Author Topic: Help with Family Matter - Is the choice be obvious for someone un-involved?  (Read 2128 times)

112ontoyou

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I need help with a family matter – hoping someone has gone through this and can give me tips!  I’m considering paying a professional to assist, but I need some logical, smart and successful folks to help me out a bit. 

Background:  I’m almost 50, married, children already out of the home.  We have reasonable income and expenses considering the High COLA.  Spouse has tax free disability income.  We support my sibling’s housing costs.  Sibling has a shrinking savings of about $10k only and uses that money to eat and use public transportation. 

Current Problem: Sibling and I are co-owners on inherited properties #2 and #4, each are debt-free and each are worth approximately 500K.   Sibling resides solo, rent free, in one of the inherited residences, Property #2.  I manage Property #4 and collect that rent, pay taxes on the income and do not split with sibling.  I pay all expenses for both properties.

This is where I need help – Sibling has about 100K in old debt.  Owes credit cards mostly, some trade school debt and other random small debts.  Most have been “charged off” or sold to other lenders.  Most debt is over 5 years old.  Sibling has no income and will likely never work.  Sibling about 50 years old, ignores the debt collectors, and thinks debt is no big deal.  Not really able to work (undiagnosed problems in the head) and unwilling to go to doctor or pursue social security disability. 

Considerations:
1.   Hire professional to help.
2.   Cash out both properties, split ways and continue life.  Sibling would end up without a residence but with $450K or so in the bank.  Pros:  No property liens and not tied financially.  Residence #2 has been home for nearly whole life and moving could cause more problems in head?  Cons: Inherited low property tax on residence and relatively inexpensive for me to continue supporting that.  Also, I don’t have confidence that within two, maybe three years I’d get a knock on the door looking for a place to live (I can’t/won’t co-habitate in single family residence with sibling)
3.   Leave everything like it is – Cons:  liens on properties #2 and #4?  Sibling or my untimely death and estate planning – no wills or trusts in place.
4.   Pay off debt.  Offer debtors deals and maybe clear 100k in old debt for $25k? Cons:  Sibling could try to take on more debt if credit score increases over the years and can do it, including attempting to take out a 2nd on the paid for home.  Pros:  No liens

Income:
My monthly take-home $2200
      Note: Maxing 401k and 457 with 457 catch-up provision (18K each=54k annually)
Spouse Tax Free Disability Monthly $2880
Rental Income (Property #3) $1150
Rental Income (Property #4) $2200
Total Take-Home Income $7430

Monthly Expenses:
Mortgage $1275 (Property #1 -Balance 197k on 30 year note at 3.25% - Home Value $575k)
Property Insurance (Property #1-4) $280 per month paid annually
Property Taxes (Property #1-4) $725 per month paid annually
Property Management (Property #3) $100 per month
Utilities – Primary Residence (Property #1)
   Water/Sewer/Trash $100
   Electric/Gas $125
   HOA $85
Utilities—Sibling (Property #2)
   Water $50
   Sewer/Trash $50
   Electric/Gas $25
   Phone $35
   Internet $40
   HOA $120
Gym Memberships $39 (use often)
Internet/TV $150
Cell Phones $120
Pet Food $45 (all Costco – big dogs)
Groceries $400
Misc $200 includes random house repairs, animal vaccinations, clothes as needed, gasoline, new bike tires, haircuts, gifts (hardly drive)
Any additional money each month is paid to principal of mortgage on Property #1.
Total Expenses: $3964

Debt:  *Looking for guidance here!
No debt other than mortgage on primary residence.
Sibling: 100K in unpaid debt (mostly Credit Cards)

Investments/Savings
Emergency Fund $15K
Combined 401k/457/Roth/Roth IRA- $499K
Cars-$12K
Combined Value of Properties: $1,350,000

Can anyone help me decide how best to move forward?  Many thanks – this is keeping me up at night!

PapaBear

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What about another option - this is a bit a tough one, but based on treating your sibling as an adult:

5. Discontinue co-ownership and officially allocate house #4 to you and house #2 to your sibling. Tell sibling, that you will not be able to continue to subsidize his/her lifestyle. Offer support in case he/she wants to sell the house and move to somewhere less expensive or rent parts of the house to a roommate. Also offer support/encourage medical check-up/applying for social security disability or similar forms of financial support.

