How to payoff and still protect a sibling's home

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ww340
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How to payoff and still protect a sibling's home

Post by ww340 »

We would like to payoff a sibling's home, however, he is a poor money manager and we fear he will just go out and borrow on it once again. We have been through this before.

He is working and drawing social security, but he is also in poor health and can't work at his current level much longer. He is going further into debt every year. We want to provide a roof over his head for the rest of his life, and we would ultimately like his paid off house to go to his children.

To complicate things, he is married to a much younger wife. We don't want to payoff the house only to have her take it in divorce or later leave it to her children. They have no children together.

We don't know if we need to buy it and put it into trust for them or if there some other scenario that could achieve our goal. We also don't want to create tax problems for ourselves in the process.
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Re: How to payoff and still protect a sibling's home

Post by sailaway »

Most of what you are suggesting assumes that this house is in no way considered marital property. Are you sure that is true?
masha12
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Re: How to payoff and still protect a sibling's home

Post by masha12 »

There is nothing in your post that makes me think paying off the house is a good idea.

You could buy the house and have them pay rent. They will probably stop paying rent and you will be on the hook for all maintenance and repairs, but at least you didn’t lose the house. Even that sounds like a bad idea.
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TomatoTomahto
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Re: How to payoff and still protect a sibling's home

Post by TomatoTomahto »

I would just send him a monthly payment that covers his shortfall every month on his/their mortgage.

Don’t get in the middle of his marriage.
I get the FI part but not the RE part of FIRE.
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celia
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Re: How to payoff and still protect a sibling's home

Post by celia »

The ship is “sinking” and you want to throw him a life vest? He needs to get in a row boat instead and start rowing (sell and rent instead).

You can help him with rent instead and the finances will be much cleaner.

Why aren’t his much younger wife and his kids helping him instead?
Last edited by celia on Thu Jan 14, 2021 12:52 pm, edited 1 time in total.
FoolishJumper
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Re: How to payoff and still protect a sibling's home

Post by FoolishJumper »

Keeping in mind the above concerns about maintenance, upkeep, throwing money at the problem, etc, if you still want to do this. Seems like a life estate for the brother (and possibly wife) could be possible. Depends if you can be forthcoming with your brother about what you are doing (as it seems unwise to pay market price as that just gives him additional cash to spend poorly, so you would ideally want to buy it for the outstanding mortgage amount). Even if the spouse has a marital interest in the home, they could sell you the home which they would have a life estate that legally permits them to be a tenant for the remainder of their life, but they don't own the property so they cannot remortgage it - you can also set up the life estate to prevent your brother and his wife from subleasing the property to gain money that way. At which time, the house would revert to you and/or your heirs, so you could will the house to your sibling's children.

Or you could even purchase the home with a life estate for your brother/wife with your nieces/nephews having remainderman interest, which is to say the house will be owned by the children but their father and stepmother have a legal right to live in the home until they die. These are all potential legal ways to do what you want, depending on the openness of your brother. You could speak to a lawyer to assist in drafting up the most effective way to do this in your state.
AlexanderTheMediocre
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Re: How to payoff and still protect a sibling's home

Post by AlexanderTheMediocre »

Either gift the money without any expectation in return or buy the asset yourself and let them pay rent for taxes/maintenance only. You can always deed the house yourself to the kids later. Anything else feels like you will end up in contortions that will hurt relationships.

If you owned the place and your sibling died, would you kick out his widow?
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ww340
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Re: How to payoff and still protect a sibling's home

Post by ww340 »

We are already covering shortfall, which is what fostered this thought. My husband would like to know that he has contributed a fixed amount of money to help them out, but not keep doling it out into infinity. He thought he could do this and be comfortable with what he was giving.

As I said, we have done this before with another relative and ended up having to repeat it 7 times until my husband did buy the house, and we are and have been responsible for everything for many years.

I did not see a good way to do this, which is why I asked here. It was proposed to buy the house, but as pointed out I don't want to be liable for all the upkeep, insurance and property taxes, and his wife will likely outlive both of us.

And yes this is martial property that the wife is agreeable to doing whatever needs to be done to save their house. We would not kick her out and she knows that.
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ww340
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Re: How to payoff and still protect a sibling's home

Post by ww340 »

FoolishJumper wrote: Thu Jan 14, 2021 12:50 pm Keeping in mind the above concerns about maintenance, upkeep, throwing money at the problem, etc, if you still want to do this. Seems like a life estate for the brother (and possibly wife) could be possible. Depends if you can be forthcoming with your brother about what you are doing (as it seems unwise to pay market price as that just gives him additional cash to spend poorly, so you would ideally want to buy it for the outstanding mortgage amount). Even if the spouse has a marital interest in the home, they could sell you the home which they would have a life estate that legally permits them to be a tenant for the remainder of their life, but they don't own the property so they cannot remortgage it - you can also set up the life estate to prevent your brother and his wife from subleasing the property to gain money that way. At which time, the house would revert to you and/or your heirs, so you could will the house to your sibling's children.

