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Post by jmad122 on Oct 11, 2020 1:33:40 GMT
Hi! We may be adding on a small apt. for mom. We can't afford to do it ourselves, so she is going to chip in to offset the cost. Here's where it gets tricky. What happens when she has to move to asst. living or decides to move out?
Let's keep to even numbers and say that she gives us $50,000 to build on. We wouldn't be able to give her that money back if she moves out.
How would you handle this?
(If it helps, she is 65 and very active. She will more than likely work a small PT job.)
Thanks!
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Post by simplysharon on Oct 11, 2020 1:50:52 GMT
I believe your mom could gift you and your husband $15,000 each in 2020 and again in 2021 with no tax consequences in the US. This would allow you and your husband to pay for the addition.
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Post by jmad122 on Oct 11, 2020 2:04:50 GMT
Thanks! I guess what I'm really asking is how to pay her back for her investment once she moves out? How does she get her money back?
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Post by Linda on Oct 11, 2020 2:08:44 GMT
Thanks! I guess what I'm really asking is how to pay her back for her investment once she moves out? How does she get her money back? she doesn't - it's an addition to your house that enables her to live there (presumably rent-free). It'll be part of the value of your house. If she needs to move to assisted living, then it's not her asset (might be tricky if she needs to move in the next 5 years but you said she's reasonably young and active). If she decides to move out, then she's lost that investment. Tax wise if you're in the US - then do what simplysharon suggests to avoid gift tax |
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Post by jmad122 on Oct 11, 2020 2:13:31 GMT
Ah! I see what you are both saying now. Thank you! It makes sense when you look at it that way. I was thinking we would need to pay her back dollar for dollar. But, I guess the money she is saving in rent can go back into her bank for her nest egg.
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Post by ScrapbookMyLife on Oct 11, 2020 2:13:50 GMT
I think it depends on the intent and expectations, of each of the parties involved.
If Parent is paying upfront for the addition to their offspring's home..... are they expecting to be reimbursed?
If repayment is expected, is it to be...in the form of lump sum(in what sort of timeframe?)? Monthly payments?
If Parent is paying upfront for addition, is it in the form of gift? Early heritance? .....with no expectations of any repayment.
If the Parent pays for the addition, will they be expected to pay monthly rent or will they be living in the addition rent free(other than their personal expenses and personal groceries)?
Who will decide the floorplan? Flooring? Countertop? Appliances?
Are there any other offspring/siblings in the picture, that down the road....will make claims in regards to the additions initial financial investment. Will they try to force a sale to get reimbursed "their share of the funds" that were invested into the addition?
Down the road, if Parent needs funds....will you be expected/forced to sell the home to reimburse?
Make sure whatever is decided, is put in writing and reviewed and signed by an Attorney.
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Post by Darcy Collins on Oct 11, 2020 2:28:53 GMT
I agree that it absolutely depends on expectations of all involved - and especially if there is other family involved.
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dantemia
Full Member
Posts: 306
Jun 27, 2014 19:28:17 GMT
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Post by dantemia on Oct 11, 2020 2:38:22 GMT
Could you then rent the apartment and give her that money?
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Post by elaine on Oct 11, 2020 2:53:25 GMT
Thanks! I guess what I'm really asking is how to pay her back for her investment once she moves out? How does she get her money back? Would you build on an apartment if she weren’t thinking of moving in? If no, then only do it if she is willing to cover whatever of the cost that you can’t cover. If getting the money back is her goal, it would be better for her to rent a place of her own, IMO. Otherwise, you may be opening yourself to her critiquing all of your financial expenditures while she is living with you, hoping to be repaid. If she pays for the addition and lives there, and then you sell your house while she is still alive, you can repay her investment then, if you are able to make it back in the house sale. |
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kelly8875
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Posts: 4,391 
Location: Lost in my supplies...
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Post by kelly8875 on Oct 11, 2020 3:09:52 GMT
Why don’t you just talk to her and figure it out together? See what her expectations and yours are and just agree.
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Post by threegirls on Oct 11, 2020 14:04:58 GMT
By adding an addition to your home would you be increasing the value and therefore increasing the property tax bill? I don't know the answer but my guess is that your value would go up and your taxes too. You might want to take that into consideration. Maybe someone on this thread knows the answer.
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peaname
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Post by peaname on Oct 11, 2020 14:32:37 GMT
I think whatever you decide and agree on it should be drawn up in writing and signed by both parties. Often memories get muddled and expectations forgotten over the years and this type of situation could spell a mess if any siblings have expectations from her estate far into the future.
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SweetieBsMom
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Post by SweetieBsMom on Oct 11, 2020 16:32:47 GMT
My two cents based on your comment around assisted living. Please be aware that assisted living, in my experience, is expensive. If she has $50k (theoretically) to help you pay for an addition, I would plan on keeping her in that addition vs going into assisted living. When my Dad was in assisted living it cost him close to $5k/month and that’s before the add-ons: additional help dressing, med assist, etc. If you add an addition and then she needs to go into assisted living, can she afford it?
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Post by ~summer~ on Oct 11, 2020 16:38:30 GMT
If she is only 65 and active - won’t she be able to live in the unit a very long time? At least 10-20 years? I think the money she saves in rent more than covers the cost.