Have you discussed any of this with your sibling yet? What is his/her opinion on selling the house and financing his/her life after the savings are consumed?
His/her savings of 10k will be consumed at some point, so it is not possible to just wait this out, neither for him/her nor for you. Depending on the lifestyle and monthly cost, it is likely going to happen in the next 12-24 months.

lizzzi

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My first thought is that you need to quit enabling your sibling. Separate your finances and the properties somehow, and let the chips fall where they may. It's like the airplane advice: Put the oxygen mask on your own face first. I think eventually your sibling is just going to drag you down...and there is no need for that IMHO. Cut loose from this mess, show your sibling how he could help himself (social security disability, etc.), and live your own life. It doesn't sound like your sibling needs a guardian or anything like that, and even if he has undiagnosed psychological issues, he has every right to make bad decisions.(Like not seeking help appropriately.)  Cut loose in tandem with giving some good suggestions for how he can manage...and then get out of the way.

BNgarden

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5. Discontinue co-ownership and officially allocate house #4 to you and house #2 to your sibling.

+1
« Last Edit: July 04, 2017, 10:48:22 AM by BNgarden »

doublethinkmoney

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What about another option - this is a bit a tough one, but based on treating your sibling as an adult:

5. Discontinue co-ownership and officially allocate house #4 to you and house #2 to your sibling. Tell sibling, that you will not be able to continue to subsidize his/her lifestyle. Offer support in case he/she wants to sell the house and move to somewhere less expensive or rent parts of the house to a roommate. Also offer support/encourage medical check-up/applying for social security disability or similar forms of financial support.

Have you discussed any of this with your sibling yet? What is his/her opinion on selling the house and financing his/her life after the savings are consumed?
His/her savings of 10k will be consumed at some point, so it is not possible to just wait this out, neither for him/her nor for you. Depending on the lifestyle and monthly cost, it is likely going to happen in the next 12-24 months.
I second this. Your sibling has no inclination to change her ways so she problem never will and I wouldn't bet on it. If anything I guarantee if you payoff her debt she will rack it up.

Just separate out the two properties and if you want to still help pay the expenses on the one she is living in that's your choice. Keeps it fair and even.

It's hard to feel bad for someone who won't even try to get the help they need.


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112ontoyou

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My first thought is that you need to quit enabling your sibling. Separate your finances and the properties somehow, and let the chips fall where they may. It's like the airplane advice: Put the oxygen mask on your own face first. I think eventually your sibling is just going to drag you down...and there is no need for that IMHO. Cut loose from this mess, show your sibling how he could help himself (social security disability, etc.), and live your own life. It doesn't sound like your sibling needs a guardian or anything like that, and even if he has undiagnosed psychological issues, he has every right to make bad decisions.(Like not seeking help appropriately.)  Cut loose in tandem with giving some good suggestions for how he can manage...and then get out of the way.

Thank you- Yes, enabling is a word I'd use to describe what I'm doing here.  This has been going on since our dad passed away, in 2014 (mom passed years ago).  I thought I was helping through a tough time.  Sibling had been unemployed and has worked only three months since then (coincidentally his job start date was almost exactly dad's date of death and work end date 3 months later for a dumb reason at that).


112ontoyou

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What about another option - this is a bit a tough one, but based on treating your sibling as an adult:

5. Discontinue co-ownership and officially allocate house #4 to you and house #2 to your sibling. Tell sibling, that you will not be able to continue to subsidize his/her lifestyle. Offer support in case he/she wants to sell the house and move to somewhere less expensive or rent parts of the house to a roommate. Also offer support/encourage medical check-up/applying for social security disability or similar forms of financial support.

Have you discussed any of this with your sibling yet? What is his/her opinion on selling the house and financing his/her life after the savings are consumed?
His/her savings of 10k will be consumed at some point, so it is not possible to just wait this out, neither for him/her nor for you. Depending on the lifestyle and monthly cost, it is likely going to happen in the next 12-24 months.

#5 may be the best option-thank you.  I need to see if I can transfer the lower property tax rate if we make the cut and each wholly own one property.  We have considered this but I keep discarding it for one reason or another.

It is very difficult to discuss with sibling.  Lots of distraction techniques and an attitude of "I have a plan" which is yet to be explained.  Sibling would like everything to stay the same and would like very much to stay in the house.  I estimate exactly 12-24 months on the shrinking savings, which includes me continuing to pay the utilities, HOA, prop tax and ins.

