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hjffkj
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If you were to move into your parents home as a permanent arrangement in order for all parties to safe money but keep specific needs in housing that they have, how would you want to handle the finances.  Keep these this in mind:

Parents have owned home for 11 years and have over 100k in equity in the house.  

Current mortgage is roughly $180,000

My family does not want to rent, we want to make this arrangement work in a way that we have a portion of the equity that related to the remaining balance of the house.  The idea is that we are here until my parents pass away and after that we'd make arrangements for my siblings to get their part of the inheritance that is related to the house.

We would take of the maintenance of the house.

We could buy the house from them and have them pay rent, which is what we'd do if we bought a new house that moved into with us, but the more houses I look at the more I feel like this house could work better with a few changes

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Will you share the mortgage payments and up keep 50/50?  I would look at it that they have about 33% equity and if you split the other part of the mortgage 50/50 then they own 67% and you own 33%   you could use numbers similar to that when the time came to sell or you buy out your siblings.

There might be other factors at play though if you provide more of the upkeep of the home, provide elder Care for your parents, etc.

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24 minutes ago, hjffkj said:

My family does not want to rent, we want to make this arrangement work in a way that we have a portion of the equity that related to the remaining balance of the house.  The idea is that we are here until my parents pass away and after that we'd make arrangements for my siblings to get their part of the inheritance that is related to the house.

 

I agree with getting a real estate attorney involved after seeing so many cousins fight over properties when my aunts died. It would likely be a tenancy in common house deed.

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15 minutes ago, Ottakee said:

Will you share the mortgage payments and up keep 50/50?  I would look at it that they have about 33% equity and if you split the other part of the mortgage 50/50 then they own 67% and you own 33%   you could use numbers similar to that when the time came to sell or you buy out your siblings.

There might be other factors at play though if you provide more of the upkeep of the home, provide elder Care for your parents, etc.

 

Everything house related would be split 50/50. Unless my parents would want us to take over upkeep.  We'd be willing to do that for a higher percentage of the equity.  If we buy our own house that they pay rent on we would handle upkeep entirely and just split mortgage and utilities 50/50.  

We will certainly have a real estate lawyer involved if this is the route we go.  Right now my parents are away and I just wanted to hear what other people would do in this situation to get a baseline of what to pitch to them when they get home.  I know they would both prefer staying at this house so they won't be hard to convince. Just making sure it is fair for my siblings is important.

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2 minutes ago, Arcadia said:

 

I agree with getting a real estate attorney involved after seeing so many cousins fight over properties when my aunts died. It would likely be a tenancy in common house deed.

 

I'll have to look into this because I hadn't heard this term before.  thank you

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It might be easier in the long run if they sold the house to you now and paid rent to live there instead of having your inheritance tied up also with your equity.  The rent payment can include their part of the maintenance like yard work, snow shoveling, etc.

Edited by school17777
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6 minutes ago, school17777 said:

It might be easier in the long run if they sold the house to you now and paid rent to live there instead of having your inheritance tied up also with your equity.  The rent payment can include their part of the maintenance like yard work, snow shoveling, etc.

I was thinking the same. Buy the house from them, split their current equity equally among all their children.

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The option that protects you the most is to buy the house and charge them rent.   They could then do whatever they want with the equity they presently have.  

I've seen situations where long-term family caregivers who move in get completely screwed afterward because their name isn't on the title.  

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6 minutes ago, maize said:

I was thinking the same. Buy the house from them, split their current equity equally among all their children.

 

I would not advise an aging couple to distribute the equity in their home to their children until they are sure their retirement is secure.  None of the children are owed an inheritance.  If there is one, great.  But the OPs parents would be prudent to ensure that their own needs and wants are met first.  

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6 minutes ago, LucyStoner said:

 

I would not advise an aging couple to distribute the equity in their home to their children until they are sure their retirement is secure.  None of the children are owed an inheritance.  If there is one, great.  But the OPs parents would be prudent to ensure that their own needs and wants are met first.  

Yes, you are probably right about this. 

I was just thinking of not having the house tied up in inheritance but the parents could keep the cash or invest it somehow.