Or you could even purchase the home with a life estate for your brother/wife with your nieces/nephews having remainderman interest, which is to say the house will be owned by the children but their father and stepmother have a legal right to live in the home until they die. These are all potential legal ways to do what you want, depending on the openness of your brother. You could speak to a lawyer to assist in drafting up the most effective way to do this in your state.
I really like both of these suggestions. It is along the lines of what we were wanting to accomplish. We were originally going to do something similar in our wills, but they need the help sooner.
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Re: How to payoff and still protect a sibling's home

Post by Jack FFR1846 »

This appears to yet again be a case where someone is in a house they simply can't afford. The wife should be working. Is she's not, then why not?

I would suggest he get a reverse mortgage. He might not like that and you might not like that because he won't then leave the house to the kids. Well, I'm not leaving a Beverly Hills estate and a Pagani Huayra to my kids either because as much as I'd like to, I clearly can't afford to. In the same way, your brother also can't afford to leave anyone anything. The reverse mortgage will give him a place to live till he dies. At that point the much younger wife will have to do the appropriate thing and go to work.
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simplebarco
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Re: How to payoff and still protect a sibling's home

Post by simplebarco »

We did a refi so that we were then 1st and 2nd trust deed holders. We made 2 trust deeds to discourage any potential future lenders or other liens who would then be in 3rd position. We made the loan interest-only payments and set the interest rate in line with lowest AFR allowed by IRS. We'll never foreclose if they miss payments, we'll just forgive the payment as a 'gift'. We are loss-payees on the insurance and keep an eye to make sure they pay the property taxes every year. Someday long in the future the house will be sold and we'll get our money back, maybe. Or if the house passes to children, we can start to gift principal reductions up to the gift tax amount each year.
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Re: How to payoff and still protect a sibling's home

Post by galawdawg »

ww340 wrote: Thu Jan 14, 2021 12:28 pm We would like to payoff a sibling's home, however, he is a poor money manager and we fear he will just go out and borrow on it once again. We have been through this before....
ww340 wrote: Thu Jan 14, 2021 1:01 pm As I said, we have done this before with another relative and ended up having to repeat it 7 times until my husband did buy the house, and we are and have been responsible for everything for many years....
Perhaps your relatives see you and your husband as "easy marks" or know that you will bail them out of their poor financial decision-making. You can certainly continue to enable the poor choices made by your relatives but there is really no solution that can't be abused by the sibling, his wife or their immediate family.

Whether a life estate or trust, the life tenant or occupant has certain rights and responsibilities. You generally cannot restrict the life tenant from leasing the property, taking in boarders or doing other things that may not meet with your approval. Likewise, there are still certain responsibilities for the life tenant to pay taxes, utilities, perform maintenance and ensure that the property is not damaged or "wasted." What if those responsibilities are not met? Likewise, if the property is purchased and placed in a trust, will the trust handle all of the ongoing responsibilities of maintenance, repair, upkeep, taxes and so on?

Best wishes in whatever you decide, but recognize that it is unlikely that your desire to "help" will have the result that you and your husband intend.
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Re: How to payoff and still protect a sibling's home

Post by Dude2 »

I was in a similar situation with my mother, and I ended up just buying it myself. Yes, I had to also pay the insurance and taxes. No, she did not pay me rent. It's family. At least this way the asset is in your name. You can chose to sell it when the time comes. I also had to carry sufficient home owner's insurance to satisfy my umbrella policy and added it to my assets that were covered. This approach seemed the most straightforward solution, and it worked out fine.
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ww340
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Re: How to payoff and still protect a sibling's home

Post by ww340 »

simplebarco wrote: Thu Jan 14, 2021 1:22 pm We did a refi so that we were then 1st and 2nd trust deed holders. We made 2 trust deeds to discourage any potential future lenders or other liens who would then be in 3rd position. We made the loan interest-only payments and set the interest rate in line with lowest AFR allowed by IRS. We'll never foreclose if they miss payments, we'll just forgive the payment as a 'gift'. We are loss-payees on the insurance and keep an eye to make sure they pay the property taxes every year. Someday long in the future the house will be sold and we'll get our money back, maybe. Or if the house passes to children, we can start to gift principal reductions up to the gift tax amount each year.
So you actually financed the home yourself, or you got a commercial refi? How did you become 1st and and 2nd deed holders? This sounds like a promising avenue.
Last edited by ww340 on Thu Jan 14, 2021 3:19 pm, edited 1 time in total.
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ww340
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Re: How to payoff and still protect a sibling's home

Post by ww340 »

Jack FFR1846 wrote: Thu Jan 14, 2021 1:13 pm This appears to yet again be a case where someone is in a house they simply can't afford. The wife should be working. Is she's not, then why not?

