We have decided to "sell" our house to our son & daughter-in-law

[SoCalDem]

It's worth about 260K, and we owe about 100K on it.... I would move in a heartbeat, but my husband won't hear of it...

Our son is in a very HIGH income bracket and needs additional write-off, so I though he could buy this house for what we owe, and we will "rent" it from them.. They can claim the write-off and we would never have to worry about a greedy hospital trying to take it from us, if a calamity befell us..

Does anyone know off-hand if a provision in our will could protect the interest of our other two sons when we check out?? My son and I thought that we could determine what "our interest in the house" would be at the point that they bought it, and that amount would be the 1/3 share that all of them would get...:shrug:

Would it be legal?? We are going to contact lawyers and tax people to be safe, but I am trying to think of all the questions we might have and might forget to ask ..Time is money:evilgrin:..

Some advice??

[madaboutharry]

1. Does your son own his own home?

I vaguely recall the laws changing that you can not claim a write-off on a second home. I could be way off, but I would check this out.

[SoCalDem]

6. Yes he does own his own home, but I am getting kind of

worried about the fact that we are both getting "up there in years", and one medical calamity could cause us to lose our house..

I think there was a proposal to eliminate a second home, but I don;t think it passed..

We will be doing the legal footwork thought :)

The house is the only thing of value we have, and I want it to go to my kids...not a greedy hospital..

[PSU84]

2. There are no VERY HIGH tax brackets any more.

Your son should just pay his income tax and stop bitching.

If he needs a "write off" he can donate some of his obscenely high income to a deserving charity.

[madaboutharry]

4. This is also a very valid

comment.

[PSU84]

7. B.S.

Try FreeRepublic.com Home of the tax dodgers.

[madaboutharry]

11. Is this directed towards

me?

[SoCalDem]

8. He DOES pay high taxes.. but he is just trying to do what our

"beloved president:puke:" keeps saying.. Planning for his own future.. The more of HIS MONEY that he can keep, will prepare HIS future :)

and it's something that would protect US too.. so that we would never be wothout a place to live...The house that he was raised in :)

[PSU84]

12. Look into a reverse mortgage.

Or a sale - leaseback with your son.

[SoCalDem]

13. I will.. Thanks.. We are just starting the process..

I guess I am getting scared these days.. I personally know people our age who have had limited incomes, and ended up losing their houses because of medical bills.. Right now we have insurance, but if anything happened to my husband, I would be up shit creek with no paddle..

It seems like a logical thing to do.. whatever the name for it is.. Our oldest son would be the one who woould help us the most, since he has the most, and it only seems fair to have it benefit him as well..

[PSU84]

15. My mom and dad are 81 and 84

and own their own home - in a small town in Pa. - also the house I grew up in. Probably worth $35,000 at most. Banks won't even consider a reverse mortgage on it. They can't manage the upkeep and maintenance anymore and are probably going to have to move to a rent subsidized 2-room apt., if they can find one..... It's all relative.

[2Design]

22. I believe reverse mortgages are not in the person best interest but

in the banks interest. Just like equity loans can get people into huge trouble and lose their house.

your son having the house in his name is a good idea. You could sell to all sons as ownership in joint tenacy or some name like that - they would own equal shares -

there are numerous provisions you can do with a mortgage - but your right protecting your right to live there is important and making sure no other 'institution' can take it away from you is another.

A real estate lawyer is a good idea. There are ways to sell with provision that you get to live there until both dead.

good luck with this

[mrbassman03]

3. This is a great idea!

We have the opposite right now, my parents purchased our house from us and we make payments to them. The lowest mortgage rates ever, and no worry about foreclosure. I say go for it!

I don't know about tax write-offs, but I would doubt the IRS would go for it...

[SoCalDem]

10. The loan would be in their names, so they would be the ones deducting

the interest, instead of us deducting it like we do now..:)

[ogradda]

5. i would check the laws of the state you live in

my mom had that kind of problem and she did a "living will" thing but that's in wa state i'm not sure if it would work anywhere else.

[madrchsod]

9. yes- check the laws in cali

with all the things you are talking about ,it`s lawyer time.

[Lex]

14. If the house is not purchased by your son for fair market value

.
then the portion UNDER fair market value is considered by the IRS to be a gift to him. In other words, if the house is worth 260K and you sell it to him for 100K, then 160K of that is a "gift" pursuant to IRS rules and gift taxes would have to be assessed for both parties.

Also, on non-market value transfers there is I think a 3 year "look back" period by Medicaid and the portion that was a "gift" can be placed under lien by Medicaid.

Check with your tax guy and your attorney on this to be sure.

[SoCalDem]

19. "look-back" is why we want to do it now, instead of later

We are definitely planning to do research, and do it all legallyt.. Thanks for suggesting all these things.. This is exactly what I wanted.. Lots of ideas and possible stumbling blocks :):)

[Kadie]

20. Yep, 3 year period that they can go back.

Talk to an attorney. You may want to see about a life estate. That would guarantee you a place to live if you change the title on your home to your kid(s) names.

[eleny]

16. Be sure to find an elder law attorney in your area

They specialize in knowing how to handle protecting property. What you've proposed here sounds just a little squishy. I'm not sure you can sell your place to one child and still have the others each own a share. But an elder law practise should have some ideas.

Good luck with this!

[GoBucksBeatBush]

17. a few observations...

1. if your son pays the whole thing off, there's no longer any interest being paid to anyone, so ergo no tax deductions...you don't get a write-off for payments on the principle of the house (the actual value of the house that you're paying), you only get to write off the amount of interest on the mortgage you're paying. If he pays off the rest of the 100K, that eliminates any need for further interest payments and therefore no write off.