Gronnie

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What about another option - this is a bit a tough one, but based on treating your sibling as an adult:

5. Discontinue co-ownership and officially allocate house #4 to you and house #2 to your sibling. Tell sibling, that you will not be able to continue to subsidize his/her lifestyle. Offer support in case he/she wants to sell the house and move to somewhere less expensive or rent parts of the house to a roommate. Also offer support/encourage medical check-up/applying for social security disability or similar forms of financial support.

Have you discussed any of this with your sibling yet? What is his/her opinion on selling the house and financing his/her life after the savings are consumed?
His/her savings of 10k will be consumed at some point, so it is not possible to just wait this out, neither for him/her nor for you. Depending on the lifestyle and monthly cost, it is likely going to happen in the next 12-24 months.

#5 may be the best option-thank you.  I need to see if I can transfer the lower property tax rate if we make the cut and each wholly own one property.  We have considered this but I keep discarding it for one reason or another.

It is very difficult to discuss with sibling.  Lots of distraction techniques and an attitude of "I have a plan" which is yet to be explained.  Sibling would like everything to stay the same and would like very much to stay in the house.  I estimate exactly 12-24 months on the shrinking savings, which includes me continuing to pay the utilities, HOA, prop tax and ins.

Of course sibling would like to stay in a 500k house with all expenses paid for by you, and not have to work. Unfortunately, no matter what undiagnosed problems sibling may have, neither sibling nor you get a pass on math. It's good that you are looking at it now, and not after it is too late and sibling has eaten up both of your inheritances.

ambimammular

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Did your parents fund your sibling's lifestyle?  How has he/she gotten along with money in the past? I mean, clearly spending out of their means, but is the debt denial something new or tied to your parents' passing?
« Last Edit: July 02, 2017, 02:51:09 PM by ambimammular »

Cassie

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I think separating finances is the best thing to do. YOur brother will either grow up and get a job or sell house and live off $ until it is gone, etc. At that point he would have to apply for disability, low income housing, etc. Stories like this are really sad but you can't keep taking care of him.

cchrissyy

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instead of co-owning #2 and #4  how about you have #4 and sibling has #2 . it's a simple solution to most of the above problems and you're not entangled anymore with shared ownership and the risks.

there is no need to sell rental property #4 if you don't want to sell it.

And there is no need to sell house #2, sibling wants to keep living in it, ok good for them. Maybe someday they will sell it. maybe they will reverse mortgage it. maybe they should declare bankruptcy in a way that lets them keep their house. or maybe there is no need for that, if the creditors have given up on collecting. if you want to help support sibling, ok fine you can keep paying those taxes and utilities. only you know if sibling is able to work and pay those basic costs to not lose the house, and I can certainly understand if you choose to pay them, especially if the house would become yours someday if the sibling passes away.  but your decision to pay those expenses should NOT mean being legally entangled as co-owners of 2 properties. Separate that so you have 100% of #4 and sibling's financial crisis is limited to their individual life at property #2.

112ontoyou

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Did your parents fund your sibling's lifestyle?  How has he/she gotten along with money in the past? I mean, clearly spending out of their means, but is the debt denial something new or tied to your parents' passing?

Sibling was employed in a low end job for years, living without a budget, paying minimums on rising debt.  Debt denial is not new, it was the termination from the long term job that led to more debt and subsequent inability to pay minimums.  Parents subsidized a bit, by not charging rent and covering home maintenance, taxes and insurance on the home he resided in solo.

Lepetitange3

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You need to separate finances before you get severely burned.  It doesn't matter which of the methods, but pick one and do it asap.  This can turn into a huge mess if you keep yourself linked with siblings debts and issues.

Laura33

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Just a cautionary note:  please talk to a lawyer before you decide between the two of you that you get X and he gets Y.  Someone who has some psychological issues may also be the kind of guy who will blame/sue you for cheating him out of his "rightful inheritance," so you need to cover your own ass and make sure that anything is done fairly and evenly. 

For example, if you guys are joint owners of the two properties, then you are both entitled to 50% of the profits and responsible for 50% of the costs of each property.  So if "his" property is worth much less than "yours," and you officially split them up, he could come back at you later arguing that you shafted him.  [Note that he could even argue this now, if the rent you are collecting off "your" property is a lot higher than the imputed rent he is getting from "his" property].

Another option would be to talk to a lawyer about putting things in a trust for him so he could draw an income/cover expenses but his creditors couldn't reach it (or at least future creditors -- not sure whether a trust would be effective against people he already owes money).  Or maybe his debts are past the local statute of limitations.  Or maybe he could declare bankruptcy now, when the home would probably be protected under a homestead exemption, and then if he wanted to sell it to live off the proceeds later, he could do so once the debts are discharged and he doesn't have to worry about the debt collectors coming after his little pot o' money.