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Having just dealt with an estate, I'm adding another vote for buy the house from them now and have them rent from you.  It will be the simplest in the long run should their health situation change and when they pass their estate is separate from yours.

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6 hours ago, LucyStoner said:

 

I would not advise an aging couple to distribute the equity in their home to their children until they are sure their retirement is secure.  None of the children are owed an inheritance.  If there is one, great.  But the OPs parents would be prudent to ensure that their own needs and wants are met first.  

Absolutely.  But, if their retirement is set and they want the proceeds handed down, they could avoid estate taxes by cashing out and distributing while they're able.

:::things people upside down inexplicably think about::: lol

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My caution about selling the house is that in the future if they need medicaid services they are allowed to own a house, but if they sell, then their equity in the house is counted as a resource for them.

Could it be legally deeded/titled as them owning 1)3 interest and you owning 2)3 interest in the home ?

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8 hours ago, maize said:

I was thinking the same. Buy the house from them, split their current equity equally among all their children.

 

Oh they wouldn't split the equity if we buy the house. They would keep it for themselves and invest it.  They are pretty set retirement wise but with health issues always being an unknown they wouldn't disburse any inheritance early.

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1 hour ago, Ottakee said:

My caution about selling the house is that in the future if they need medicaid services they are allowed to own a house, but if they sell, then their equity in the house is counted as a resource for them.

Could it be legally deeded/titled as them owning 1)3 interest and you owning 2)3 interest in the home ?

 

This is something I have considered. They actually own two homes, would a second home count as a resource for them?  Because if so, the current equity they would get from this house is roughly equivalent to the value of the other house. So if a second house is counted against you in regards to Medicaid having that equity sooner isn't really an issue.

49 minutes ago, kiwik said:

Could you redo the mortgage so you are joint holders of the $180,000 mortgage. Get a legal agreement that when sold $100,000 goes to your parents and the rest is split.  Make sure it is watertight.

 

I'm not sure, we will certainly make sure it is a solid legal agreement once we decide how to proceed.

 

Thanks all for the suggestions.  Buying the house now is likely the best idea for all involved.

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6 minutes ago, hjffkj said:

 

... with health issues always being an unknown they wouldn't disburse any inheritance early.

 

Smart move health and independence wise.  Estate tax (death tax) is now at $5.6 million per individual, so not relevant to most people.  Shedding assets to get medicaid to pay for nursing home is the other possibility (five year lookback?) Yes, other assets count toward medicaid, only the house is excluded AFAIK.

 

The parents want to stay in there own home because they've always been in control and would love to have their child and grandchildren back in THEIR home. They might not be so keen on giving up that control, NOBODY is.  Maybe they'd agree that selling their house and continuing to live in it is a good idea, but it would be a tough sell in most cases. 

 

The parents paying half of the mortgage might be a bad idea, that could lead to a claim on the equity down the road. 

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6 minutes ago, barnwife said:

The parents want to stay in there own home because they've always been in control and would love to have their child and grandchildren back in THEIR home. They might not be so keen on giving up that control, NOBODY is.  Maybe they'd agree that selling their house and continuing to live in it is a good idea, but it would be a tough sell in most cases. 

 

The parents paying half of the mortgage might be a bad idea, that could lead to a claim on the equity down the road. 

 

My parents will go where ever we go and only prefer to stay in this current home because of the hassle of moving.  They have no real emotional attachment to the house. We have lived here with them since April and it is very much our house as well.  The only thing my dad will not allow us to handle in this current house is financially fixing the issues it has.  That is because he doesn't feel like that is fair since they are issues that arose prior to us moving in. 

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7 minutes ago, Carol in Cal. said:

Don't just talk to a real estate lawyer.  Talk with an estate lawyer that is experienced with Medicaid issues. 

Also, think about how you all would manage the situation if they ran out of money down the road.  

 

Great advice, thank you.  Running out of money down the road is unlikely to be an issue, given their current financial set up, but anything is possible. It is a good thing to consider.

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11 minutes ago, hjffkj said:

 

Great advice, thank you.  Running out of money down the road is unlikely to be an issue, given their current financial set up, but anything is possible. It is a good thing to consider.

It is startling how much nursing home or at home care can cost.  I hope that they have factored that into their calculations.

