What is the risk/downside to buying a condo for parents?

[Fullhouse11]

My in-laws paid for all of my husband's medical school costs.  They have asked for nothing in return.  They are ready to move out of their family home and into a condo where they have friends and a sense of community.  Their finances are not awful, but not flush either.  They both have significant health issues, but they are still able to live on their own and I expect that they could for another 5-8 years.   We recently moved to the city where they live to help.  I am the stay at home spouse and money manager.  My husband loves his job and does not have a desire to retire, his income is on the high end for a specialist.  Our retirement investments are over $3M and we are in our mid-40s.

I want to buy the $230k condo for his parents and then they could use their proceeds from their house to feel more comfortable.  What is the downside?  Would we put it in the parents' names, my husbands, mine, all of us?

[StarTrekDoc]

Family first IMHO.  Talk it over with your SO, but it's a nice notion and makes the parents pretty proud that the offspring does things like this.

For finances - depends on the city and how you setup your finances, and the new tax reform.    What's the plan for this condo in 5-10years afterwards?  Sell?  Rent?    With $3M already, what's your Real Estate exposure in the that portfolio?  I would consider creating LLC, and putting the condo in there.  That will allow all expenses to pass through most efficiently (including deductions off HOA, paying their electricity bill and whatever expenses) along with depreciation on the property and mortgage if you don't pay in full.   Then future rental earnings also pass through and if positive flow, may get that 20% deduction if <415k or tinker the nonvoting LLC ownership with adult kids.

If no LLC; without mortgage - hold directly in Trust.   with mortgage-- Title as Community property and move into trust.

Your estate is getting big enough to really take a closer look at that.  We just revised our plans with your same age/worth.

[Donnie]

Go for it.  If you are buying it, I would put it in your own names.  You can worry about an LLC if you decide to rent later.  The main downside is that if you hold for less than about 7 years, you will probably have been better off renting the condo for your parents.

[q-school]

we bought my parents a house.  it's in their name.  we bought them a car--it's german and has three pointed star cause they wanted one nice car before they died.  it's fine but no we are on the very backend of their lives, and mom is worried about assets and long term care and losing all the money to what she considers ridiculous health care costs.  send them monthly stipends.

she wants all her assets divided 50/50 between her two kids, which in a way is fine, but ignores that we bought them a house and sent them a lot of money over the years.  i told her to give everything to my sister, who is very middle class,  but she absolutely refuses.  wife is happy mom refused.

we didn't buy my inlaws a house but sent them a lot of money over the years, i mean into hundreds of thousands aggregately.  their house is worth over 7 figures.  many years ago they promised the house to my wife since her sister didn't want anything to do with it.  sister is rich, even compared with me.    now sister is married, and her husband mba thinks house should be divided in half along with rest of assets.  when i tested the waters about splitting the monthly support they balked.   i'm unhappy that sister in law and husband who are wealthy are suddenly changing the deal.   blah blah about kids and what's fair.

anyhoo, point is life changes for everyone.  i think you have to be prepared to lose all the money.  by prepared, i mean everyone involved with no hard feelings.  i thought i was prepared but i find myself annoyed by my in laws even though i thought of the support as truly a gift since inception.  and surprised my lovely and generous wife cared whether mom split the small inheritance with me and sister.  although that house has appreciated too, now that i look it up on zillow.  it's not so small anymore.  be prepared for questions from any siblings.  may be best to write down on paper exactly what the entrance and exit plans are, depending on family dynamics.

this may have nothing to do with your question.

good luck

 

 

[Fullhouse11]

Q-school... This is exactly one of the scenarios that I worry about.  The inlaws were generous to a fault to both my husband and his sister.  Or, if we purchase the condo, put it in our name and they burn through all of the money from the sale of the house, she may see it as we enabled them to spend it all.  I think that it's best if we put it in our names, but then there is the scenario where we all think it's time for them to go to assisted living.  Would we be the ones to have a bigger say because we hold the deed to their home?  This stuff is harder than just money.

[jz]

I like the idea above of creating an LLC as a rental home, in order to deduct most of the cost of ownership. However, IRS wants to see you charge a "fair rental value." Is there a way for them to pay "rent", at least on paper.?
Also, how will you manage this if a survivor needs to move to assisted living?

[Donnie]

Fullhouse11 wrote:

Q-school… This is exactly one of the scenarios that I worry about.  The inlaws were generous to a fault to both my husband and his sister.  Or, if we purchase the condo, put it in our name and they burn through all of the money from the sale of the house, she may see it as we enabled them to spend it all.  I think that it’s best if we put it in our names, but then there is the scenario where we all think it’s time for them to go to assisted living.  Would we be the ones to have a bigger say because we hold the deed to their home?  This stuff is harder than just money.

Click to expand...

No, you wouldn't have more say because you gave them a house.  That's ridiculous.  You don't get to buy control of your parents or buy more voting power in your family.  Just give them the house with no strings attached.  If you feel like you would be owed something for this gesture or would be mad if they burn through all their money (which it is absolutely their right to do), don't give them a house.  I have changed my opinion, I don't think you should buy this house.  It is very likely going to cause issues with your family.

