Dad's Plan

Personal Finances Buying or Selling a Home
1

Hi,

My dad is 80 years old and he is trying to figure out expenses and where to live after evidently not saving enough over a lifetime. He has $120k left on a condo mortgage with about a $1,000 monthly payment to include mortgage, taxes, and condo fees. He has a 401k, but apparently it will be gone soon as he is saying he will be living on social security alone. He doesn’t think he can afford to live in the condo anymore soon.

So he is now working on a plan to sell the condo, and buy a house with my brother that has a separate structure or separate entrance for him. He would put all the money from the condo into the house. My brother would be able to combine his money with my dad’s for a down payment and have a lower mortgage payment. My dad would then use his social security to live on. My brother would be responsible for all mortgage and tax payments and upkeep. The money my dad provided would essentially be given to my brother per my Dad’s take. I’m more than glad my brother is willing to live with my dad, and my sister and I are certainly not expecting any inheritance, lol, so no problem if my brother were to gain from this arrangement long term.

But I’m trying to think through concerns about this plan, just to be prepared even if these things don’t happen. Like what if my dad becomes incapacitated in a few years and needs extra care and can’t live there anymore. Or what about my brother, he did have a health scare with a stroke a few years ago. My brother has 4 (mostly adult) kids, and his estate would go to them (he’s divorced). My dad couldn’t afford to keep living there, and with his money tied up in the house he couldn’t afford to go to a care facility. There would need to be a plan, I’m assuming, and I haven’t heard any discussion about it. Any advice appreciated and what to look out for. And how to bring up!

Another option is for my brother, sister, and I to contribute to my dad’s current mortgage or expenses so he can just stay where he is, with expectation none of us will get anything back assuming all his money will eventually be needed to go to his care. I could afford this although yes it is hard to swallow emotionally knowing the financial position my dad has put himself in willingly. My brother and sister are stretched with all their kids and their own expenses right now, so not sure it would be ok with them. Living with me is not viable.

Or sell and move to something else that is affordable? Although $1000 seems low for our area for rent or mortgage, not sure he could get that.

If there is another board you’d recommend on these issues dealing with elder care issues like this let me know. I’m also trying to figure out the full picture of his expenses to see if we can help lower them as a next step.

Thanks,
jenny

2

Does he have assets that he can pay off the mortgage (or almost all of it and get a little to pay it off from family)?
If he did so, what would his monthly payments be for taxes, condo fees, etc? Would that be manageable on his social security?

Moving in with his son (your brother), providing a downpayment for the house, seems like a reasonable option…
I think having your brother get additional accidental-death / disability insurance to ensure the house is paid off isn’t a bad idea. Usually those aren’t expensive policies even for older people. And while it wouldn’t cover all contingencies, it may make everyone feel better that at least some of the possible issues are covered.

Your father and your brother will need to look at how to have the property titled. Looking at numerous possible scenarios - like what happens when one of them dies. And what happens if one of them is disabled, etc.

I think there could be tradeoffs in whether it’s titled as joint or just under brother’s name (with the downpayment being a gift - which might require a gift tax form, but is likely under the lifetime limit, so wouldn’t result in any gift taxes)

3

There are a ton of issues here, including DIY estate planning. If your father needs nursing care later on, this could be a mess.

Find an elder care attorney before moving forward with any of this.

6 Likes
4

jschoenb: “My dad is 80 years old and he is trying to figure out expenses and where to live after evidently not saving enough over a lifetime. He has $120k left on a condo mortgage with about a $1,000 monthly payment to include mortgage, taxes, and condo fees.”

What about insurance?

“He has a 401k, but apparently it will be gone soon as he is saying he will be living on social security alone. He doesn’t think he can afford to live in the condo anymore soon.”

Probably correct, but without knowing the size of his SS payment it is difficult to confirm. To meet a front end not more than 28% of income test, his SS would need to be roughly $3,571.43, which is much larger than the average monthly payment and is close to (and may even exceed) maximum amount payable per month.

"So he is now working on a plan to sell the condo, and buy a house with my brother that has a separate structure or separate entrance for him. He would put all the money from the condo into the house. My brother would be able to combine his money with my dad’s for a down payment and have a lower mortgage payment. My dad would then use his social security to live on. My brother would be responsible for all mortgage and tax payments and upkeep. The money my dad provided would essentially be given to my brother per my Dad’s take. I’m more than glad my brother is willing to live with my dad, and my sister and I are certainly not expecting any inheritance, lol, so no problem if my brother were to gain from this arrangement long term.

But I’m trying to think through concerns about this plan, just to be prepared even if these things don’t happen."

My first concern is to make sure that if Dad and your brother have a falling out that your dad can continue to live there (or that he gets some money back to fund living elsewhere). Internet is full of stories about parents who quitclaim or otherwise transfer house to child and are later put out and homeless.

“Like what if my dad becomes incapacitated in a few years and needs extra care and can’t live there anymore.”

Valid concern.

“Or what about my brother, he did have a health scare with a stroke a few years ago. My brother has 4 (mostly adult) kids, and his estate would go to them (he’s divorced). My dad couldn’t afford to keep living there [alone], and with his money tied up in the house he couldn’t afford to go to a care facility. There would need to be a plan, I’m assuming, and I haven’t heard any discussion about it.”

Brother could carry insurance to pay-off the mortgage and bequeath dad a life estate and remainder to one or all of brother’s four children. make sure counsel is involved, this is not DIY territory. Perhaps an irrevocable trust would be better because a will can be revoked.

“Or sell and move to something else that is affordable? Although $1000 seems low for our area for rent or mortgage, not sure he could get that.”

what about the net proceeds from the sale? How much equity does he have (above the mortgage balance)?

“I’m also trying to figure out the full picture of his expenses to see if we can help lower them as a next step.”

Another very valid issue.

Regards, JAFO

5

There would need to be a plan, I’m assuming, and I haven’t heard any discussion about it. Any advice appreciated and what to look out for.

If your brother is going to be the sole owner of the property, he should look into giving your father a life estate. That would allow your father to stay in the property even if your brother dies first.

I would also point out that having your father give a significant payment toward the property without having any ownership is likely to run afoul of Medicaid gift rules, should your father need to use Medicaid for long term care within 5 years after giving that gift.

On the other hand, having your father on the title of the property that he owns with your brother may also run afoul of Medicaid rules.

I would strongly suggest that your father consult an eldercare attorney before actually making any plans on what he should do about selling his condo. If your father can’t afford that, it would probably be worth your while for you and your siblings to pay for it, especially since your brother is considering becoming involved with your father’s plans.

AJ

1 Like
6

One thing immediately struck me…

<>My brother would be responsible for all mortgage and tax payments and upkeep.

Responsible is a two edged word. Your brother would be responsible, but is he responsible? Really responsible? Sometimes even people who mean when and whose hearts are in the right place should not be relied upon.

Just my two cents.

7

There are a lot of moving parts here.
Assuming no other assets of value are held by your dad, he will likely qualify for some form of public assistance. Is he a vet? Depending on your state, Human Services likely has some form of financial assistance and there is Medicare Savings Programs to help pay Medicare premiums, deductibles, etc.

I would seek help first from a Fee Only Certified Financial Planner in your area, as the principal need seems to be cash flow, but from your description, legal assistance may also be needed along with proper referrals to state/federal human services. A good planner will see this and make recommendations accordingly.

BruceM