Need help with understanding the financial worth of this plan

[Mrs. Healthywealth]

My mom, currently 75yrs old, will be retiring in the next 1-5yrs. Due to health issues with my father (84yrs old), she has had a major financial setback which has led to her not having enough to cover all her expenses. Her current expenses are $90k ($36k is housing expense, and $30k is care giver expense).  I've been helping her downsize, and in the process have realized she can't really afford another home AND cover all her expenses. Went through various scenarios, and came up with this plan: Have her put a sizable down payment on the home to bring the expenses down to a level I can afford. She will continue to save and pay the mortgage while she is working, then once she retires, I pay 30-50% of the mortgage, depending on what she can afford.  I will also be taking care of any repairs. The house would be under my name.

She asked me, "since I'll be gifting you the down payment, how much should I adjust the will/living trust so your brother and sister don't feel I gave you more?" I HAVE NO IDEA.  My negative perspective on this is: I would never have purchased a home at this point b/c it seems we are at or close to top of market, so my crystal ball predicts this property will depreciate in value then track inflation (if lucky), it pushes my own retirement back at least 5 yrs, I now have more debt, and we aren't getting the actual amount this property would rent for. So, I don't see this as a "gift" to me.  The Pros:  It's a great area in Southern California, good school district, beautiful homes, and most of all, it decreases my mom's stress and keeps her close to family and friends (albeit it magnifies my own stress, but I'll get over it).

I know I'm missing the math behind how this plan would be monetarily beneficial to me? I want to be fair to my siblings and mom, which is why I would like you to help me figure this out--"how much should I adjust the will/living trust so your brother and sister don't feel I gave you more?".  Do we just decrease it by the amount she gifts?

***Edited for my number crunching***
I got curious so played around with numbers. Scenarios of investing vs. purchasing the house to understand the "opportunity cost"

Purchasing the Home to help mom:
Cost of home is $600,000. Down payment of $250,000. Loan amt: $350,000. interest rate 4.7%. 
After 10yrs: Loan amt $282,000 ($68k additional equity from payments).  10yrs of repairs: $60k.  Appreciation @ 3%: $206,000. Plus: $500 extra to invest will increase my acct by $75k
TOTAL AFTER 10YRS: $539,000


Investing what I would have spent towards helping mom:
Invest $2500/month. Predicted ROR 3.3%: $369k.

Difference: $170,000

Did I figure this out correctly.  This is helpful to see.

[AMandM]

So the idea is that your mother would provide the down payment, the deed and the mortgage would be in your name, but she would cover the whole mortgage payment till she retires, and 50-70% thereafter. Will you and she live in this house together?  What about your father?

I see some possible pitfalls. Is there a plan in case your mother comes to need care herself? Can you afford the mortgage on your own if her retirement income has to be devoted to paying for care?

As far as not making your brother and sister feel slighted, I'm inclined to think a fair reduction is the sum of the down payment plus the equity accrued through her (share of the) payments up to the date of her death. That's how much wealth your mother will have given you by then, which is how much less she has to leave to your siblings.  That's what you'd get if you sold the house.

[Mrs. Healthywealth]

I LOVE Leisure World, and look forward to living there, she refuses. She believe there are no other folks with her cultural background. She’s working cause she loves her job.

Renting is significantly more expensive, avg rent is about $2900 or more. Pain in the ass stuff: she doesn’t want retirement home or senior living, I’ve been trying to push her in this direction. There aren’t a whole lot of senior options in the nearby area either. She has pride and part of it is also cultural. She currently lives in a $1.2 million home, she has nearly half of her net worth tied into it, which means she has to sell it since she still owes $450k on it. She had more money before dad got sick.

She’s prone to depression, which is why I’m trying to help. I would like the rest of my mom’s life to be in a location she wants, but it might be crazy making. It’s frustrating trying to help someone who doesn’t realize how much they need to alter their life to adjust to their retirement income.

The resources help a lot. Ideally I would like to find her a home in a senior community.

[Mrs. Healthywealth]

Are reverse mortgages a good idea? She has a financial planner that suggested this.

[Mrs. Healthywealth]

Imani—From your lips to my ears! Yes, when I was reading what I was writing, I noticed some major unhealthy rescuing...enabling is the perfect word for it. My spouse and I have been trying to simplify our lives, and this will do the complete opposite. In fact, we’ve been trying to figure out how to get her to only work 2 days a week vs 4-5days. So, as noble as the cause to help my mom may have been theoretically, it’s not a wise choice for me and my family. Think my mom will need to address her current financial situation, and I can help her with that like I’ve been doing. When I read the responses earlier this morning and then again, it definitely creating a nice calm. The cultural aspect of helping elderly parents is very engrained, but there are many ways to forms it can take. Thank you all again. Also, appreciate the resources. 

[marty998]

Renting is significantly more expensive, avg rent is about $2900 or more.

I wonder... you say renting is more expensive... but if I can be frank here... your parents are at a life expectancy stage where releasing the capital, investing it, and paying rent from a combination of earnings and capital, might make sense.

An 8% withdrawal rate if you like. No need for it to last forever under a normal 4% withdrawal rate strategy.

[Mrs. Healthywealth]

Yes, it’s true, especially for my dad. We aren’t sure how long he has with us, but would be grateful for another couple years as long as he is comfortable. My mom, that’s a bit harder to say, she’s very active and “young” for 75. She has the potential to love into her mid-late 90’s, like her dad.

Im curious, where did you get 8% WR from?

Also, we spoke today and agreed to not have me assist with purchasing the house. If/when she is older she can always live primarily with me or one of my siblings, then rotate amongst the kids. Huge relief off my shoulders, now we can get back in our FIRE.

[frugaliknowit]

I think your plan is potentially messy.  I wouldn't co-mingle your capital and your parents in order to avoid selling the home your mom cannot afford.  I see little in the way of upside potential plus too many things can go wrong.

Your Mom should sell the house and either buy a much smaller one, rent, or go into assisted living for your Dad. 

[Goldielocks]

OP, to your original question -- the truly "fair" way to help your mom and dad with housing and have inheritance equal between the kids:

1.  They buy a home, and each offspring gives them an equal amount of money each month for expenses.
2.  If one of you needs to co-sign for it (you?), maybe that is what you have to do and get on the title, but your siblings  equally contribute $$.
3.  If you end up on title, just state your portion of the home that you paid for (above your share of the monthly support).  What % is owned by you at the time of purchase?
4.  Upon death, the house is sold.   Estate gets your mom's %portion, you get your %portion (if any, based on additional $$ you may have contributed). 
5.  Estate splits the remainder across all offspring equally.


You are absolutely correct that if buying this home, with an unknown and uncontrolled sell date, was not where you intended to invest your money (and it would NOT be), then helping your mom is a net cost to you, a cost that all siblings should share, all things being made fair.

Renting is by far preferred, as your parents can use up their home equity monies first, to eek out any shortfall instead of getting cash from you.  They need their money now.  You need your money now (to invest as you like).  The siblings getting less money in future is a much lower concern.

[Mrs. Healthywealth]

Thank you all for your responses. Really helped me during this rather stressful time. I agree it’s too messy. We agreed to not follow thru with this plan. HUGE relief; was able to sleep calmly again. Crunches some numbers for my mom, and came up with a more modest plan in which she uses her money to retire. If she lives into her 90’s, I will share responsibility of caring for her with my siblings as needed.