What to do with my dad? Financial Q - reverse mort? or we buy? or something else?

[Zeze]

Here's a scenario and I'm looking for the best financial & relationship approach. I don't mind sharing these. I'm researching and will talk to some professionals myself.

• My mom is dead, before hitting SS age, so no benefits carryover; I don't think (Georgia). My dad's current home in ATL is paid off (sale $400k; zillow estimate is $500k) & (2) cars paid off.
• The monthly bills +lifestyle come out to $3000/mo. After dad's benefits/pension; he needs to cover $1700/mo still. (or I need to).

His retirement plan was to reverse mortgage his home; maintain his lifestyle then peace out. If he gets old, then go to public nursing home.

Going forward...

• He offers to will his house to us in return after he dies. OR
• He can 'take care of himself' via reverse mortgage OR
• Wife was thinking we can buy the property from him; he effectively becomes a tenant + amazing caretaker of the property. We can write off all maintenance of that home as the market continues to rise. That $1700/mo we must support him for - he can charge us for that amount for his 'maintenance services'. We can write that off.
• Other options entirely?

Again - dad, wife and I - trust is not an issue in terms of xferring assets for the most financially prudent path.

 

[IronWing]

His old plan of "go to a public nursing home" only works if 1) he's destitute and qualifies for Medicaid and 2) he needs skilled nursing. If he's old and destitute w/o needing skilled nursing then that plan ain't going to work.

Don't rely on getting the house in a will. Medical bills can wipe out that value in a matter of weeks. Buying the house from him outright would shield it from his creditors. Again, the most financially responsible folks can get wiped out with medical bills which only go up as folks get older.

Don't go with any scheme where you become responsible for his bills.

 

[manly]

Without getting into details, can he drastically reduce his monthly outlay? $3k is a lot of hookers and blow. If he's in fairly good health, you should plan for him living for a while.

I'm not an estate planner or tax attorney, but it's probably better that he wills the house to you unless he has other plans. Being the good Asian kid that you are, you can help him make up the monthly income gap. What people sometimes miss about leaving a house in inheritance is that you'll get a step up in basis for capital gains tax purposes.

 

[Torn Mind]

Trusts may be a potential way to form an arrangement.

Don't take me too seriously, not a pro estate guy although I am reminded I have to shore up my own stuff so my daddy's side of the family doesn't suddenly get a bounty for a few pumps-and-a-dump.

 

[Greenman]

That $3k a month in bills with no debt seems heavy to me.

 

[bbhaag]

Does he have have any other debt? You mentioned the house and two cars are paid off but there are other types of debt beyond those.

Also sell one of the cars. Your mom has passed on he doesn't need to have two cars now.

 

[bbhaag]

nvm I read some posts wrong

 

[PowerEngineer]

You really need to consult a tax/estate attorney to get your questions answered.

If the object of this exercise is to eventually receive his house in exchange for a $1700/month payment for the rest of his life, then PERHAPS he can put this house into an irrevocable trust that transfers the house to you upon his death. As trustworthy as you might be, it can be a bad mistake for your father to put the biggest part of his nest egg into an irrevocable trust because it is as the term implies unchangeable once established. Of course, there are revocable trusts, but my understanding is that assets held in revocable trusts are counted when Medicaid tests for destitution (and possibly for other debts). Note that trust laws are state specific.

If you buy the house... I mean really buy the house for $500k, then why would you still need to pony up the $1700/month support? Or are you thinking that the $1,700/month is your mortgage payment to you father and that he is the mortgage holder? Either way, there are tax consequences for both of you.

If you own the house and he continues to live there rent-free, then I would be surprised if the IRS didn't questioned the deductibility of your "maintenance costs" if those expenses aren't more than offset by the rental income you declare.

But you really need to consult a tax/estate attorney to get your questions answered! 😖

 

[VirtualLarry]

I had a hard time understanding this to but I believe what Zeze is saying is that his dads monthly expenses are $3000 total. Of that $3000 he still needs to come up with $1700. So his dad is in reality taking home $1300/month.

Tell his dad to take up crypto-mining.

 

[bbhaag]

Tell his dad to take up crypto-mining.