2. If I recall correctly, you can only claim a write-off for your primary residence. If your son owns his own home, as you indicate, a good possibility that he woulnd't be able to claim a tax write-off, even disregarding (1) above.

3. By doing this (I'm assuming your son will plunk down the whole 100K in cash), you effectively lose any tax deductions that YOU might still otherwise have for paying interest. The flip side of that is that you won't have to worry about losing the house should your income stop or lessen unexpectedly.

4. Note that there may be some issues related to the fact that the apparent market value of the house is $260K and you are, if I understand correctly, selling this house to another party for $100K. Not sure that the gub'ment (and your neighbors) will be too keen on that idea, but I don't know if there's a law that says you CAN'T do it...

5. Also note that you will have to pay taxes on the difference between the appraised value when YOU bought and the value for which you sold the house...might want to plan for that...

6. I'm not sure what the deal is regarding ensuring that the ownership interest is split three ways...

7. Above all, even though this is a family transaction, handle it as if this were another private party buying your house...hammer out ALL the details, and PUT IT IN WRITING!!!!! I know it sounds silly to do, but doing things the right way will prevent a TON of head(and heart)aches further on down the line. Go to the lawyers, explain exactly what you want to do, and have them work everything out, with not only your wealthy son, but ALL of the children fully informed and aware of what's going on. Pay someone the money it will cost to have a lawyer do this transaction correctly...you'll be thankful you did later on.


Just my opinion, don't take any of this to be any form of legal advice in any way whatsoever. I know nothing!

[SoCalDem]

21. Excellent points.. That's why I posed the issue here..

There are many very savvy people here..

I am not a materialistic person, and making money off this is not my goal.. I am interested in having a roof over my head.. If we sell the house, then we have to move.. My husband is 100% against this.:grr:...

We will need to stay here and not owe more than we do now.. We just thought that we could pay rent to our son who would "own" the house, instead of a bank :)

He would take out a loan to "buy" it from us.. :)

We will be consulting on the legal stuff..:)

[2Design]

23. don't want to rent or he would have to claim as income

if he owns the house and it is not rented - then it is a second home and he can write off stuff - something about only renting it for two weeks or less in a year -

[SheilaT]

18. This is really complicated enough

that you should check with a lawyer.

As someone else said, your son probably cannot take an interest deduction for a second house, but that needs to be researched. The other thing is that if you sell it to the one son, he owns it. There is no way to protect the interests of your other two sons.

Do you have a will? When was the last time it was updated?

You need to look at all aspects of your financial situation. If you sell the house for such a low amount, less than half of what it's worth, you're kissing goodbye that money forever. You'd be much better off selling it, and putting the proceeds into an annuity to provide income. Anyway, the lawyers and tax people will be able to work through all the ramifications and figure out what's best all around. And expect all of this to take several months. It's not a quick process.

[sandnsea]

24. Very complicated

Create a family trust? Incorporate a rental business? People are right that he won't get a tax break for a second home if he's renting the house out. Seems there should be another way though. And you can sell to your kids for "x" dollars and "love and kindnesses", some wording like that, I can't remember anymore. The only way I know of that you could get into trouble is if you're trying to get Medicaid to pay hospital bills, not if you're just trying to protect your assets with no particular illness coming at you. Of course, a friend of ours had his parents home in his name and the hospital tried to coerce him into signing it over anyway. So just getting the house out of your name is no guarantee. A good estate lawyer should be able to help you out. Annoys the crap out of me, work your whole life just to hand it all over to a medical corporation. They get you coming and going, the bastards.

(Of course your husband won't move... leave all that oak??? :))

[OKNancy]

25. Hi there - are you sure they can "take" your home

I assume you are talking about if you have tons of medical bills, and you file bankruptcy?

I know different states are different, but in Oklahoma they can't take your home or it's furnishings.

[SoCalDem]

26. Thanks for all the wonderful input..

We are just starting to think about this "stuff".. Neither of us is ill (well , my husband is diabetic, but so are millions of other folks)...but as we enter the "endgame" of my husband's work time, we are starting to get kind of scared.. Right now he has excellent healthcare, but when his job ends (in not all that many years), so does that,, I am 6 yrs younger than he, so I will have no coverage at all.. I am not a doctor-y person, but you never know..

It's odd, that when you reach a certain age, things start to matter now that never did.. For literally 2 decades we were totally absorbed in getting the best medical care for our oldest son, and moved heaven and earth to pay for his care (with the help of insurance, of course).. During the time when others like us (lower-to-middle class) were starting the "nest-egg" years, we were paying doctors and hospitals and barely getting by...and now we might pay dearly..

I am the free-spirit in this marriage.. I would pack up today, and move...anywhere...but my husband is the one with deep roots..:(..

We will be researching this further, and getting the professional advice, but at this point, I am only interested in seeing that the one asset we have is protected.. Not out to screw anyone..Uncle Sam included.. :)

Again, thanks for all the wonderful tips.. It never hurts to know the questions to ask :)

[ikojo]

27. Aaah class privilege...isn't it grand?

I hope you don't lose your house to a hospital but I also hope you realize how privileged you are....poor people don't have the connections to sell what little they have to avoid losing it all to greedy hospitals who have cared for them.

I hear talk like this a lot at work. Middle and upper middle class people taking over their well to do parents home so that their parents can scam Medicaid and get services they would not be eligible for if the very nice home was still in the parents' name. Yet some of these people (I am not saying this of the poster) would say that the poor are poor because they are lazy and they deserve no assistance.