I would suggest he get a reverse mortgage. He might not like that and you might not like that because he won't then leave the house to the kids. Well, I'm not leaving a Beverly Hills estate and a Pagani Huayra to my kids either because as much as I'd like to, I clearly can't afford to. In the same way, your brother also can't afford to leave anyone anything. The reverse mortgage will give him a place to live till he dies. At that point the much younger wife will have to do the appropriate thing and go to work.
At one time they could afford it, but that has been several years ago. It should have been paid off by now, or nearly so, but they have continued to refinance and take as much equity out as they could. A reverse mortgage will not work now because they do not have enough equity.

The wife finally started working last year after we refused to give them anymore money as long as she was not working. She is not educated and makes minimum wage, but she is working.
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Re: How to payoff and still protect a sibling's home

Post by galawdawg »

simplebarco wrote: Thu Jan 14, 2021 1:22 pm ...We made the loan interest-only payments and set the interest rate in line with lowest AFR allowed by IRS. We'll never foreclose if they miss payments, we'll just forgive the payment as a 'gift'...
You should probably consult with a tax attorney regarding this. It is possible that what you are describing is a "disguised gift" and therefore subject to gift taxation. In certain instances it could be considered tax fraud. :o IANYL!
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ww340
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Re: How to payoff and still protect a sibling's home

Post by ww340 »

masha12 wrote: Thu Jan 14, 2021 12:38 pm There is nothing in your post that makes me think paying off the house is a good idea.

You could buy the house and have them pay rent. They will probably stop paying rent and you will be on the hook for all maintenance and repairs, but at least you didn’t lose the house. Even that sounds like a bad idea.
I agree with you that this does not sound like a good idea, but it appears we will have to do something in order to ease my husbands mind.

celia wrote: Thu Jan 14, 2021 12:49 pm The ship is “sinking” and you want to throw him a life vest? He needs to get in a row boat instead and start rowing (sell and rent instead).

You can help him with rent instead and the finances will be much cleaner.

Why aren’t his much younger wife and his kids helping him instead?
His wife has finally gone to work. His kids are just starting out and have helped as much as they could. The one able to help the most now has 2 small children. He is willing, but not able at the moment. His boys are good money managers and will do well if given the chance.

We have spent years trying to get them to manage money, now there is not much left to manage, and too late to turn it around.
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Re: How to payoff and still protect a sibling's home

Post by celia »

The problem with a life estate that includes the younger wife is that she could later re-marry and you/your heirs would have to let her live there. Sounds complicated, to me.

If she outlives the husband and you are supplementing mortgage costs, are you going to do that for the rest of her life? You have to take care of yourselves first.
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Re: How to payoff and still protect a sibling's home

Post by PVW »

Loan your brother and wife an amount equal to the value of the house. Part of this will pay off the current mortgage and you can take out a mortgage lien for the entire value of the house. This would be a deterrent to anyone accepting the house as collateral on a 2nd loan. It removes the burden of ownership and liability that you would have if you bought it outright. It would discourage a widow from giving it to someone unacceptable to you. If another lien holder (tax, judgement, mechanics) forces foreclosure, you can either settle the debt or let the foreclosure proceed - which would likely return a good portion of your original loan.

Gifting the annual loan payments to your brother's family might cause some complexity with your taxes, but probably not anything more than buying the house and not charging rent.
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Re: How to payoff and still protect a sibling's home

Post by Wricha »

Was in a similar situation. For what it’s worth it seems like they have not hit bottom either because you are not allowing it or they are not there. Bottom maybe losing the house, and the wife leaving since he has nothing left at which point you can buy a one bedroom condo where everything is taking care of for a fee which is a known amount. Maybe be harsh, but after 5 years later SS is covering the expenses of the condo/living expense and requires no further financial commitment from me. Any additional money you might want for the next generation can be done more directly.
It just seems to me all this changing ownership, reverse mortgage, cutting the wife out, and trusts is far to cleaver for my liking.
Last edited by Wricha on Thu Jan 14, 2021 4:07 pm, edited 2 times in total.
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Re: How to payoff and still protect a sibling's home

Post by FelixTheCat »

ww340 wrote: Thu Jan 14, 2021 12:28 pm We would like to payoff a sibling's home, however, he is a poor money manager and we fear he will just go out and borrow on it once again. We have been through this before.
Every time I hear "poor money manager" I think BUDGET. Teach your sibling how to live within their means.

