Buying a house with mom and dad?

[ABCD]

I have about $50k saved up for a second home, a lakehouse. I'm 50 and can buy one now, or wait a year or so to save up about 30k more. We're looking at about a $200,000 range for the house. That's all set and budgeted. However, my parents live seven hours away and need to move closer, because they are now in their 80s. My sister lives up here with her family as well, so between us and our spouses/kids, we can keep an eye on them. They want to move, but they are really dragging their feet due to all the decisions that have to be made.

They're interested in a lakehouse in the same price range. Here's my question: what would be a reasonable and fair way for me to go in with them on the purchase of a house? They can live in it, and then when they pass, I would like to pay it off and have it in my name. So, should I suggest we buy it together, with it in both our names, and just put in the will that it goes to me out of my share of the estate?

I'm also wondering about how this might affect their taxes, specifically capital gains. The house they're in now might sell for $325k or so. How does that tax apply? Should we split the cost of the house 50/50?

I just had this idea, and I haven't thought it through, so I'd appreciate everyone's thoughts. I'm sure there are a lot of things I'd need to consider, so any brainstorming ideas you have on this, I'd appreciate.

[FINate]

What country? USA? If the US then your parents should have no federal capital gains after selling if they've lived in their house for at least 2 out of the past 5 years. State is another issue, you'll have to look into it.

I'm not a fan of commingling finances with family members (or others for that matter) if it's not done in strictly legal terms. This is because doing so leaves you exposed; informal agreements to leave things in wills and what don't hold up. What happens if your parents decide to change the will? Parents can do strange things in old age, and/or in the early onset of dementia which may go undiagnosed for a time. What if your sister gets upset when, from her point of view, your parents leave the lake house to you and you still get an equal share of the rest of the estate? She may even have a valid complaint if your parents carry all the costs of owning and maintaining the property (taxes, maintenance) and then you inherit the entire property.

IMO, keep it simple and be clear about what things are intended for. If your goal is to get your parents closer then help them with that process, but get them into a house of their choosing and in their name and in their finances. Then, if you want a lake house then do so separately with your own finances. Family relationships are complicated in the best of times, I just don't see the point in complicating things even more, and I don't see how mixing your two financial worlds helps either of you.

I might consider going in with family on buying a vacation home together (though I generally think vacation homes are a waste of money), but I would only do this entirely above board, with all parties on the deed and all sharing the upkeep and expenses, and with an agreement in writing for how to dissolve ownership.

[Fishindude]

I wouldn't do it.   Get two lake house, one for yourself and they can get their own.   How does this work when you want to have a gang of your friends to the lake for a week?   Can't hardly kick the parents out, and it's not going to be a comfortable arrangement.

[GizmoTX]

Is the lakehouse big enough for your family + your parents at the same time? If so, is there enough separation that you all wouldn't get in each other's way?

Know that your parents may get to the point where assisted living or a 24/7 caregiver may be necessary.

If you do proceed with multi-generations, boundaries still need to be established: Put the property into a Family Partnership, with each contributor holding a pro rata share per the initial purchase plus ongoing expenses, with remedies if a shareholder doesn't stay current, i.e their share value diminishes. Each share, not the property, gets left in a will, transferred, or sold. Other members may be added or subtracted as time goes on. The defining document is all-important here & must be agreed to in writing.

[Penelope Vandergast]

After buying the property together you can convert ownership to an LLC. An elder law attorney (who you should discuss this with in any case as they may have other recommendations for your parents!) can make sure it is done properly and fairly. I think it can be a great idea if done correctly and if you all can communicate reasonably well together.

Assisted living/nursing homes cost $5000-$15,000 a month. Per person. If doing this saves even 6 months in the home, you will all likely come out way ahead. I also think it can prevent the need for a nursing home in the first place -- or at least put off the need -- because you will be around to catch small problems before they become major issues.

[Penelope Vandergast]

Also just wanted to add again/underline that you need an elder law attorney, not just an estate planner or real estate atty. You need someone who understands real estate from an elder law perspective. Depending on your state, there are things like Medicaid recovery laws that could require you to sell the house and pay back anything your parents may have paid for with Medicaid after they pass (which actually makes Medicaid a loan -- potentially a very large one). In my state, the laws are draconian and they will take life insurance, tax refunds, force home sales, etc. (Medicaid pays for nursing home care once parents are basically destitute. Parents don't have to sell house while they are alive, but you can be forced to sell the house afterwards even if you are living there. This is different from Medicare, which does NOT pay for nursing home care.)