Also, the Medicaid issue is complicated, and it's really important to get that straight.  A lien might be put on the primary residence by Medicaid, payable when the second spouse dies.  I know a family that something similar happened to.  One adult kid built on the parents' property years before they needed care, and got some kind of title protection for their part of the equity--however, the property was on undivided land.  The rest of the property ended up with a big Medicaid lien on it.  After the second parent died, the lien forced the sale of the *entire* property, necessitating the adult kid and family to move.  The lien was so big that after the sale, the other adult kids got *nothing* even though they had shared responsibility for care.  They thought that it was unfair that the first adult kid had gotten all of the remaining money, and had not expected to end up with nothing.  The first adult kid had trouble getting a new place, and it turned out to be a very expensive and unstable move for a number of reasons.  The family has never been as close again.  It is EXTREMELY important that EVERYONE understands the long term implications of whatever move you make right now.

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10 hours ago, maize said:

I was thinking the same. Buy the house from them, split their current equity equally among all their children.

 

Maybe someone has said this, but they have no obligation to split their current equity among siblings after selling their house to you.  This is their money and should go into savings.  They may need it in the future.  

Edited by Attolia
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4 hours ago, Carrie12345 said:

Absolutely.  But, if their retirement is set and they want the proceeds handed down, they could avoid estate taxes by cashing out and distributing while they're able.

:::things people upside down inexplicably think about::: lol

Only a very small number of estates are subject to estate tax.  Right now, federally it's $5.6 million for each deceased person before estate taxes kick in.  

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2 hours ago, barnwife said:

Smart move health and independence wise.  Estate tax (death tax) is now at $5.6 million per individual, so not relevant to most people.  Shedding assets to get medicaid to pay for nursing home is the other possibility (five year lookback?) Yes, other assets count toward medicaid, only the house is excluded AFAIK.

The parents want to stay in there own home because they've always been in control and would love to have their child and grandchildren back in THEIR home. They might not be so keen on giving up that control, NOBODY is.  Maybe they'd agree that selling their house and continuing to live in it is a good idea, but it would be a tough sell in most cases. 

The parents paying half of the mortgage might be a bad idea, that could lead to a claim on the equity down the road. 

6

 

I agree with this.  Set the rent to be at or below market for renting rooms.  You can split other costs as you all agree.  

Edited by LucyStoner
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2 hours ago, hjffkj said:

 

This is something I have considered. They actually own two homes, would a second home count as a resource for them?  Because if so, the current equity they would get from this house is roughly equivalent to the value of the other house. So if a second house is counted against you in regards to Medicaid having that equity sooner isn't really an issue.

 

 

Yes, the value of any home they own but do not reside in would be considered an asset for Medicaid.  Also, the home they own and live in is only excluded if the person in need of care is expected to be able to return to living there or their spouse is living in the home.  If a single widow or widower someone needs fulltime care out of the home and is not expected to return there to live, the value of their home is considered an available resource that needs to be used towards the cost of their care.  

Edited by LucyStoner
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Buy the house, so it's in your name.  Do it now, to take advantage of tax savings and fairly low mortgage rates.  That will protect you from the rest of the family who may not hesitate to behave badly.  (Personal experience -- you'll think family member are fair and honorable and wouldn't ever do that, but you'd be surprised how people can justify getting what they want and not see it your way.) 

 

Edited by Halftime Hope
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37 minutes ago, Halftime Hope said:

Buy the house, so it's in your name.  Do it now, to take advantage of tax savings and fairly low mortgage rates.  That will protect you from the rest of the family who may not hesitate to behave badly.  (Personal experience -- you'll think family member are fair and honorable and wouldn't ever do that, but you'd be surprised how people can justify getting what they want and not see it your way.) 

 

O. M. G. .....death brings out the worse in people.  the absolute worst. . . . my brother . . . smh . . . . .

and I was watching a judge judy ep last night,  you wanna know who someone really is - see how they react when they have an "inheritance".

make sure your parents have a will - that ALL the "i's" are dotted and "t's" crossed.  make sure it is airtight.  