If you want to do something for them, pay for their YNAB bill https://www.youneedabudget.com/
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ww340
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Re: How to payoff and still protect a sibling's home

Post by ww340 »

celia wrote: Thu Jan 14, 2021 3:27 pm The problem with a life estate that includes the younger wife is that she could later re-marry and you/your heirs would have to let her live there. Sounds complicated, to me.

If she outlives the husband and you are supplementing mortgage costs, are you going to do that for the rest of her life? You have to take care of yourselves first.
This is a very real complicating factor. We are already doing something similar for my deceased mother-in-law's younger surviving husband. Not a fun situation to say the least. He does not have a life estate, but tough to kick him out.
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ww340
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Re: How to payoff and still protect a sibling's home

Post by ww340 »

This is all a consequence of a dying father's last words to his eleven year old son being "you are the man now, I am counting on you to take care of your mother and brother".

You know and I know that he did not mean that as literally as that child took it. But my husband has done well and he did take care of his mother to the max, even to the point of supporting her and her new husband until she died. He now intends to fulfill the rest of the promise by making sure his brother is taken care of.

The rest of our family will not be deprived no matter how he decides to handle this part of it. I would like it to be as painless for all of us as possible now and in the future.

Be careful what you say to people - especially children.
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Re: How to payoff and still protect a sibling's home

Post by JoeRetire »

ww340 wrote: Thu Jan 14, 2021 12:28 pm We would like to payoff a sibling's home, however, he is a poor money manager and we fear he will just go out and borrow on it once again. We have been through this before.

He is working and drawing social security, but he is also in poor health and can't work at his current level much longer. He is going further into debt every year. We want to provide a roof over his head for the rest of his life, and we would ultimately like his paid off house to go to his children.

To complicate things, he is married to a much younger wife. We don't want to payoff the house only to have her take it in divorce or later leave it to her children. They have no children together.

We don't know if we need to buy it and put it into trust for them or if there some other scenario that could achieve our goal. We also don't want to create tax problems for ourselves in the process.
Buy the house and rent it to your sibling and his young wife at whatever rate you feel is warranted.
Then, whenever he passes you can just decline to rent it to her. You can choose to give the house to his children, or not.
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illumination
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Re: How to payoff and still protect a sibling's home

Post by illumination »

I think buying the house and renting it to him makes the most sense. That's the only way I could see to make sure he always has a place to live no matter what dumb things he does financially. Just be prepared for him to never pay rent ever again on the place, you'll be lucky if he pays the utilities.

You could then decide to sell the house to the "young wife" or evict her.

I really think this situation screams "tough love" and to let him and his able bodied, non-working wife to figure it out. FWIW, I have a relative that did this type of stuff, it really did not help the people except ask for a bigger handout.
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Re: How to payoff and still protect a sibling's home

Post by celia »

ww340 wrote: Thu Jan 14, 2021 4:10 pm
celia wrote: Thu Jan 14, 2021 3:27 pm The problem with a life estate that includes the younger wife is that she could later re-marry and you/your heirs would have to let her live there. Sounds complicated, to me.
This is a very real complicating factor. We are already doing something similar for my deceased mother-in-law's younger surviving husband. Not a fun situation to say the least. He does not have a life estate, but tough to kick him out.
Hmmm, My first reaction is to ask if the BIL’s younger wife could live with the surviving Father-in-law? She doesn’t have to, but this could be the option your DH offers.

Very difficult promise for an 11-yo to keep, but your DH has done it wonderfully.
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Re: How to payoff and still protect a sibling's home

Post by FoolStreet »

ww340 wrote: Thu Jan 14, 2021 4:10 pm
celia wrote: Thu Jan 14, 2021 3:27 pm The problem with a life estate that includes the younger wife is that she could later re-marry and you/your heirs would have to let her live there. Sounds complicated, to me.

If she outlives the husband and you are supplementing mortgage costs, are you going to do that for the rest of her life? You have to take care of yourselves first.
This is a very real complicating factor. We are already doing something similar for my deceased mother-in-law's younger surviving husband. Not a fun situation to say the least. He does not have a life estate, but tough to kick him out.
Having gone through something similar, I will agree to not get involved if you can avoid it, and if you can't to protect yourself first and make the rules as clear as possible.

If at all possible, get them to move and downsize. I am not hearing about sentimental reasons that your husband cares about the property.

Simply writing a check to the landlord for $xx per month rent on behalf of your in-law would be the best situation.

