lurkyloo
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Post by lurkyloo on Jan 12, 2011 22:08:10 GMT -5
Background: My retired in-laws, who are awesome people, have about 28K left on their mortgage (house worth 160-ish). Last year, MIL had some prolonged health issues that built up quite a few medical bills, and it sounds like that interfered somewhat with their cash flow (which is primarily from pension/Social Security). A few months ago, MIL started talking about moving, to a place more suitable for retirement with lower property taxes.
DH and I think that would be a big mistake. Their current house is in a university town with vibrant life and energy and excellent hospitals close by. FIL has spent the 10 years since they bought the place developing his garden; he's got a tiny vineyard (maybe 400 sq ft) and a cherry tree and berry bushes, etc. that keep him happily busy. To be blunt, we think they'll last much longer if they stay put awhile yet. And to us, 28K is a significant but not life-altering amount of money; we can relatively easily afford to pay it off in cash. So our goals here are to improve their cash flow, increase their peace of mind (important, some of MIL's issues were anxiety-related), and keep them in what we see as a beneficial living situation. So here are the questions: what are the pitfalls? Would we owe gift tax (would come out of a checking account with just DH's name on it)? What's the best way to do this, mechanically speaking--wire transfer? What other financial or emotional issues should we consider before taking the plunge?
Thanks!
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Post by Deleted on Jan 12, 2011 22:10:25 GMT -5
I think the biggest pitfall is making sure your in-laws buy in to this.
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lurkyloo
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Post by lurkyloo on Jan 13, 2011 0:33:50 GMT -5
Ya, it's taking some time. DH thinks they're coming around, though; FIL wants to talk it over with his tax guy which is a step past "no, we can't let you do that".
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Post by Deleted on Jan 13, 2011 1:22:49 GMT -5
First, do you have enough of an EF to make the gift/loan without affecting your own financial status?
Second, you might double check over in the tax corner but it sounds like if DH "gifts" each of his parents $14k he is within the annual gift limits and won't even have to fill out the tax form. Or he can just fill out the tax form.
The other option is to become "the bank" by paying off the existing mortgage and having a "silent" first which requires no payments but accrues interest and is due upon their deaths or sale of the property. Does DH have any siblings? If so what is their relationship like?
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TD2K
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Post by TD2K on Jan 13, 2011 1:41:49 GMT -5
Gift tax isn't going to be an issue. You and your husband could each 'gift' $7k to each parent, there's the $28k. You don't have to file anything with the IRS.
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Post by Deleted on Jan 13, 2011 7:25:42 GMT -5
I'm curious as to whether your DH is an only child. What happens to the house when his parents die?
The other reason why your inlaws may want to downshize is maintenance. Something always has to be done when you own a house. She may be looking at the roof or furnance and recognizing that the house is going to be an ongoing drain on their finances. Yesterday we had to replace a hot water heater for $750. It really is always something.
I think this is a decision your inlaws should be allowed to make for themselves. It may not sell, anyway.
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Urban Chicago
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Post by Urban Chicago on Jan 13, 2011 9:28:14 GMT -5
I agree that you definitely need to figure this out with any siblings your DH has, as they also have an interest in the house. Plus you don't want to pay off the mortgage only to find out that they left the house to your irresponsible SIL or something.
I also like the idea of taking over payments if they have a fairly decent interest rate, so that you can keep some of your assets liquid.
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Wisconsin Beth
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Post by Wisconsin Beth on Jan 13, 2011 10:03:03 GMT -5
I'm curious as to whether your DH is an only child. What happens to the house when his parents die? The other reason why your inlaws may want to downshize is maintenance. Something always has to be done when you own a house. She may be looking at the roof or furnance and recognizing that the house is going to be an ongoing drain on their finances. Yesterday we had to replace a hot water heater for $750. It really is always something. I think this is a decision your inlaws should be allowed to make for themselves. It may not sell, anyway. I think Susana hit an important point. What ongoing maintenance is coming up? Roof ok? Siding/windows ok? What is the state of kitchen/bathrooms? And how easy will it be for them to continue to live in the house as they age? Is it a ranch? Are there lots of stairs? Where's the laundry room? Is the bathroom convenient for someone who doesn't move well?
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lurkyloo
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Post by lurkyloo on Jan 13, 2011 11:12:02 GMT -5
So, first off, we have way more in checking than we actually should I suppose I should post that over on YM sins...really, we'll still have x-months worth of expenses plus a lot more (and yes, we max 401k and so forth). If they decide to sell anyway, we'll be disappointed but accept it with good grace. DH has one sibling, she's also a wonderful person, and we figure once this is done it's done--it's theirs to do what they want to, including leaving it all to SIL, the dog, or the guy off the street. (FWIW, I don't think they will sell, but anything we can do to shrink MIL's stress load is a plus.) Also, we feel that the one-fell-swoop approach is the best way to have them maintain independence and dignity. I appreciate the maintenance issues, but FIL is truly the sort of person that isn't happy unless he's busy, and he's all about household maintenance chores--he gets a lot of satisfaction from his little projects. Obviously at some point he'll be past that, but we'll deal with that when it comes. FIL just remodeled the one bath a year or two ago, which involved lifting out a cast-iron tub. There are stairs, and they will have to move eventually, but they're 71 and 65 right now and have no trouble at all. Gotta head to work, but will be reading! I'll post more this evening.