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twinsmomfla99
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Posts: 3,987
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Post by twinsmomfla99 on Oct 11, 2020 16:47:18 GMT
1. See an attorney before you do this. The amount she pays for the addition could be considered income if she is expecting to live there as a result —sort of like “prepaid rent.” It may not be a gift (no tax liability since she appears to be below the lifetime exemption for gift tax) because a transfer in return for something of value is not a free and clear gift.
2. An attorney may be able to structure this to protect you both and solve potential problems down the road if she has to go into assisted living.
3. Is this going to be a separate apartment with its own entry? Zoning laws may limit what you can do. This is probably the more expensive option as well, but you would have the ability to rent it when she no longer lives there.
4. If it is just an in-law suite inside your home with shared kitchen and common living space, it will be less expensive since you won’t have the expense of building a kitchen.
5. I’m not sure if now is the time to consult with a social worker, but one may have resources to help you figure this out.
ETA:
6. Do you have siblings who might get upset? It’s your mom’s money, and obviously she can do as she pleases. However,you don’t want to be in the middle of a battle with siblings who accuse you improper influence over your mother.
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Post by Jennifer C on Oct 11, 2020 17:04:38 GMT
Do you have any siblings? Let them be aware of your decisions.
I added a suite with a kitchenette for my Dad a few years ago. He totally paid for the build and we paid for the finish work. My brother knew that us adding on to the house added to the value of our house, but he's ok with that because he says we deal with my Dad on a daily basis. I had an attorney make up something simple for my Dad and us to sign. My brother was happy about that.
Why do I include my brother? My cousin had her parents build a large home using one of their pensions. A very nice home. The house was finished 2 months before my Uncle broke his hip and it was decided by the daughter that my Aunt and Uncle would go into an assisted living facility.
Now, both parents are in assisted living and there is a big problem blowing up because the two boys want the sister to pay the value of the house back to the parents. The sister is saying that the house isn't hers legally because it is tied up in their parents names. But she, and her family, is living there rent and mortgage free. It is just a mess because the two boys were not aware that the parents closed out one of their pension accounts to fund this house. They had the house that they raised their kids in for almost 50 years that they sold when they went into assisted living.
I have been out of the loop since quarantine started but, back in March, I know the two boys had an appointment with an attorney. My Aunt and Uncle thought that the house would be only theirs and that's why they signed all of the papers. My cousin has since sold her house, I believe in August so now she's claiming that she and her family have no where else to go so my Aunt & Uncle are letting her stay for now. Her siblings made her sign a rental agreement but she hasn't paid any rent because she's saying her parents aren't the ones asking for rent. Again, it is a mess.
Jennifer
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Deleted
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May 17, 2024 6:46:12 GMT
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Post by Deleted on Oct 11, 2020 19:57:27 GMT
If I had the land and space I would look at buying a tiny house that could easily be moved or sold in case the situation changes. Mom can recoup some of the money by selling and it keeps you and DH off the hook with other siblings. The only thing you would possibly need to add or build is additional electrical support (maybe) and a deck to make entry and exit more safe.
If you do build a physical addition to your home you will be subject to property taxes on the extra square footage.
My mom had a sister who built an addition for their mother. A year later the sister moved the mother into a nursing home, sold the house, and made a substantial profit which she pocketed. When their mother died the will had unknowingly been adjusted to reduce the sister's share of assets since she received income to not only build the addition but also received even more when she sold the house right out from under everyone. My dad was the executor of the will. The phone calls were interesting to say the least. I loved the night my Dad told the sister "You will get every penny allotted to you. No more. No less. If your pile of pennies is smaller than your brothers and sisters then look in the mirror and ask yourself if your selfishness has served you well." Big families. Gotta love em.
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Post by jmad122 on Oct 11, 2020 20:30:25 GMT
Thank you, all, for your kind input. Due to HOA, we would have to do an addition instead of a tiny house. She wants to move to our area from her small city and can't really afford to buy in a home in our area that is decent. I also think she is finished with having to be a homeowner. We may look at senior living places, but again, it can be expensive.
We have talked to both her and my only sibling. None of us really know how to handle it.
I'm thinking that the best idea may be to have her bank the money she would normally be paying for rent. I guess I wanted to make sure that was fair. We would be paying for the uptick in taxes/utilities.
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Post by pmm on Oct 11, 2020 23:55:54 GMT
If you decide to add an apartment for her to live in, I would go with fixtures and layouts that allow her to age in place. For example, hard flooring throughout in case of a wheel chair, large walk in shower without a lip to step over, extra large door frames. She may prefer to have home health aides over going into assisted living.
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Post by coaliesquirrel on Oct 12, 2020 12:54:23 GMT
We're at a similar point. While we built a main level mini-master suite in our house at the outset with the specific mindset that whichever of DH's parents lasted longer would move in, his mother doesn't want to "be a burden" and do that. And, because of the placement of our house, rooflines, etc., there's no good place to put a sizeable add-on. We do have 5 acres, though, so we're looking into building an additional home for her - something single-level and 850-1200 sf with ADA considerations. We do need to look into the legalities, but the plan is that she would fund the build and eventually it would be part of our inheritance, and to the extent that there's not an equivalent amount of cash to pay out to DSIL, we'd pay out to DSIL whatever it takes in cash to be even. It's not clear whether the amount we're looking to be even with is construction cost or appraised value with vs. without at the time DMIL passes, but that's one thing on the list to figure out.
DMIL is 76 and while not ill, she does not get around at all well and tires very quickly. She has made it abundantly clear that she'd rather die than go to a nursing home, so we're not particularly worried about tying up funds she'd otherwise need for that.
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