If there is a decent amount of equity in the property and it is in a region with expected moderate property growth expectations and your hubby has sentimental attachments to the home that he cannot resolve, then the life estate seems to make the most sense. An Estate lawyer would write it up ($2-3k) and you can document applicable rights -- only available to the in-law and his family while he is living. In effect, your in-law is giving you equity in exchange for free rent stream of payments until in-law no longer needs it. Be prepared for paying for all rent, all maintenance, all utilities, the works. And then kick out the family if in-law ever passes. (or reevaluate). It will suck, but at least its in your control and you will have the home equity. This option tends to be better for aging-in-place widow or widower. An in-law with a family will get awkward.
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Re: How to payoff and still protect a sibling's home

Post by obafgkm »

Do the nieces and/or nephews WANT the house?
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ww340
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Re: How to payoff and still protect a sibling's home

Post by ww340 »

obafgkm wrote: Thu Jan 14, 2021 7:30 pm Do the nieces and/or nephews WANT the house?
That is a good question, We should ask them.
celia wrote: Thu Jan 14, 2021 4:52 pm
Hmmm, My first reaction is to ask if the BIL’s younger wife could live with the surviving Father-in-law? She doesn’t have to, but this could be the option your DH offers.

Very difficult promise for an 11-yo to keep, but your DH has done it wonderfully.
I wish we could just put them all together in one house, but I don't think that will work.

Yes, that was a heavy burden for an 11 yo and a young man, but he managed to provide well for them and us. He is pretty amazing.
FoolStreet wrote: Thu Jan 14, 2021 4:55 pm
Having gone through something similar, I will agree to not get involved if you can avoid it, and if you can't to protect yourself first and make the rules as clear as possible.

If at all possible, get them to move and downsize. I am not hearing about sentimental reasons that your husband cares about the property.

Simply writing a check to the landlord for $xx per month rent on behalf of your in-law would be the best situation.

If there is a decent amount of equity in the property and it is in a region with expected moderate property growth expectations and your hubby has sentimental attachments to the home that he cannot resolve, then the life estate seems to make the most sense. An Estate lawyer would write it up ($2-3k) and you can document applicable rights -- only available to the in-law and his family while he is living. In effect, your in-law is giving you equity in exchange for free rent stream of payments until in-law no longer needs it. Be prepared for paying for all rent, all maintenance, all utilities, the works. And then kick out the family if in-law ever passes. (or reevaluate). It will suck, but at least its in your control and you will have the home equity. This option tends to be better for aging-in-place widow or widower. An in-law with a family will get awkward.
Thank you for this advice. We do need to be in control as much as possible. My husband is not attached to the property, but he likes the property for his brother and wants to keep him there. It is a good location and does have potential for upside in value. From experience, we will be stuck with maintenance, etc. So far we have managed to escape taking on utilities and hope we will likely continue to draw that line.
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celia
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Re: How to payoff and still protect a sibling's home

Post by celia »

ww340 wrote: Fri Jan 15, 2021 11:18 am
celia wrote: Thu Jan 14, 2021 4:52 pm Hmmm, My first reaction is to ask if the BIL’s younger wife could live with the surviving Father-in-law? She doesn’t have to, but this could be the option your DH offers.
I wish we could just put them all together in one house, but I don't think that will work.
On the other hand, if you're pretty sure they won't be interested, you can offer for them to move in with you (depending on what your housing is like). Let them be free to choose to go elsewhere on their own dime. In the worst case and they move in with you, after a few months you can decide it's not working out and find someplace else for them.

This mainly would work if you're pretty sure they would not want to live with you (and your "noisy" / "obnoxious" neighbors you should start complaining about).

:D
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Re: How to payoff and still protect a sibling's home

Post by FoolStreet »

celia wrote: Fri Jan 15, 2021 2:13 pm
ww340 wrote: Fri Jan 15, 2021 11:18 am
celia wrote: Thu Jan 14, 2021 4:52 pm Hmmm, My first reaction is to ask if the BIL’s younger wife could live with the surviving Father-in-law? She doesn’t have to, but this could be the option your DH offers.
I wish we could just put them all together in one house, but I don't think that will work.
On the other hand, if you're pretty sure they won't be interested, you can offer for them to move in with you (depending on what your housing is like). Let them be free to choose to go elsewhere on their own dime. In the worst case and they move in with you, after a few months you can decide it's not working out and find someplace else for them.

This mainly would work if you're pretty sure they would not want to live with you (and your "noisy" / "obnoxious" neighbors you should start complaining about).

:D
I’m impressed Celia, you know how to play the long game.
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ww340
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Re: How to payoff and still protect a sibling's home

Post by ww340 »

Haha, Celia, unfortunately they would love to move in with us and never move out. No way that would work.

