Skip to main content
Help Center Community Shop

A question on parental real estate

Warbirds
My inlaws are great people, just fantastic family.

My father in law is still working until he pays off his home. Time is catching them and they are talking about selling their home and buying something smaller so he could retire.

The outstanding balance is larger than I could write a check for, but I could payoff the home in 5-7 years pretty easily.

They have said if I do this, they would be willing for my wife and I to ultimately own the home.

Is there a legal route for me to start making mortgage+ principal payments on their home, while having my ?investment? protected and allow them to live there?

Im trying to understand the mechanics of how my money would be covered if something bad happened to one or both of them before it was paid off by me. For example- a major medical thing forced the sale of the home but I was already 60K and a few years into making the payment.
0

Comments

16 comments

Date Votes
  • Locust Fork
    I don't know anything about these things....but what we are dealing with as far as my own mother goes is nothing matters much that is over 5 years as far as her estate goes. My mother owns some property that will have to go up for sale (family can buy it, but they have to buy it for $1 over the assessed tax value.) So, if your in laws have to go into anything like a nursing home for extended care or such it will be a major issue if it changes hands less than 5 years after they try to get coverage for anything. I'd find out what the property tax says the value is and work on getting it into your name ASAP if that is a long term plan.
    0
  • duckhunter
    Sounds like they need a trust. Check with your lawyer.
    0
  • Alpine
    quote:Originally posted by duckhunter
    Sounds like they need a trust. Check with your lawyer.



    Bingo! We have the winner!
    0
  • roswellnative
    sounds like a call to a local Realtor or Real Estae Atty you trust... you need two things. First a written contract of what is paid , by who, when. Then you need an option agreement to purchase the home at a future date for a specified amount. This could be a yearly figure less any principle paid that year

    You can have two pieces of paper that both parties sign to have it very clear.

    The tricky part is title and estate taxes. The capital gain , the amount the seller makes from what they paid to what they sell is a homestead exempt and will not be a taxable event if the seller lives in the home 2of the last 5 years. This can be a considerable amount of avoidable taxes.

    The other thing is you could pay the mortgage and they ?gift? you a portion each year of the balance effectively avoiding taxes.

    Bottom line, spend a few hours in a lawyers office to discuss the logistics.

    It sounds like it could be a big win win if all things are in paper and the IRS is kept out of the mix

    Ros
    0
  • roswellnative
    Does your wife have any other siblings?
    0
  • scooterdriver
    Based on what you wrote, they should sell and get a cheaper place. The potential snags aren?t worth the small upside.
    0
  • remingtonoaks
    quote:Originally posted by duckhunter
    Sounds like they need a trust. Check with your lawyer.


    Yep, an irrevocable trust
    0
  • SW0320
    quote:Originally posted by remingtonoaks
    quote:Originally posted by duckhunter
    Sounds like they need a trust. Check with your lawyer.


    Yep, an irrevocable trust


    This is the real winner. They need an irrevocable trust in place for at least five years before they submit their application for Medicaid.

    I do not recommend at all a transfer of the deed to a child of the parent. If that is done the parent may lose real estate tax exemptions, homestead rights and worse if the child gets divorced that asset is part of the marital estate subject to distribution to an ex spouse.
    0
  • mjrfd99
    quote:Originally posted by Alpine
    quote:Originally posted by duckhunter
    Sounds like they need a trust. Check with your lawyer.



    Bingo! We have the winner!

    Yep. Best answer.
    0
  • Rocky Raab
    Form a trust, definitely. A good trust lawyer will include a will, living wills, power of attorney, and more as a package deal. We did exactly that years ago and the peace of mind is priceless.

    You can also make each of them a tax-free gift of no more than $10,000 a year, I believe. That could cover most or all of their mortgage payments and allow him to retire.
    0
  • SW0320
    quote:Originally posted by Rocky Raab
    Form a trust, definitely. A good trust lawyer will include a will, living wills, power of attorney, and more as a package deal. We did exactly that years ago and the peace of mind is priceless.

    You can also make each of them a tax-free gift of no more than $10,000 a year, I believe. That could cover most or all of their mortgage payments and allow him to retire.


    Tax free gifts are now $15,000 per year.
    0
  • beneteau
    You need to set up a Life Estate.

    A life estate is a form of joint ownership that allows one person to remain in a house until his or her death, when it passes to the other owner. Life estates can be used to avoid probate and to give a house to children without giving up the ability to live in it.
    0
  • shilowar
    quote:Originally posted by SW0320
    quote:Originally posted by Rocky Raab
    Form a trust, definitely. A good trust lawyer will include a will, living wills, power of attorney, and more as a package deal. We did exactly that years ago and the peace of mind is priceless.

    You can also make each of them a tax-free gift of no more than $10,000 a year, I believe. That could cover most or all of their mortgage payments and allow him to retire.


    Tax free gifts are now $15,000 per year.


    per person....
    0
  • BoltactionMan
    Not sure if your state has one, but beneteau has the right thought. A life estate transfers ownership but not possession. Therefore you would be the titled owner and they would stay in the house until they can't any longer.

    When that day arrives it is yours to do what you please

    KC
    0
  • Toolman286
    See if you can add you & your wife to them on the deed & re-record it as "joint tenants with right of survivor." Different states have different rules for this as it's within the family. That way, they stay there, you pay the mortgage & it passes, outside any will to you.
    0
  • posh
    Before you do anything, read the mortgage documents and/or talk to the mortgage holder to see whether any of the above actions might trigger a problem-such as the entire mortgage balance becoming immediately due and payable.
    0

Please sign in to leave a comment.

Recent Activity