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Wisconsin Beth
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Post by Wisconsin Beth on Jan 13, 2011 11:44:55 GMT -5
It's good that FIL is the busy type.
My family used to keep my dad busy by having him haul the grandkids around, esp. during summer. I think my sisters and sil may have co-ordinated all the activities because I don't remember much overlapping between swimming lessons, camp, etc...
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thyme4change
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Post by thyme4change on Jan 13, 2011 11:52:41 GMT -5
I guess I'm not understanding.
What is upside to them staying in their current house? It sounds like a lot of work, and expense they don't wish to have. Paying off the $28k is the tip of the iceberg.
When they move, will they move to someplace that is cheaper as well as taxed less heavily? If so, they might sell the house, get enough cash to buy another place AND have some extra cash lying around. So, they will increase their cash and decrease their expenses.
Will the new place have less cost in utilities, maintenance, etc?
It sounds like you want them in their old place more than they want to be in their old place. I mean - go ahead and give them the money if you want, but make sure you really understand what they want. Don't force them into something you want.
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8 Bit WWBG
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Post by 8 Bit WWBG on Jan 13, 2011 13:34:44 GMT -5
Even in an apartment/condo situation where you might not be the one to administer the work, you still have to shake down facilities and have them do things.
I also see the point about how this house really is a HOME. I'd imagine it would be tough to leave something that they'd worked on all those years.
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thyme4change
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Post by thyme4change on Jan 13, 2011 13:41:08 GMT -5
They have only lived there 10 years. Yes, that's a long time - but it isn't like this was where Grandpa Smith was born, and Uncle Joe did all the wordwork, and the family graveyard is behind the backwall.
People getting attached to houses can be really detrimental to them. Financially - absolutely. Even physically. How many elderly people would do better in a one story house rather than a two, or spend days on end alone because they can't bear to live the family home. These seemingly responsible adults have made the decision that would be better off elsewhere. Should their kid really force them to stay in a house because the guy planted a tree a few years ago.
I am not that sentimental, so maybe I think the OP is thinking with her heart. I am just not seeing how staying put is better than moving.
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zibazinski
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Post by zibazinski on Jan 13, 2011 13:55:14 GMT -5
I have insisted to DF that the house we buy be a ranch because one of us is sure to have some kind of health issue and I don't want to move or have a bedroom in the dining room because we live in a 2 story house. So the ones we are looking at have the master and another bedroom on the first floor that can be used as an office or a bedroom and a finished basement for guests and whatnot. At our age (mid-50's) we need to plan ahead.
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Wisconsin Beth
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Post by Wisconsin Beth on Jan 13, 2011 14:55:34 GMT -5
What is with the way you all think??? My dad is 93 and can take the stairs just fine. its making life too easy that makes people weak. My FIL had hip replacement surgery. Prior to that, stairs were really hard for him. My Dad had a stroke, stairs were not a good idea the first 3 months or so of his recovery. We have family friends that put one of those chair lift things in their house in the stairs to the basement. They say it's real handy for putting a laundry basket on, the groceries that get stored in the basement and getting the fire wood into the basement.
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Post by Deleted on Jan 13, 2011 15:47:04 GMT -5
TD2K,
I like the way you think but the bank account is in her DH's name. Not sure if it's going to be an issue since the worse thing is just filling out paperwork. But she really needs to talk with the CPA about doing it correctly.
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hoops902
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Post by hoops902 on Jan 13, 2011 18:06:29 GMT -5
So FIL is the "busy type", he likes to fix things, remodel etc. Maybe he's done with that point in his life? Or maybe he's still in that stage but wants something new to work on. He's got a great garden, maybe he wants to start from scratch now that his garden is established. Maybe the current house offers no more projects that he would like to undertake.
Either way, paying off the current house doesn't do anything to help them with property taxes, utilities, etc that might worry them. Heck maybe they just want to move to a place "more suitable for retirement" because they want to be around more people their age, have more structured social activities, cut back on the upkeep and spend more time on other hobbies.
It really sounds from your posts that you want them to keep this house because you've decided that they should, and you care more about convincing them that you're right than letting these adults do what they want to do.
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Post by bobbysgirl on Jan 13, 2011 18:08:42 GMT -5
What is with the way you all think???
I agree with TBIRD.