UPDATE:

Anyway, thanks again to everyone! We made the decision today and my husband informed his brother that we will send him a set amount every month for him to pay his mortgage. The amount will only cover the principal and interest payment. He will have to pay the insurance and taxes and we will not be putting the house in our name. We will pay this amount for 14 years, and at that point they should be able to get a reverse mortgage.

I am happy with this decision and so is my husband, so problem solved. I know he has been agonizing over this and he feels good about it tonight. So thanks again for a range of options for us to discuss and think about.
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Re: How to payoff and still protect a sibling's home

Post by FoolStreet »

ww340 wrote: Mon Mar 01, 2021 8:58 pm Haha, Celia, unfortunately they would love to move in with us and never move out. No way that would work.

UPDATE:

Anyway, thanks again to everyone! We made the decision today and my husband informed his brother that we will send him a set amount every month for him to pay his mortgage. The amount will only cover the principal and interest payment. He will have to pay the insurance and taxes and we will not be putting the house in our name. We will pay this amount for 14 years, and at that point they should be able to get a reverse mortgage.

I am happy with this decision and so is my husband, so problem solved. I know he has been agonizing over this and he feels good about it tonight. So thanks again for a range of options for us to discuss and think about.
Not an easy situation. Yet, you are a true rock upon which your family can depend. Curious why not send it directly to the mortgage company?
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climber2020
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Re: How to payoff and still protect a sibling's home

Post by climber2020 »

ww340 wrote: Mon Mar 01, 2021 8:58 pm Anyway, thanks again to everyone! We made the decision today and my husband informed his brother that we will send him a set amount every month for him to pay his mortgage. The amount will only cover the principal and interest payment. He will have to pay the insurance and taxes and we will not be putting the house in our name. We will pay this amount for 14 years, and at that point they should be able to get a reverse mortgage.
What will you do when you find out he's been spending that money on something else? I don't think anyone here will be shocked when that's what actually happens.
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Re: How to payoff and still protect a sibling's home

Post by surfstar »

climber2020 wrote: Mon Mar 01, 2021 10:02 pm
ww340 wrote: Mon Mar 01, 2021 8:58 pm Anyway, thanks again to everyone! We made the decision today and my husband informed his brother that we will send him a set amount every month for him to pay his mortgage. The amount will only cover the principal and interest payment. He will have to pay the insurance and taxes and we will not be putting the house in our name. We will pay this amount for 14 years, and at that point they should be able to get a reverse mortgage.
What will you do when you find out he's been spending that money on something else? I don't think anyone here will be shocked when that's what actually happens.
Agreed. My immediate thought/worry upon hearing of the plan.
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Re: How to payoff and still protect a sibling's home

Post by HomeStretch »

The start date of your assistance may be influenced by whether or not sibling has a mortgage payment moratorium.
Last edited by HomeStretch on Mon Mar 01, 2021 10:31 pm, edited 1 time in total.
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Re: How to payoff and still protect a sibling's home

Post by Dottie57 »

climber2020 wrote: Mon Mar 01, 2021 10:02 pm
ww340 wrote: Mon Mar 01, 2021 8:58 pm Anyway, thanks again to everyone! We made the decision today and my husband informed his brother that we will send him a set amount every month for him to pay his mortgage. The amount will only cover the principal and interest payment. He will have to pay the insurance and taxes and we will not be putting the house in our name. We will pay this amount for 14 years, and at that point they should be able to get a reverse mortgage.
What will you do when you find out he's been spending that money on something else? I don't think anyone here will be shocked when that's what actually happens.
If that happens it is truly time to cut the folks off.
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Re: How to payoff and still protect a sibling's home

Post by Peaceful »

ww340 wrote: Mon Mar 01, 2021 8:58 pm Haha, Celia, unfortunately they would love to move in with us and never move out. No way that would work.

UPDATE:

Anyway, thanks again to everyone! We made the decision today and my husband informed his brother that we will send him a set amount every month for him to pay his mortgage. The amount will only cover the principal and interest payment. He will have to pay the insurance and taxes and we will not be putting the house in our name. We will pay this amount for 14 years, and at that point they should be able to get a reverse mortgage.

I am happy with this decision and so is my husband, so problem solved. I know he has been agonizing over this and he feels good about it tonight. So thanks again for a range of options for us to discuss and think about.
O.K. it's clear this is being set up to fail almost immediately. There's no need to send the money to the brother and trust him to pay. He can just set up an online mortgage account and give your husband access to it to make the monthly payments directly to the account.

