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!