Life and humans can't be constricted by pen and paper. Numbers do lie quite a bit. This is what I see:
The OP and DH are frugal and handle their finances wisely.
They are not slaves to their money.
They see money as a tool to be used for others when in need.
Many people give money to people they don't know, charity, but when someone wants to give to a relative, well, that is a no no.
I would listen to the people here who know about the tax laws and double check with your accountant.
Your FIL has something to live for with his garden and projects. The time will come to make changes. Once that time comes, it is downhill from there.
Chances are one of them will be widowed. That's when a person needs familiar surroundings so they don't feel like a 'man without a country'. These things are the reality to a situation with the elderly.
The saying goes "Once an adult, twice a child.' The elderly need their families. Some day we will need them too.
I hope I'm making sense. Sometimes we have to think with our hearts and not our heads.
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Post by Deleted on Jan 13, 2011 18:16:57 GMT -5
I don't disagree, Bobbysgirl, but what the OP is describing about her FIL is basically "tinkering." Can he reroof? Replace the furnace? The air conditioner? The hot water heater? Can he paint the exterior?
It's great that some older people can go up and down stairs. My DH and I can as well at 57 and 66. But the point is that it won't be forever. Fortunately our house is all one level except the basement. We have friends whose parents basically live in the living room because of the stairs issue.
Let the parents decide. They aren't at the "twice a child" stage. I would be really annoyed if my DD tried to make me stay in this house if I decided to sell it. I'm in charge of my finances. I don't expect her to support me, and I wouldn't even welcome it. The reason is that with $$$ comes control. If the OP thinks any differently now, give her time. Eventually, she will reach the point where she says, "But we made it possible for you to stay here . . . ."
Not for me.
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Post by bobbysgirl on Jan 13, 2011 18:36:29 GMT -5
I don't disagree, Bobbysgirl, but what the OP is describing about her FIL is basically "tinkering." Can he reroof? Replace the furnace? The air conditioner? The hot water heater? Can he paint the exterior? It's great that some older people can go up and down stairs. My DH and I can as well at 57 and 66. But the point is that it won't be forever. Fortunately our house is all one level except the basement. We have friends whose parents basically live in the living room because of the stairs issue. Let the parents decide. They aren't at the "twice a child" stage. I would be really annoyed if my DD tried to make me stay in this house if I decided to sell it. I'm in charge of my finances. I don't expect her to support me, and I wouldn't even welcome it. The reason is that with $$$ comes control. If the OP thinks any differently now, give her time. Eventually, she will reach the point where she says, "But we made it possible for you to stay here . . . ." Not for me. SOUTHERN: I didn't look at it from the financial point of view. I wouldn't let anyone make those decisions either. I see your point. Hopefully the issues can be resolved with patience and care.
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Post by debtheaven on Jan 13, 2011 18:44:16 GMT -5
I don't like the idea of paying off their mortgage because it sounds like they are basically doing fine on their own. I don't know how much time is left on their mortgage. But they sound like proud people to me, justifiably. I am guessing that's where their hesitation is coming from.
If I were you, based on what you posted (that they were doing fine till their recent medical bills) personally I would contact the docs / hospital and discreetly pay those bills off instead. Those bills are probably weighing more heavily on them than their mortgage.
You are very kind and generous. But I would do that first, and then reevaluate things. Even if you do decide to help them with their mortgage, I would not pay it all off, I would try to help but leave them their pride and dignity. Do they watch your kids? If so, do you pay them? Does your FIL do DIY for you? You get the point.
Plus once the medical bills are out of the way, you will have a better grasp on why they want (or no longer want) to downsize.
ETA: Can they afford good medical insurance? Again, I think that is something that could give them great peace of mind.
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The J
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Post by The J on Jan 13, 2011 19:28:23 GMT -5
There are stairs, and they will have to move eventually, but they're 71 and 65 right now and have no trouble at all. What is with the way you all think??? My dad is 93 and can take the stairs just fine. its making life too easy that makes people weak. Yeah -- it all depends on the person. My grandmother's 95 -- it takes her a little longer to get up the stairs than it did 10 years ago, but she's still perfectly capable.
