Author Topic: moving in with parent, best way to stucture ownership of new house  (Read 4493 times)

wotan

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both wife and i are retiring next year. wife's father is 85 years old and wants us to move in with him for medical reasons. we plan to move into a new house and was wondering the best way to structure the purchase concerning the ownership. both of our current houses are free and clear. father has will leaving his current house to her. will be moving to south carolina were the father currently lives.

GizmoTX

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Re: moving in with parent, best way to stucture ownership of new house
« Reply #1 on: October 29, 2014, 10:05:30 AM »
Will you be keeping either of the existing houses? Purchasing another house?

wotan

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Re: moving in with parent, best way to stucture ownership of new house
« Reply #2 on: October 29, 2014, 11:22:29 AM »
selling both houses and buying a new one. concerned with the father if he has to go into a nursing home.  if he pays for the house but the house is in our name, is there a tax situation?

TrMama

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Re: moving in with parent, best way to stucture ownership of new house
« Reply #3 on: October 29, 2014, 12:15:50 PM »
Does your wife have any siblings? If yes, this can complicate things in terms of family relationships since your wife stands to benefit financially from whatever arrangement you come up with. She will basically be getting some of her inheritance early. Her siblings may take issue with this.

We did something very similar with MIL. Since MIL is terrible with money we did not want any joint ownership with her. DH and I bought the house and MIL gave us a lump sum from the proceeds of the sale of her home. We view it as her paying us rent up-front for the rest of her life.

Goldielocks

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Re: moving in with parent, best way to stucture ownership of new house
« Reply #4 on: October 29, 2014, 12:19:14 PM »
When we considered this, our choice was to have the relative pay rent on a monthly basis.    (Relative has not moved in yet, so we use the extra space ourselves for now)

That way they still have $$s to spend, give away, or invest as they liked, and they also have a nest egg to pay for long term care if things should change.

wotan

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Re: moving in with parent, best way to stucture ownership of new house
« Reply #5 on: October 29, 2014, 01:40:24 PM »
Does your wife have any siblings? If yes, this can complicate things in terms of family relationships since your wife stands to benefit financially from whatever arrangement you come up with. She will basically be getting some of her inheritance early. Her siblings may take issue with this.

We did something very similar with MIL. Since MIL is terrible with money we did not want any joint ownership with her. DH and I bought the house and MIL gave us a lump sum from the proceeds of the sale of her home. We view it as her paying us rent up-front for the rest of her life.

wife has no siblings.

Terrestrial

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Re: moving in with parent, best way to stucture ownership of new house
« Reply #6 on: October 29, 2014, 02:06:24 PM »
selling both houses and buying a new one. concerned with the father if he has to go into a nursing home.  if he pays for the house but the house is in our name, is there a tax situation?

As long as his total estate is under ~5M there will be no long term tax consequences.  He can:

Gift both you and your wife 14k this year (28k total)
Gift both of you 14k after January 1st (28k total)...assuming you will not get everything finished in the next 2 months to move.
That's 56k total that fits under the annual gift tax exemption. 

I BELIEVE if you have children (or other trusted family members) he can gift them 14k as well that they can turn around and gift to you under their yearly personal gift exemption.  So theoretically you can gift any ammt of money if you have enough people to run it through without ever decreasing your lifetime exemption.  I'm not positive this is acceptable, but I don't know of any rule against it.

The short answer is I am assuming his total estate is under 5M so he can realistically gift you any amount without paying taxes, he just has to file an IRS form for that year for anything above the exemption amount and that will decrease his lifetime estate exemption.  As the receiver of the gift you will not incur any tax.

The other thing you can do, is just buy it Joint Tenants with Right of Survivorship, and when he passes his ownership share will go to you and your wife.  Not to impugn your honor at all but that would probably be better for him...it prevents you from booting him out on the street (again not at all implying you would do that, just from a purely legal point of view).  The downside for you is that technically he can sell his ownership share to another person, say if you were to have a falling out.   


GizmoTX

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Re: moving in with parent, best way to stucture ownership of new house
« Reply #7 on: October 29, 2014, 02:08:06 PM »
I'd be hesitant to put the proceeds from the sale of both houses into a joint new one, because your FIL may need to pay for a nursing home or medical expenses.

I think you should keep the sale proceeds separate. You & your wife buy the new house in your names only. Your FIL can pay you room & board for as long as he's living there, which reduces what he will eventually leave to your wife. If you need part of his money to qualify or avoid PMI, then this could be part of his lifetime gift tax exclusion and/or a loan.

My MIL sold her house to move into an independent living apartment in a senior community that also has assisted living if she needs it. This has many advantages: lots of social life (she had become isolated in her house), safe environment (her house was a multi-story danger to her), regular meals (she had been neglecting to eat), & easy access to services (she no longer could safely drive). She had to pay an upfront price that will mostly be refunded to her or her heirs when she leaves, plus a monthly fee that covers most meals, some housekeeping, & other appropriate services. A relative helps manage her remaining money, since dementia is becoming an issue.

