With the loans, nursing home, and Medicaid, how is the sale of the house handled?

You will hit the wall at closing unless you get an attorney NOW to arrange the short sale of the property.

Wow what a complicated situation.

So how much debt and how much could you realistically sell the house for?

Could between whatever funds your disabled sister gets and what you could afford to pay, would between the 2 of you have the $ to pay for everything on the house & enable your sister to continue to live there & could your sister be able to live alone & do OK ? I'm just trying to figure out IF you really need to sell the house OR if there exists the possibility to have mom continue to own the house for the rest of her lifetime and then deal with it probate. If you go this route, you need to have mom's will changed to it goes to your disabled sister (so there will be no Medicaid MERP to deal with as Sissy gets the disabled child exemption).

Has anyone brought up that Medicaid will expect to get proceeds from the sale of the home to cover the costs of care spent by the state to date? If the sale happens after death, this is done through MERP - Medicaid Estate Recovery Program and there should be pretty specific details on your state's website. But selling it when they are still alive has some of the same issues. Basically the state expects all proceeds from the sale to either pay for past costs or mom will (due to house sale $) will be disqualified for Medicaid and has to do a spend-down. Since Medicaid is a state run program under an overall federal guidelines, it will unique as to just how your state does this function.

Now prior debt - like a mortgage or a HELOC - will also be in the line to get proceeds of the sale. A mortgage holder is going to be paid off first.

The city loan, hmmm, that one is going to be odd. I bet it's unsecured debt; I'd carefully read the paperwork on the city loan to see what they expect, what was pledged to the loan and if there was any paperwork recorded on the property and if the city has placed a lien (perhaps a workman's lien) on the house for the city loan. The state's position may trump the city's position in all this.

Whatever the case, you need to let the Realtor know about the 3 liens against the property - HELOC, city & state/Medicaid. When the house gets sold, the buyer is going to more than likely going to need a mortgage to buy the house and that means they will need to get title insurance. The title company will find the liens and all this will come up and be an issue at the act of sale as you have to get releases from each to get a clear, clean title. Talk with your Realtor on all this BEFORE the listing agreement is done as you don't want any surprises the week that you go to the act of sale and find it can't be done the day set for closing.

So what is your financial situation like? If you have been paying for things for mom's house; and it will fall to you to do all the work to get the house ready, pay for any repairs, taxes, insurance,etc from now till the house sells, do you need to be reimbursed for your costs? I'm assuming that since mom is in a NH, she is doing a co-pay of her monthly income to the NH, so mom has not been paying anything on the house. So who has been paying for house items so far? If you or they want to get some of this back, to be reimbursed, it is going to be very sticky to do. It seems to be that if you sell the house while they are alive, the state is going to view what you do and what you've paid for as done out of a sense of family duty and done for free without consideration of compensation. If you take any proceeds out, it could be viewed as gifting and an issue for Medicaid compliance for mom. To get around this, you need to get some sort of agreement between you & mom as to all this if you want to be reimbursed for the costs to take the house to sell; keep detailed records & receipts of all expenses too.

If mom kept the house and you paid for things till she passed away, most states have in their administrative code, that maintenance, taxes, etc are deducted from the Medicaid tally. For selling a home, when they are alive, doesn't seem to have the same protection. Whichever the case, you have to keep records, receipts, etc. You can pay for others to do work but you really can't pay yourself for things.

Another thing, you may want to go to your county records on-line to see what has been recorded on the property. Most courthouses have this easily available as a pretty inexpensive download. Like a warranty deed for $ 7.00. You want to get everything that is on the property and review so there isn't any other surprises out there. Usually this is by the parcel number rather than the address. Mom's property tax bill will have the parcel number on it.

Good luck with the siblings. Be sure to let them know NOT to expect to get any $ from the house sale due to the rules of Medicaid.

Thank you for your thoughtful and informative answer, igloo572. I wish I did have the money to pay all the debts! We have been handling most of the repairs, and paying on bills. I have been very clear to sibs that we will not be getting anything from the sale of the house, and, I expect no reimbursement.