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lurkyloo
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Post by lurkyloo on Jan 13, 2011 21:09:12 GMT -5
First off, thanks for all the responses! Second: yikes. I hadn't actually meant to declare myself Grand High Poohbah In Charge of Everything for Everyone, but I can see how the original post read that way. Sorry. Let me try to clarify: DMIL/DFIL had what we think is a temporary cash crunch. DMIL commented a couple of times on thinking about moving somewhere with lower property taxes. DH and I would be totally fine and absolutely supportive if DMIL/DFIL want to move somewhere because they don't feel they can handle the house anymore (as far as we can tell that's not the case). We do not, however, want them making major life decisions based solely on wanting to save $2-3K a year, especially since we are willing and easily able to cover it. Paying off their mortgage seems like a reasonable way of putting our money where our mouth is, enabling them to stay where they are while still easing the financial crunch. You also may note that there's no mention of DFIL saying anything about wanting to move. That's sort of another concern; DMIL is mildly prone to whims and has honestly been subject to a couple of doozies in the past. Also of note: last fall, after hearing the comments a couple of times, we expressed (gently) that we didn't want them making major life decisions over relatively small amounts of money (that's a more complicated situation and less heavy-handed conversation than it sounds, but this post is long enough!). Since then, we haven't heard any more comments period about wanting to move. Finally, I don't think "proud" is necessarily a good way to describe them, at least not in the sense of excessively proud. What they are is amazingly secure, emotionally--it's one of the things that always astonishes me about their son. I agree that with a lot of parents, my own included, something like this would go over like a lead balloon. DMIL/DFIL are a lot more easy-going and open to ideas...and okay, they're pretty proud of their son, with good reason. Not that I'm biased or anything!
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lurkyloo
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Post by lurkyloo on Jan 13, 2011 21:13:04 GMT -5
I did a little more reading on the tax implications. I'd hoped that sending the payment directly to the mortgage company would put it under paying bills rather than giving gifts, but it doesn't look like that's the case, except for things like college tuition or medical bills. I suppose it's easy enough to split it into two payments from each of our checking accounts, but I'm also curious--does it make a difference that DH and I are in a community property state, so technically I have a legal claim to the contents of his checking account?
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lurkyloo
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Post by lurkyloo on Jan 13, 2011 21:24:48 GMT -5
WisconsinBeth: Yup, it's great, especially since DH takes after him!
bobbysgirl: Thanks for the kind words. I seem to be giving totally the wrong impression here, and am starting to wonder what's wrong with me! We're not trying to make the decision for them; we're trying to make sure they have enough breathing space that they don't pressure themselves into a decision they might regret.
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Post by bobbysgirl on Jan 13, 2011 22:37:17 GMT -5
WisconsinBeth: Yup, it's great, especially since DH takes after him! bobbysgirl: Thanks for the kind words. I seem to be giving totally the wrong impression here, and am starting to wonder what's wrong with me! We're not trying to make the decision for them; we're trying to make sure they have enough breathing space that they don't pressure themselves into a decision they might regret. LURKY: I totally understand. You are doing well by researching and gaining advice. You'll come up with a decision as you chat and see things in writing. Good luck.
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Tiny
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Post by Tiny on Jan 13, 2011 22:48:51 GMT -5
LURKY: when trying to figure out how much cash flow the $28K gift will free up - don't forget they will still need to pay property taxes and insurance for the house. The actual "mortgage" part of their monthly payment may be small beans... Just saying cause my Property Taxes and Insurance cost surpassed my mortgage payment a couple of years ago (and I had a pretty substantial PI payment).
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lurkyloo
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Post by lurkyloo on Jan 14, 2011 0:30:25 GMT -5
Good point, ATSiaRU. I'm guessing it'd be around $250-300, which x12 would be 3-3.6K on a yearly basis. I think their yearly property taxes are 4K, so hopefully it'd be at least equivalent to any difference in property taxes. We had also set up a 10K EF for them earlier, originally intended for medical expenses, but part of the discussion referenced above was confirming that it's their money to be used as needed...anyway, that can be replenished, as events warrant. One thing that might calm the skeptics a bit: DH really sees this more as paying his parents back for putting him through college. Paying back a loan hopefully doesn't carry the same negative/controlling connotations...and heaven knows, educating him was totally worth it
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Post by Deleted on Jan 14, 2011 0:58:40 GMT -5
I say you would need to consider all the reasons why they want to move. I am from a culture where it is the norm for your parents to take care of you and then for you to take care of them in their old ages.... in our culture (we are both Haitians) parents don't have 401K plans, they have kids. We are their retirement plan. So yes I would have no problem doing the same for my mother when the times comes and she needs it, or the same way I know my mother in law will most likely move in with us when the times comes. So I understand how your husband feels. But you have to make sure that the other reasons why they might want to move are: -> too much house to clean/maintain -> extra chores -> going up/down stairs -> and everything else that might come with having a house. My mom loves her current house (5 bedroom/3 bathroom with a finished basement with an extra bedroom/bathroom) but she knows that when she gets into her old age she will not be able to maintain it with my step dat (3 flight of stairs, big house, etc). The only thing is she made us promise not to make her live with our sister, she would rather go to a nursing home before that . And also she hates being alone... I can see my siblings, cousins and I buying a ranch home and putting all our parents in it together so they could keep each other company.
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Urban Chicago
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Post by Urban Chicago on Jan 14, 2011 10:30:45 GMT -5
Just curious, how close do your in-laws live to you? Are you willing/able to help out with maintenance and chores when the time comes?
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