I know my brother - he would have sued us (dh was executor) after my mother's death if he could have gotten a lawyer to take the case. (we gave him a copy of the trust - no lawyer in their right mind would take that case unless he paid upfront.)   there are three siblings. . .  a 1/3 share of the estate wasn't enough for him.   legally executors are allowed to be paid a fee for their time - we were afraid to take that fee for fear of what other trouble he would cause that we'd have to deal with (it had been neglected to be stipulated in the trust/will).  . . . oh, and he deleted files related to the estate from dh's computer. . .  dh has an audit background. . . his back ups have back ups, so we didn't actually lose anything. my brother didn't know that. -this is just scratching the surface of the crap he pulled.

Edited by gardenmom5
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1 hour ago, LucyStoner said:

Only a very small number of estates are subject to estate tax.  Right now, federally it's $5.6 million for each deceased person before estate taxes kick in.  

Last year, when the exemption was $5.6 million, it was estimated that fewer than 00.3% of estates were subject to federal tax. And the exemption nearly doubled this year — for 2018 it's actually $11,180,000 per person or $22,360,000 per couple. A few states do have estate taxes (or inheritance taxes, or both) with lower limits, though.

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1 hour ago, gardenmom5 said:

O. M. G. .....death brings out the worse in people.  the absolute worst. . . . my brother . . . smh . . . . .

and I was watching a judge judy ep last night,  you wanna know who someone really is - see how they react when they have an "inheritance".

make sure your parents have a will - that ALL the "i's" are dotted and "t's" crossed.  make sure it is airtight.  

I know my brother - he would have sued us (dh was executor) after my mother's death if he could have gotten a lawyer to take the case. (we gave him a copy of the trust - no lawyer in their right mind would take that case unless he paid upfront.)   there are three siblings. . .  a 1/3 share of the estate wasn't enough for him.   legally executors are allowed to be paid a fee for their time - we were afraid to take that fee for fear of what other trouble he would cause that we'd have to deal with (it had been neglected to be stipulated in the trust/will).  . . . oh, and he deleted files related to the estate from dh's computer. . .  dh has an audit background. . . his back ups have back ups, so we didn't actually lose anything. my brother didn't know that. -this is just scratching the surface of the crap he pulled.

I'm so sorry, gardenmom5.  I hate that it happened to you, as well. 

Our experience with dh's family led me to tell my brother at one point several years later as he was beginning elder care for my parents, "I don't care if you get *everything* that mom and dad have left, my inheritance will be a good relationship with you and my treasure of a SIL."  

 

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7 hours ago, Carol in Cal. said:

It is startling how much nursing home or at home care can cost.  I hope that they have factored that into their calculations.

Also, the Medicaid issue is complicated, and it's really important to get that straight.  A lien might be put on the primary residence by Medicaid, payable when the second spouse dies.  I know a family that something similar happened to.  One adult kid built on the parents' property years before they needed care, and got some kind of title protection for their part of the equity--however, the property was on undivided land.  The rest of the property ended up with a big Medicaid lien on it.  After the second parent died, the lien forced the sale of the *entire* property, necessitating the adult kid and family to move.  The lien was so big that after the sale, the other adult kids got *nothing* even though they had shared responsibility for care.  They thought that it was unfair that the first adult kid had gotten all of the remaining money, and had not expected to end up with nothing.  The first adult kid had trouble getting a new place, and it turned out to be a very expensive and unstable move for a number of reasons.  The family has never been as close again.  It is EXTREMELY important that EVERYONE understands the long term implications of whatever move you make right now.

 

that sounds like a nightmare

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5 hours ago, gardenmom5 said:

O. M. G. .....death brings out the worse in people.  the absolute worst. . . . my brother . . . smh . . . . .

and I was watching a judge judy ep last night,  you wanna know who someone really is - see how they react when they have an "inheritance".

make sure your parents have a will - that ALL the "i's" are dotted and "t's" crossed.  make sure it is airtight.  

I know my brother - he would have sued us (dh was executor) after my mother's death if he could have gotten a lawyer to take the case. (we gave him a copy of the trust - no lawyer in their right mind would take that case unless he paid upfront.)   there are three siblings. . .  a 1/3 share of the estate wasn't enough for him.   legally executors are allowed to be paid a fee for their time - we were afraid to take that fee for fear of what other trouble he would cause that we'd have to deal with (it had been neglected to be stipulated in the trust/will).  . . . oh, and he deleted files related to the estate from dh's computer. . .  dh has an audit background. . . his back ups have back ups, so we didn't actually lose anything. my brother didn't know that. -this is just scratching the surface of the crap he pulled.