[CREGuy]

q-school wrote:

we bought my parents a house.  it’s in their name.  we bought them a car–it’s german and has three pointed star cause they wanted one nice car before they died.  it’s fine but no we are on the very backend of their lives, and mom is worried about assets and long term care and losing all the money to what she considers ridiculous health care costs.  send them monthly stipends.

she wants all her assets divided 50/50 between her two kids, which in a way is fine, but ignores that we bought them a house and sent them a lot of money over the years.  i told her to give everything to my sister, who is very middle class,  but she absolutely refuses.  wife is happy mom refused.

we didn’t buy my inlaws a house but sent them a lot of money over the years, i mean into hundreds of thousands aggregately.  their house is worth over 7 figures.  many years ago they promised the house to my wife since her sister didn’t want anything to do with it.  sister is rich, even compared with me.    now sister is married, and her husband mba thinks house should be divided in half along with rest of assets.  when i tested the waters about splitting the monthly support they balked.   i’m unhappy that sister in law and husband who are wealthy are suddenly changing the deal.   blah blah about kids and what’s fair.

anyhoo, point is life changes for everyone.  i think you have to be prepared to lose all the money.  by prepared, i mean everyone involved with no hard feelings.  i thought i was prepared but i find myself annoyed by my in laws even though i thought of the support as truly a gift since inception.  and surprised my lovely and generous wife cared whether mom split the small inheritance with me and sister.  although that house has appreciated too, now that i look it up on zillow.  it’s not so small anymore.  be prepared for questions from any siblings.  may be best to write down on paper exactly what the entrance and exit plans are, depending on family dynamics.

this may have nothing to do with your question.

good luck

 

 

Click to expand...

This was my first thought when I read the above scenario.  Most likely the biggest issue would be if you put it in your parents name, to make sure that it's clearly defined in their will/estate plan that the house is excluded from their assets.  While you're not doing this for financial gain, having to essentially "pay" 50-75% (or whatever % it works out to be with your siblings/heirs) of the homes future value would not be easy to stomach, regardless of your financial status.  While it seems reasonable that this wouldn't be an issue, and that any siblings would be rational that you bought the condo for parents and it shouldn't be included as part of their estate to be split among all the heirs, I can tell you from my experience that rational, reasonable thoughts and actions from family when it comes time to split an inheritance simply isn't going to happen most of the time.

 

[cgossage]

I think it's a great thing that you are doing.  We bought my in-laws a house and a car as well.  My wife grew up under the poverty line and is Chinese.  For those that don't know, in Chinese culture, taking care of one's parents is part of the deal.  We had a deal in medical school that once she was making an income in residency that she could use most of that to take care of her parents, so we actually bought them a house at that time which is kind of crazy.  After she became an attending, we bought them a Lexus as a thank-you for always being available to watch our two young kids.

For logistics, I agree with putting the condo in your name.  That way you don't have to worry about any estate issues later in life.

 

 

[Fullhouse11]

CREGuy:  I'm sorry, I think maybe my response didn't convey the intent.  I worry that things can get muddy and it sounds like it did for Q-school.  Our intent would never be to do anything that is against the wishes of my inlaws.  They are amazing people and have given us so much.  Thank you for making me aware of how my post sounded.

[q-school]

We thought all those things through. However in the end we thought it was a gift and my parents felt better about being the home owners than they felt about living in someone else’s house. Just to provide another perspective.

I mean I send them money and they donate it to charity. I could use the write off but I could never get them to understand how they were giving the money if I was giving the money.

The sense of ownership was important to them.
Ymmv.

[KPInvestor]

Fullhouse11 wrote:

My in-laws paid for all of my husband’s medical school costs.  They have asked for nothing in return.  They are ready to move out of their family home and into a condo where they have friends and a sense of community.  Their finances are not awful, but not flush either.  They both have significant health issues, but they are still able to live on their own and I expect that they could for another 5-8 years.   We recently moved to the city where they live to help.  I am the stay at home spouse and money manager.  My husband loves his job and does not have a desire to retire, his income is on the high end for a specialist.  Our retirement investments are over $3M and we are in our mid-40s.

I want to buy the $230k condo for his parents and then they could use their proceeds from their house to feel more comfortable.  What is the downside?  Would we put it in the parents’ names, my husbands, mine, all of us?

Click to expand...

Go for it.  Based on your finances, I doubt 230K will make much of a difference if at all.  In fact, it may make a good rental for you in the long run.  In all honesty, sometimes money is that last thing you should think of.  This just seems like the right thing to do.  If I was your husband, you would make my day by simply suggesting this.

 

 

[StarTrekDoc]

This is why it's important for your SO to take the lead on this.  Sibling dynamics vary and can be very subtle, dating back to that single childhood moment when you got the blue one instead of the green one -- yes can be that minute and silly at times.

We did the same for both sets of parents with different arrangements.  My wife is single child so the $$ sent to support them is only our own concern and easy to go through the 'what if' scenarios.

My parents though is different.  We moved away from the family -- 2 siblings and parents -- with the parents wanting to move with us due to weather and location.   We ended up buying a condo under LLC and having them pay a small rent.   It still didn't go over great with us stealing mom and dad, but they do go visit quite often.  It's not the same and older sis does rib me on it, but we all have a good relationship.

Luckily, we're all financially secure despite each of us having very different saving/spending/investing styles -- makes fun conversations when we all get together!  It's about open communications and mutual respect on decisions and 'you do you' with no secret agendas.   Makes a lot better lines of communications and feelings be where they fall.

[mobilehomegurl]

If you decide to do it, be sure you're buying the condo with the intention mentioned: as a gift. If you feel like there will be strings attached for either party, you may want to hold off. Things change as well as situations. Good luck!