Tl;dr:  we can only advise on the psychological/relationship aspects of what you should do; you really need an attorney to tell you what you can do.
Laugh while you can, monkey-boy

Lepetitange3

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Just a cautionary note:  please talk to a lawyer before you decide between the two of you that you get X and he gets Y.

...

Tl;dr:  we can only advise on the psychological/relationship aspects of what you should do; you really need an attorney to tell you what you can do.

++++++1 THIS

112ontoyou

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For example, if you guys are joint owners of the two properties, then you are both entitled to 50% of the profits and responsible for 50% of the costs of each property.  So if "his" property is worth much less than "yours," and you officially split them up, he could come back at you later arguing that you shafted him.  [Note that he could even argue this now, if the rent you are collecting off "your" property is a lot higher than the imputed rent he is getting from "his" property].

Another option would be to talk to a lawyer about putting things in a trust for him so he could draw an income/cover expenses but his creditors couldn't reach it (or at least future creditors -- not sure whether a trust would be effective against people he already owes money).  Or maybe his debts are past the local statute of limitations.  Or maybe he could declare bankruptcy now, when the home would probably be protected under a homestead exemption, and then if he wanted to sell it to live off the proceeds later, he could do so once the debts are discharged and he doesn't have to worry about the debt collectors coming after his little pot o' money.


Yes- we had worked with an attorney to get us where we are as co-owners.  Attorney suggested we cash out and sell both properties and go separate ways.  Because one was inherited about two years prior to the other due to the trustee's personal interest in the property (resolved with a payout) we ended up each with half of each property.  If the properties would have been inherited at the same time, we would have split up as part of the trust dissolution and each of us would wholly own one property.  Now that we are here, we are saving a great deal in property taxes due to the parent/child exemption in this state.  We save 8K per year on the two properties since we are taxed at the property value from years ago.  Now that this is in each of our names 50/50, we can't transfer it, or we lose this great benefit.  Any title switch will increase our annual taxes (but at least the property would be secure).   

I asked the attorney about protecting the asset in trust and it would have been possible to do that, prior to it going in our name, as a "special needs trust".  However, as I mentioned, there is no mental illness diagnosis so it didn't seem legitimate in my/our case.

I like the bankruptcy idea but since there is ownership in the second home, I don't think it works.  That's why I started considering calling the debtors to determine if we could agree to a small percentage of the amount due for each lender and just pay it myself. 

Anyway, thank you and thanks to everyone for the comments.  I think you're right, I need to get an attorney to assist.  I have kept meticulous records of all spending on both properties plus the living expenses to assist us in splitting them evenly over time.  One house does have a little more value than the other.  At this point, we're still in the red due to the trust attorney fees and the trustee payout for the home.


lizzzi

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Just reading all this reinforces my feeling that you need to cut your sibling loose ASAP. If you lose some tax advantages, so what. I just see you getting majorly burned by this situation. And yes, get a good lawyer to help you. Yesterday.

Acastus

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You have a hair on fire legal problem that you need to resolve. You both own property jointly. It is the same as if you held a joint checking account. When the creditors find out about the properties, they will confiscate your rental along with sibling's house. You need to separate your finances from your sib before this happens. Get legal advice now. You might be able to swap ownership so you each end up with 1 property. Then you can decide if you wan to keep paying sib's bills because sib is too lazy to get SSI. I assume sib's work history is not great.

I feel your pain. I also have a deadbeat sibling. Mine did not get moving until my mother's house was foreclosed. Sib was forced to leave home at 45 years of age. Tough love sucks on both sides of the equation, but it sounds like it is needed here.

Cali Nonya

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I'll go with the counter position here.  You're talking about your sibling.  Have some compassion.  Yes, you want to go to lawyer, you want to protect yourself and set up some rules.  But this is your sibling, this is family.  I would try to find a middle ground where you can help them out somewhat, but make sure you are not over exposed to potential blow-back.

And no matter what, try to get your sibling some help (counselor, therapist, doctor, whatever might be needed).

rbuck

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I'll go with the counter position here.  You're talking about your sibling.  Have some compassion.  Yes, you want to go to lawyer, you want to protect yourself and set up some rules.  But this is your sibling, this is family.  I would try to find a middle ground where you can help them out somewhat, but make sure you are not over exposed to potential blow-back.

And no matter what, try to get your sibling some help (counselor, therapist, doctor, whatever might be needed).