Um, I don't know his dad. I suppose I could ask Zeze to give me his dads phone number. I could then call him and tell him to take up crypto mining. What if he says yes to me? Am I going to have to explain to Zeze's dad how to get started in crypto mining?

I'll be honest here.....as I type this out I'm having some serious reservations about this plan.....

 

[ponyo]

That's pretty tough. It's hard to say without knowing your financial situation. I always heard reverse mortgage have lot of junk fees so it's not a great deal for the homeowner. I don't know if that's still true today, but I doubt much has changed.

How old is your dad? Is he working? If not, can he go back to work? If you and your wife can comfortably afford to give your dad $1,700 every month for life, I would probably go that route and have him include his house in the will to you. Or you can add your name to the deed along with your dad now so you don't go through probate after his death.

You could also buy the house from your dad like you mentioned and owner finance it from him. Just pay him every month. But then he would have to rent it from you at market value according to the IRS.

Another option is he could sell the house to someone else and he move in with you. I don't know how you and your wife would feel about that but that's an option.

 

[otho11]

This question is right in the wheelhouse of the Bogleheads forum. Best of luck

 

[VirtualLarry]

I'll be honest here.....as I type this out I'm having some serious reservations about this plan.....

Just saying, if you're looking for passive income to supplement retirement, that's one way to go about it.

I know, people think that this is my troll meme, but it really isn't. I'm making over $1000/mo with 20+ GPUs (purchased mostly at / below MSRP).

Before jumping in, though, do a LOT of research.

Most of it is just "running the numbers" though. $2/card per day in profits (currently, for one day of ~30-35MH/sec per day), times how many cards, times how many days, it's easy to make $30-50/day with the right selection of cards, while not totally breaking the bank on investment.

Not financial advice; just an anecdote on what I hope to do for retirement.

 

[bbhaag]

Haha it's cool man. You're worrying to much about this. This is OT man just relax and shoot the shit with us....no need to explain your post in detail.

 

[VirtualLarry]

This is OT man just relax and shoot the shit with us....no need to explain your post in detail.

Yeah, sorry, forgot that $1K/mo isn't really what one would call "ATOT money". I mean, fruit loops cost more than that, or will soon, right?

 

[Steltek]

You really need to consult a tax/estate attorney to get your questions answered.

If the object of this exercise is to eventually receive his house in exchange for a $1700/month payment for the rest of his life, then PERHAPS he can put this house into an irrevocable trust that transfers the house to you upon his death. As trustworthy as you might be, it can be a bad mistake for your father to put the biggest part of his nest egg into an irrevocable trust because it is as the term implies unchangeable once established. Of course, there are revocable trusts, but my understanding is that assets held in revocable trusts are counted when Medicaid tests for destitution (and possibly for other debts). Note that trust laws are state specific.

If you buy the house... I mean really buy the house for $500k, then why would you still need to pony up the $1700/month support? Or are you thinking that the $1,700/month is your mortgage payment to you father and that he is the mortgage holder? Either way, there are tax consequences for both of you.

If you own the house and he continues to live there rent-free, then I would be surprised if the IRS didn't questioned the deductibility of your "maintenance costs" if those expenses aren't more than offset by the rental income you declare.

But you really need to consult a tax/estate attorney to get your questions answered! 😖

This. In addition to counting revocable trust assets, Medicaid also has a 5 year look back period on resource transfers. If something happened to him within that 5 year period, he could end up on the hook for the entire cost of a nursing home stay (even the absolute worst ones - the ones you wouldn't want to put your dog into much less your father - probably are going to cost $4-5k a month or more) or catastrophic medical bills.

Consulting a qualified legal expert in this field before you do something is the best money you will ever spend.

 

[Lost_in_the_HTTP]

This is why I hope to die before funds run out.

 

[Zeze]

Buying the house from him outright would shield it from his creditors. Again, the most financially responsible folks can get wiped out with medical bills which only go up as folks get older.

Don't go with any scheme where you become responsible for his bills.

I have much to learn but I keep reading this.

If dad gets Medicaid (or medicare or can you get both?) why would long-term care wipe out his assets? Medicaid simply sucks?

Aren't Medical expenses capped out at $8k/yr thanks to affordable care act? That's not 'too bad' for me to cover. Why would he lose his assets?

 

[Lost_in_the_HTTP]

Why would he lose his assets?