You should be careful to select a house that has safe living space for your FIL or can be easily altered for aging issues. These include single story access, no steps, 3' wide doors, grab bars in the bathroom, rimless shower instead of tub, no throw rugs or slippery floors, good lighting.

wotan

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Re: moving in with parent, best way to stucture ownership of new house
« Reply #8 on: October 29, 2014, 03:54:45 PM »
selling both houses and buying a new one. concerned with the father if he has to go into a nursing home.  if he pays for the house but the house is in our name, is there a tax situation?

As long as his total estate is under ~5M there will be no long term tax consequences.  He can:

Gift both you and your wife 14k this year (28k total)
Gift both of you 14k after January 1st (28k total)...assuming you will not get everything finished in the next 2 months to move.
That's 56k total that fits under the annual gift tax exemption. 

I BELIEVE if you have children (or other trusted family members) he can gift them 14k as well that they can turn around and gift to you under their yearly personal gift exemption.  So theoretically you can gift any ammt of money if you have enough people to run it through without ever decreasing your lifetime exemption.  I'm not positive this is acceptable, but I don't know of any rule against it.

The short answer is I am assuming his total estate is under 5M so he can realistically gift you any amount without paying taxes, he just has to file an IRS form for that year for anything above the exemption amount and that will decrease his lifetime estate exemption.  As the receiver of the gift you will not incur any tax.

The other thing you can do, is just buy it Joint Tenants with Right of Survivorship, and when he passes his ownership share will go to you and your wife.  Not to impugn your honor at all but that would probably be better for him...it prevents you from booting him out on the street (again not at all implying you would do that, just from a purely legal point of view).  The downside for you is that technically he can sell his ownership share to another person, say if you were to have a falling out.
we don't need his money to buy the next house. just trying to protect his house equity from the nursing home if he has to go in.
instead of joint tenants i was thinking of a life estate to protect his interest.  don't know how to "price" a life estate.

Goldielocks

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Re: moving in with parent, best way to stucture ownership of new house
« Reply #9 on: October 29, 2014, 04:02:47 PM »
just trying to protect his house equity from the nursing home if he has to go in.


Such a sad philosophy -- you want to protect his house equity by falsely claiming that his is destitute and therefore qualifies for government support,. should he need to use government funded nursing homes.

Yeah, I know that there are things I don't understand about US government and culture, but this is really what your comment boils down to, isn't it?

I would rather have my relatives able to pay with their own money for their choice of support, and if full-on expensive care is needed, then that is where the money goes. Here, many people spend out their last $$'s on private care before nursing homes, so giving it to the government is rarely an issue.   I prefer that to my getting an "inheritance" anyway.

GizmoTX

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Re: moving in with parent, best way to stucture ownership of new house
« Reply #10 on: October 29, 2014, 04:48:18 PM »
we don't need his money to buy the next house. just trying to protect his house equity from the nursing home if he has to go in.

You mean your inheritance.
Medicaid is supposed to be the last resort for the indigent.
Don't you know the government looks back 5 years to see if such "protection" has happened?
This is exactly why you don't want to co-mingle your assets -- you may be liable as well as your FIL for recapture.
 
http://www.nolo.com/legal-encyclopedia/how-can-i-safely-transfer-my-assets-get-medicaid-pay-long-term-care.html

wotan

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Re: moving in with parent, best way to stucture ownership of new house
« Reply #11 on: October 29, 2014, 09:14:09 PM »
just trying to protect his house equity from the nursing home if he has to go in.


Such a sad philosophy -- you want to protect his house equity by falsely claiming that his is destitute and therefore qualifies for government support,. should he need to use government funded nursing homes.

Yeah, I know that there are things I don't understand about US government and culture, but this is really what your comment boils down to, isn't it?

I would rather have my relatives able to pay with their own money for their choice of support, and if full-on expensive care is needed, then that is where the money goes. Here, many people spend out their last $$'s on private care before nursing homes, so giving it to the government is rarely an issue.   I prefer that to my getting an "inheritance" anyway.

so if a person uses a reverse mortgage and spends his entire house equity to live on, according to you he would be falsely claiming to be destitute and qualify for government support. such a sad philosophy

Goldielocks

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Re: moving in with parent, best way to stucture ownership of new house
« Reply #12 on: October 29, 2014, 09:56:59 PM »
just trying to protect his house equity from the nursing home if he has to go in.


Such a sad philosophy -- you want to protect his house equity by falsely claiming that his is destitute and therefore qualifies for government support,. should he need to use government funded nursing homes.

Yeah, I know that there are things I don't understand about US government and culture, but this is really what your comment boils down to, isn't it?

I would rather have my relatives able to pay with their own money for their choice of support, and if full-on expensive care is needed, then that is where the money goes. Here, many people spend out their last $$'s on private care before nursing homes, so giving it to the government is rarely an issue.   I prefer that to my getting an "inheritance" anyway.

so if a person uses a reverse mortgage and spends his entire house equity to live on, according to you he would be falsely claiming to be destitute and qualify for government support. such a sad philosophy

If that's what you meant I misread. I thought you were talking about his buying into your home without putting his name on title and transferring A lot of money to you.