I understand the sentiment but at some point you need to separate for your own sanity and to maintain your own lifestyle. The OP could loss a good portion of his income if the rental property is foreclosed on. Then my opinion is colored by my experiences with my uncle and his dad. You try everything to help them but they have to help themselves. Eventually you find your 18 year old self walking into a crack house to buy back your grandfather's car that the uncle sold.

SimpleCycle

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I actually think there are several ways forward here, and ways you can protect yourself and still help your sibling.  Some of those may cause you to lose the tax exemption, but I think that is worth it for being disentangled.

Ultimately, you are co-owners of a million dollars in assets, and there is $100k in debt that is for now not secured against any of those assets.  Your sibling is without income, functionally if not legally disabled, and unlikely to have a big change in the situation anytime soon.

I think you probably need multiple professional opinions here.  First, the lawyers.  You need to talk to someone who specializes in the care of disabled adults.  Often these are lawyers practicing special needs/elder law.  You also should talk to a bankruptcy lawyer.  Between those two legal opinions, you should have a sense of the options available to you and your sibling.  Then I would consult with a mental health professional about how to approach this with a resistant sibling.  They should have some insight about how to approach this in a way that is compassionate to your sibling while also guarding your own mental and financial well being.

I think your desires here are very reasonable.  It's a tough situation and I don't think there's any obvious way to settle it that you are missing.

TrMama

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Agree with everyone that you need to legally separate your finances from your siblings. A simple swap of the properties seems like the simplest solution, but you'll need to hire a lawyer to confirm. The increase in property taxes is a steal of a deal compared to the risk that he/she will drag you down with them.

When discussing the matter with your sibling, make it all about you while also pointing out the benefits to him. Also, remember to use your "I" statements (this is a communication strategy):

"I need to simplify my life. All these rentals, plus spouse's health issues are getting to be too much for me. I need to downsize my property portfolio and I know you want to stay in house #2. For my own sanity I need the transaction to be competed by X date (4-6 months from now)."

Don't bother discussing how sibling can pay off their debts, or manage their money better. Clearly he doesn't care and will just use the discussion to sidetrack you.

Bicycle_B

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Great comments all along.  Research your options ASAP and find a way to legally separate, even if it means losing a tax exemption.  The financial entanglement will be more costly if not resolved.

Sib's part won't change until you force change.  Compassion comes into play once you get the necessary changes in place to protect self.  Certainly if your advisors/consulting experts/etc can help prior, use that help, but sib won't likely agree until under pressure anyway.  Once he's on his own, you can continue moral, emotional, planning, and even financial support from a position of safety where he won't drag you down.  Persist in your love and, if you feel appropriate, your support... after the necessary separation.

Fwiw, I had a relative (stepmother, due to dad's new marriage after I grew up) living rent free for years in a house that didn't legally belong to her after my dad passed (they married long after he bought it).  She owned two other houses but wouldn't move for what we perceived as mental issues.  Finally she moved after we got her in touch with a private contractor who physically sorted and moved her many possessions, which was the actual issue.  Legal action had looked difficult and we thought the move would never happen, damaging the estate.  You never know when you'll find the missing key.  But you have to move and persist in finding solutions, because the other party won't.

Acastus

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I'll go with the counter position here.  You're talking about your sibling.  Have some compassion.  Yes, you want to go to lawyer, you want to protect yourself and set up some rules.  But this is your sibling, this is family.  I would try to find a middle ground where you can help them out somewhat, but make sure you are not over exposed to potential blow-back.

And no matter what, try to get your sibling some help (counselor, therapist, doctor, whatever might be needed).

I am not saying abandon your family. I am saying get yourself safe, then you can help your family as you see fit and are able. Put the oxygen mask on yourself, then help other passengers. Right now, someone else will come in and make decisions. The OP will not be able to control the fallout.

lizzzi

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I'll go with the counter position here.  You're talking about your sibling.  Have some compassion.  Yes, you want to go to lawyer, you want to protect yourself and set up some rules.  But this is your sibling, this is family.  I would try to find a middle ground where you can help them out somewhat, but make sure you are not over exposed to potential blow-back.

And no matter what, try to get your sibling some help (counselor, therapist, doctor, whatever might be needed).

I am not saying abandon your family. I am saying get yourself safe, then you can help your family as you see fit and are able. Put the oxygen mask on yourself, then help other passengers. Right now, someone else will come in and make decisions. The OP will not be able to control the fallout.

+1