Your brother in law and his wife can't afford this house. Sorry. You're not helping them for a temporary period. This is permanent. The correct solution is for your brother and his wife to sell the house and move to a cheaper apartment that they can afford. If they still need some help you can help them with the monthly rent payments.

Ironically you and your husband think you're helping. You're not helping. This is a man who is at least 62 years old on social security already. You're treating him like a child. He's married with a younger wife too who presumably has the ability to work and earn some income to help pay their living expenses.

It sounds like your husband and his brother have a very weird family dynamic and somehow due to guilt or whatever your husband feels he owes his brother this.

None of it make sense.

This will unfortunately end up just costing you money and not solving the brother's problem. Is the brother an alcoholic/compulsive gambler/have diagnosed personality disorder which prevents him from functioning properly? That makes a big difference in how you try to help.
"Be fearful when others are greedy, be even MORE fearful when others are fearful."
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Re: How to payoff and still protect a sibling's home

Post by Peaceful »

ww340 wrote: Thu Jan 14, 2021 4:24 pm This is all a consequence of a dying father's last words to his eleven year old son being "you are the man now, I am counting on you to take care of your mother and brother".

You know and I know that he did not mean that as literally as that child took it. But my husband has done well and he did take care of his mother to the max, even to the point of supporting her and her new husband until she died. He now intends to fulfill the rest of the promise by making sure his brother is taken care of.

The rest of our family will not be deprived no matter how he decides to handle this part of it. I would like it to be as painless for all of us as possible now and in the future.

Be careful what you say to people - especially children.
Sorry, no sale. Your husband may have been a kid when his father told him those dying words, but he's been an adult for a long long time now. He's responsible for his decision including continuing to enable his brother.

Your husband supported not just his widowed mother, but her new husband as well?

Something is very strange in your husband's background. I'm sure the issue with the brother's house is just the tip of the iceberg.
"Be fearful when others are greedy, be even MORE fearful when others are fearful."
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Re: How to payoff and still protect a sibling's home

Post by beernutz »

TomatoTomahto wrote: Thu Jan 14, 2021 12:38 pm I would just send him a monthly payment that covers his shortfall every month on his/their mortgage.

Don’t get in the middle of his marriage.
I second this idea. By doing this you aren't committing to a permanent arrangement, opening yourself up to a liability, or getting in the middle of his relationship.

"Hey bro, we love you and we'd like to help you get out of this financial predicament you are in." Also give him a copy of the ChooseFI book.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. --Will Rogers
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Re: How to payoff and still protect a sibling's home

Post by Peaceful »

beernutz wrote: Mon Mar 01, 2021 10:49 pm
TomatoTomahto wrote: Thu Jan 14, 2021 12:38 pm I would just send him a monthly payment that covers his shortfall every month on his/their mortgage.

Don’t get in the middle of his marriage.
I second this idea. By doing this you aren't committing to a permanent arrangement, opening yourself up to a liability, or getting in the middle of his relationship.

"Hey bro, we love you and we'd like to help you get out of this financial predicament you are in." Also give him a copy of the ChooseFI book.
It's not that simple. Read the entire thread, it's interesting. What's presented as a "helping" motivation by the OP on the part of the husband seems under the surface to be something else entirely. OP's husband apparently uses his money to maintain the depency of and hence his control over the entire extended family. It sounds very Gothic. But it sure isn't "helping" anyone, and it sure isn't healthy. A psychiatrist or family therapist would probably be far more useful than a financial advisor.
"Be fearful when others are greedy, be even MORE fearful when others are fearful."
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Re: How to payoff and still protect a sibling's home

Post by Scott S »

^ Yeah, it's fascinating. No one is learning any lessons here. :oops:
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Re: How to payoff and still protect a sibling's home

Post by mgensler »

PVW wrote: Thu Jan 14, 2021 3:31 pm Loan your brother and wife an amount equal to the value of the house. Part of this will pay off the current mortgage and you can take out a mortgage lien for the entire value of the house. This would be a deterrent to anyone accepting the house as collateral on a 2nd loan. It removes the burden of ownership and liability that you would have if you bought it outright. It would discourage a widow from giving it to someone unacceptable to you. If another lien holder (tax, judgement, mechanics) forces foreclosure, you can either settle the debt or let the foreclosure proceed - which would likely return a good portion of your original loan.

Gifting the annual loan payments to your brother's family might cause some complexity with your taxes, but probably not anything more than buying the house and not charging rent.
This solution should fulfill what you are looking for. The house gets paid off and you have no future liability. You have the optionality of protecting your interest in the future if things get worse for them. It wouldn't take much time to put this in place. Your CPA or attorney can help structure this correctly.
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Re: How to payoff and still protect a sibling's home

Post by ww340 »

OK, thank you for your responses! This is why I posted. We are going to amend things based on what you have said.