 

That sounds crazy, sorry to hear you had to go through that.  We have all been very honest and open with my siblings about our plans and everyone is on board with the idea.  We plan on making sure everything is spelled out clearly and my parents' wills are very clear.  Thankfully, I'm pretty positive my siblings won't cause a problem, they are all pretty happy that we are doing this with my parents. 

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My first thought is to buy the house off of the parents and discount the payments against their "rent" equivalent.

That way your siblings would have no right to try to claim rights to the house later on.  (However, if your parents both pass before you finish paying off the house, your siblings might have a claim to the remaining mortgage payments, depending on how your parents do their will.)

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2 hours ago, SKL said:

My first thought is to buy the house off of the parents and discount the payments against their "rent" equivalent.

That way your siblings would have no right to try to claim rights to the house later on.  (However, if your parents both pass before you finish paying off the house, your siblings might have a claim to the remaining mortgage payments, depending on how your parents do their will.)

No, they should absolutely not buy the house and have the parents hold the mortgage.  The parents should sell the house to OP, OP brings her own mortgage lender, and parents get their equity in the house returned to them when their mortgage is settled at closing. There is no need to involve a realtor and pay them a percentage. this can be handled with a good real estate lawyer. Ours in 2012 was $500.

Heck no, if parents hold the mortgage, then the heirs do have the ability to ask for their share of the inheritance within a reasonable time frame, which could make the OP lose the house if the OP can't come up with the cash to pay the siblings their share of the estate.

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22 hours ago, LucyStoner said:

The option that protects you the most is to buy the house and charge them rent.   They could then do whatever they want with the equity they presently have.  

I've seen situations where long-term family caregivers who move in get completely screwed afterward because their name isn't on the title.  

I’ve seen situations where live in relatives have an elderly relative sign their house over to them without them fully understanding what is going on. It’s actually financial fraud and is considered to be elder abuse. 

There are too many ways this can go badly. I agree with the other posters that the cleanest way is for you to buy the house outright and then rent part of it back to them. That way, they have the cash on hand when needed and whatever their will says is what happens to remaining cash. 

However, if your parents are already in poor health, then you need to be aware of the look back period for your state Medicaid. If you can find a real estate attorney that is also an estate planning attorney, that would be ideal. There are many implications of property changing hands with elderly people. 

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Since preparing for nursing home expenses has been discussed in this thread, I'll mention that the full-pay price of my mother's full time care in a nursing home is over $100,000 per year. She has been there for eight years now.

So, yes, it's shockingly expensive.

She was full pay for almost a year until her assets were depleted and she qualified for Medicaid. We're thankful that there is help paying that bill, but the spend-down period was a brutal experience for my dad and left him without a financial cushion of his own.

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I think the best thing you can do is buy the house from your inlaws for a fair price, fair market price. Get an estimate from Open Door or somethijng, see a realtor, something. Do not just use the tax value. Then buy from them for the full price. Keep all documentation, all of it. And then have your inlaws pay a fair rent, again, keeping track of everything. When they die or get close to dying, the relatives are going to be looking and asking and complaining. And you want all your ducks in a row to show all was fair. And since you did fully purchase the house, no one can take it out from under you and kick your family to the street. Remember, if the house is in their name when they die and they leave it to all the siblings, then you will have to convince the others to sell to you. When your parents die, you don't want that drama. I am watching my family hate on each other and am shocked at the direction some of the alliances have gone and such.

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I definitely think you should own the house, but...In our situation, we bought a house and my parents paid rent. (It wasn't theirs originally, it was new to all of us.) Our big mistake was that it was a bigger house than we needed and it's a financial strain to manage it without them. If they had both passed, inheritance would have paid it off.  In our case, my mom passed and I cared for my dad for nearly four years (and couldn't work), but it became more than I could handle, so he is in a home. All of his monthly income (and part of his savings) goes to the facility each month, so we are on our own. We need to sell, but it is a really bad time for us and it has become "home" to us.  Our HOA doesn't allow renters, and I'm in no mental state to share the house with anyone else anyway. It's awful all the way around.  