Not only can he lose his ass, but so can you. The medical industry is one of the biggest scams in the world. Caps don't mean squat if the bean counters go on a rampage.


Neighbor transferred all of his assets to other family. Effectively he owns nothing at all, so there is nothing for them to take unless they go after the family


Whether or not you can get both programs is up to each state. Medicaid is a state run program and they set the rules on assets. Some of them are quite restrictive.

 

[Lost_in_the_HTTP]

And read VERY carefully on Reverse Mortgage scams. Some companies have taken houses early ( as in thrown the occupants out) for extremely minor violations of terms. Some require you to carry the insurance and pay the taxes on your own. Some may not let you change insurance companies without a lot of red tape.

 

[MrSquished]

The biggest thing is get the house out of his name so if medical bills pile up in this thievery of a medical system, they can't take it.

When my sister bought a house when my dad was very sick, it was one where my mom could live too. She helped with the purchase and helps with the mortgage. But her name is nowhere on anything.

 

[IronWing]

I have much to learn but I keep reading this.

If dad gets Medicaid (or medicare or can you get both?) why would long-term care wipe out his assets? Medicaid simply sucks?

Aren't Medical expenses capped out at $8k/yr thanks to affordable care act? That's not 'too bad' for me to cover. Why would he lose his assets?

Medicaid is for the indigent. Recipients can sometimes keep their houses and still qualify but have to be otherwise broke or close to it.

The big thing is that neither Medicaid or Medicare cover long term care (nursing home) unless "skilled nursing" is required. A person can be fairly incapacitated and need nursing home care w/o needing skilled nursing. This situation is common with very old people and unless the person has long term care insurance then they can quickly go broke covering nursing home costs.

 

[Lost_in_the_HTTP]

The biggest thing is get the house out of his name so if medical bills pile up in this thievery of a medical system, they can't take it.

And transfer it. No money. No buying or selling. Find a good lawyer experienced in this area.

Some states have a 'backsies' clause, where they can revoke certain transfers in 'x' years of financial need. Something like if you transfer it today and he goes into care next year, they can do it because it's clear why you did it. But if he doesn't go into care for 'x' years, you're OK.

 

[ponyo]

Georgia doesn't participate in expanded federal Medicaid program so it's really hard to get Medicaid in GA. You have to be really poor and have little to no assets. Basically you can't have more than like $8k in bank assets and can't make more than x amount a month. Your dad's $1,300 a month income is going to be close. It might actually be too high, and he won't qualify because he makes too much money. But there are organizations that can help him identify and fill out applications to various social programs he might qualify for. I think there's Korean Association on Buford Hwy that should be able to help/assist him with filling out various government social programs. Korean churches in metro Atlanta also have people knowledgeable who will be able to help or point him in the right direction.

 

[Steltek]

I have much to learn but I keep reading this.

If dad gets Medicaid (or medicare or can you get both?) why would long-term care wipe out his assets? Medicaid simply sucks?

Aren't Medical expenses capped out at $8k/yr thanks to affordable care act? That's not 'too bad' for me to cover. Why would he lose his assets?

For one thing, long term nursing care isn't considered a health expense. It is classed as an entirely different category of health care, one that has its own insurance policies and coverages (which tend to be expensive, because long term care as provided in this country is very expensive).

Medicare and Medicaid are also two different things. Medicare is essentially earned health insurance coverage for the aged and disabled that only provides for health coverage, and specifically excludes coverage for long term care. Medicaid, which is the federal program for the low income and indigent (the definition of which varies from state to state), can provide such coverage through the long term Medicaid program. In short, all Medicaid is welfare. Being a welfare program, it doesn't kick in until you have pretty much entirely exhausted your ability to pay for your own care.

In determining eligibility, they look at your income, assets, and other resources. In some states, if you own a home or have other resources and go into long term nursing care, the state can (and most certainly will) put a lien on the house or resource to recoup what they can of the cost of the patient's care.

Medicaid also takes a dim view of transferring a resource or asset to somebody else at below market value, which is the reason for the 5 year Medicaid lookback period. Asset transfers made during the lookback period are subject to significant penalties. The reason why they were done isn't relevant to Medicaid, only that they were done to the detriment of the individual's ability to pay for their own care at the time they filed for Medicaid.