I am going to send the payment directly to the mortgage company. I know that this will not guarantee they have a house in the end, as they will still be able to borrow more, but I will have done what I could.

That is what I wanted to do to begin with. My husband says he doesn't care if this doesn't solve the problem, because they do something else with the money, but I don't really believe that.

His brother actually said he would direct deposit the escrow payments to our account and we could make the full payment. I definitely do not want to do that. I will just send the principal and interest payment and he can direct deposit the escrow to the mortgage company.

I don't think at this late date we can have any impact on the way they handle finances. We have tried for decades to teach and advise him, but he has no interest in life beyond today. He is not going to change at this point - he is 65.

We do want to help in a way that has the least impact on us. We have been very fortunate and we don't mind sharing, but we hate just throwing the money away.
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Re: How to payoff and still protect a sibling's home

Post by HMSVictory »

You can not force someone to be responsible. There is no way for you to pay the house off and protect him from himself. He will find a way to borrow against it.

If you are INTENT on doing this then he can sell you the house and you can rent it to him for $1 per year. That way it is paid off his expenses are eliminated and he can not borrow against it. I would expect the house to not be taken care at this point though and you should budget for repairs and maintenance that they will refuse to do. You can leave the property to his children in your will.

For the record I would not pay off someones house who will not take your advice. Never.
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Re: How to payoff and still protect a sibling's home

Post by dziuniek »

Buy his house and rent it to him for free.
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Re: How to payoff and still protect a sibling's home

Post by ww340 »

As far as the personal relationships, it is very complex.

And yes, he still supports his widowed mother's second husband. He has never kicked him out of the house he bought for her. We pay all expenses and upkeep on the house as it is in our name, but have no other contact.

As my son once said when I was complaining " that's just the way Dad is, and that is why we love him."

Everyone is too old to be changing much at this point, so I am just trying to minimize collateral damage!
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Re: How to payoff and still protect a sibling's home

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (payoff).
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Re: How to payoff and still protect a sibling's home

Post by Dottie57 »

ww340 wrote: Tue Mar 02, 2021 9:29 am OK, thank you for your responses! This is why I posted. We are going to amend things based on what you have said.

I am going to send the payment directly to the mortgage company. I know that this will not guarantee they have a house in the end, as they will still be able to borrow more, but I will have done what I could.

That is what I wanted to do to begin with. My husband says he doesn't care if this doesn't solve the problem, because they do something else with the money, but I don't really believe that.

His brother actually said he would direct deposit the escrow payments to our account and we could make the full payment. I definitely do not want to do that. I will just send the principal and interest payment and he can direct deposit the escrow to the mortgage company.

I don't think at this late date we can have any impact on the way they handle finances. We have tried for decades to teach and advise him, but he has no interest in life beyond today. He is not going to change at this point - he is 65.

We do want to help in a way that has the least impact on us. We have been very fortunate and we don't mind sharing, but we hate just throwing the money away.
The best way to handle brother is what makes you and your husband feel the best. Sounds like you have a solution.
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Re: How to payoff and still protect a sibling's home

Post by Peaceful »

Doing what makes you feel best may not actually be what IS best for all concerned.

There are hints of this when OP states she was "complaining" to her son about the situation.

Yes, it is complex, which is why family therapy might be useful.

Clearly, OP's husband has sufficient resources to continue subsidizing the other family members.

That doesn't mean it's what is best for OP's brother in law.

Maybe the brother in law and his spouse would be better off if the house they are currently living in--and clearly cannot afford--is sold. If OP's brother wants to, he can just donate the proceeds of the sale to the brother in law and his spouse. Maybe they can find a perfectly suitable apartment or rental which is less costly, and then use the money saved for other things--travel, investments, etc. OP and her husband will still be free to send monthly payments to the brother in law and his wife, it's just that the brother in law and his wife won't be forced to continue living in a house which is unaffordable, as the "string" attached to the financial subsidies provided.

Continuing to treat the 65 year old brother in law like a child who is incapable of taking care of himself is probably not going to lead to the best solution over his remaining lifetime, and that of his younger spouse. I would imagine if some of this money now being dedicated to the unaffordable house were instead being directed to an investment portfolio for the benefit of the brother and his younger wife, that might be an option that appeals to them, in exchange for selling the house and downsizing.

This all assumes that the 65 year old brother in law is not cognitively or emotionally deficient or incapacitated in some way. Since OP hasn't said that he is, why not try to give him a greater role in establishing some degree of real autonomy and managing the rest of his own life?
"Be fearful when others are greedy, be even MORE fearful when others are fearful."
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