held for her.

She could lower the mortgage payment by paying off $78,000 in principal. But, it would be a shame to throw all that money towards an underwater mortgage. So, I wouldn't recommend that. I'm not sure what real estate values are like in Florida. Can your mom buy a new home for $78,000? She could then walk away from her current home. If the bank sues for a deficiency, she can file BK and take advantage of Florida's unlimited homestead exemption.

Your mom should sit down with a BK attorney, or two, or three, and discuss her options.

[AngelinaCatHub]

She lives in Florida. This is good. If she give this money away to anyone, it could be classified as avoiding a future suit (hiding assets).

You do have a mess but, it takes six months in FL to become exempt in home exemptions. With 78K, she could buy a little lot and a small mobile home, file NOW (you have till March) as a homestead. Declare the other house as a rental, and try to rent it. I am thinking of every legal way for you. Let me continue. To give any money at this time a look back I believe would be any time six months before an impending situation, could be an attempt to hide assets. I'm not a lawyer so you may have to deal with one.

In what form are these assets? Just in savings? Does she have any other means of support as in SS or retirement? She could do well if she unloads that house or even perhaps sell/rent it. 'Hub

[SweetGeorgia]

I'm surprised the mortgage is such an immediate problem (lowered income), because 35% debt to income ratio is usually considered OK. But what do I know - there could be any number of circumstances involved. My own mom has expensive (and not covered) medicine that throws the whole budget off.

BUT even if your mom can afford the mortgage, I agree with you that the negative equity is worth addressing. I can't see the point in paying off an underwater house.

Florida is taking FOREVER to foreclose these days, isn't it? If she stopped paying, it might well be YEARS before she got foreclosed on. That's plenty of time to talk to an attorney. Not just a bankruptcy attorney, but a trusts and estates specialist. I don't live in Florida anymore, but I was always amazed at how the legal system there was set up to protect the interests, assets, and privacy needs of older people. I'm sure there's a way to protect her money.

And I'm sorry for your loss. Hers, too. You know how they say you shouldn't make any life decisions within six months of a big event (like loss of a spouse)? They're right. Maybe you should just gather information at the moment; thankfully your dad put away some money to give you both the time to make good decisions. Take care of each other! (hugs)

[AngelinaCatHub]

I'm surprised the mortgage is such an immediate problem (lowered income), because 35% debt to income ratio is usually considered OK. But what do I know - there could be any number of circumstances involved. My own mom has expensive (and not covered) medicine that throws the whole budget off.

BUT even if your mom can afford the mortgage, I agree with you that the negative equity is worth addressing. I can't see the point in paying off an underwater house.

Florida is taking FOREVER to foreclose these days, isn't it? If she stopped paying, it might well be YEARS before she got foreclosed on. That's plenty of time to talk to an attorney. Not just a bankruptcy attorney, but a trusts and estates specialist. I don't live in Florida anymore, but I was always amazed at how the legal system there was set up to protect the interests, assets, and privacy needs of older people. I'm sure there's a way to protect her money.

And I'm sorry for your loss. Hers, too. You know how they say you shouldn't make any life decisions within six months of a big event (like loss of a spouse)? They're right. Maybe you should just gather information at the moment; thankfully your dad put away some money to give you both the time to make good decisions. Take care of each other! (hugs)

Yes. A really nice post with much thought. I certainly agree. All have a Merry Christmas the best way you can. 'Hub and Mrs.

[JackBondLove]

Converting the home to a rental is the best bet. Buy a cheap home with the $78K, and then hire a realtor to rent it out. Then simply pay the existing mortgage with whatever is left from the rent after paying the agent, taxes, insurance, maintenance, etc., including saving up a contingency fund, so that there is no (or little) income generated. Wait for the bank to foreclose, and if a deficiency judgement happens, simply file for BK, completely shielding the equity in the new home.