All that to say, make sure you can comfortably afford the house without their portion of the rent.

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On 11/10/2018 at 10:28 PM, TechWife said:

I’ve seen situations where live in relatives have an elderly relative sign their house over to them without them fully understanding what is going on. It’s actually financial fraud and is considered to be elder abuse. 

There are too many ways this can go badly. I agree with the other posters that the cleanest way is for you to buy the house outright and then rent part of it back to them. That way, they have the cash on hand when needed and whatever their will says is what happens to remaining cash. 

However, if your parents are already in poor health, then you need to be aware of the look back period for your state Medicaid. If you can find a real estate attorney that is also an estate planning attorney, that would be ideal. There are many implications of property changing hands with elderly people. 

 

Thankfully, they are not already in poor health.  

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On 11/11/2018 at 12:29 AM, Patty Joanna said:

 

Ive seen open and honest and everyone agrees go completely berserk because life situations change.  Get an attorney experienced in these matters and get it all on paper and if possible get a signature from siblings that they agree.  It’s just better to be safe.  

 

 

Oh we fully intend on making everything spelled out clearly and legal.  I know how money can affect people.  

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On 11/11/2018 at 8:18 AM, Joules said:

I definitely think you should own the house, but...In our situation, we bought a house and my parents paid rent. (It wasn't theirs originally, it was new to all of us.) Our big mistake was that it was a bigger house than we needed and it's a financial strain to manage it without them. If they had both passed, inheritance would have paid it off.  In our case, my mom passed and I cared for my dad for nearly four years (and couldn't work), but it became more than I could handle, so he is in a home. All of his monthly income (and part of his savings) goes to the facility each month, so we are on our own. We need to sell, but it is a really bad time for us and it has become "home" to us.  Our HOA doesn't allow renters, and I'm in no mental state to share the house with anyone else anyway. It's awful all the way around.  

All that to say, make sure you can comfortably afford the house without their portion of the rent.

 

I am sorry that you are dealing with this, I can imagine that being a very difficult situation. My dad's biggest question through all of this is, can we afford the house comfortably without them.  It is something I wouldn't have considered a priority as long as the payments weren't terribly huge but the more I research the more I realize that is the most important thing.

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If they want to try to preserve an inheritance for their children, they can place funds in an irrevocable trust. If this is done before a look back period starts, then the funds are protected and they won't be required to use them for nursing home care. Upon their death, the children inherit the money in the trust fund. The downside is that the trust cannot benefit them in any way, so the funds would also not be available to them for anything. It is purely a wealth preservation tool, IIRC.

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On 11/9/2018 at 8:55 PM, hjffkj said:

If you were to move into your parents home as a permanent arrangement in order for all parties to safe money but keep specific needs in housing that they have, how would you want to handle the finances.  Keep these this in mind:

Parents have owned home for 11 years and have over 100k in equity in the house.  

Current mortgage is roughly $180,000

My family does not want to rent, we want to make this arrangement work in a way that we have a portion of the equity that related to the remaining balance of the house.  The idea is that we are here until my parents pass away and after that we'd make arrangements for my siblings to get their part of the inheritance that is related to the house.

We would take of the maintenance of the house.

We could buy the house from them and have them pay rent, which is what we'd do if we bought a new house that moved into with us, but the more houses I look at the more I feel like this house could work better with a few changes



So, this is not an exact scenario, but something to consider.

My father took over the family farm and had ten siblings.  In order to prevent even a whiff of problems, the property (house and acres) were sold to my father at market value - all wrote up with two appraisals and terms by a lawyer with each side having a lawyer.  If the grandparents died, then Dad would need a banknote for the remainder, with the amount he had already paid as equity.  He had the farm paid off before my grandparents died but there was never a hint at inequality.

Honestly?  This is how I would do it.  I'd have a couple real estate agents draw up a market value, decide at a price.  Draw up the terms.  Anything you pay towards it from now until your parents are deceased is your equity in it based on the value of 2018 as the offered purchase price from the family.  Sign everything, dot all is, and cross all ts.

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