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What happens if your daughter and husband divorce? Could their home be considered in a divorce settlement? Could your son-in-law take half the profits of the house?
I've set up my Trust so if I die everything goes to my wife. If we suddenly both pass away all assets are divided equally between my sister, her two daughters and my wife's sister.
However, after seeing the way my sister is spending the inheritance she received from our mother I'm having second thoughts.
I considered parameters surrounding how my sister is to receiver a 1/4 share but realized this creates additional problems.
So.... I'm thinking of removing her name and all assets are simply divided three ways.
My advise to the OP would be: After witnessing a number of ugly fights over the years regarding who gets what I would recommended as others suggested to set the Trust up so it's not unduly complicated.
I've set up my Trust so if I die everything goes to my wife. If we suddenly both pass away all assets are divided equally between my sister, her two daughters and my wife's sister.
However, after seeing the way my sister is spending the inheritance she received from our mother I'm having second thoughts.
I considered parameters surrounding how my sister is to receiver a 1/4 share but realized this creates additional problems.
So.... I'm thinking of removing her name and all assets are simply divided three ways.
My advise to the OP would be: After witnessing a number of ugly fights over the years regarding who gets what I would recommended as others suggested to set the Trust up so it's not unduly complicated.
You don't want to do this.
What you want to do, is award her $1, and not "nothing."
What happens if surviving spouse or someone is incapacitated and must leave the compound for extended stay at nursing home? What if your daughter wants to move prior to your deaths? Divorce and new hubby has a great job opportunity elsewhere? Daughter dies (pfft, pfft, that's spitting so it doesn't happen) and SIL remarries and wants to move away?
Think of the worst and most horrible things that could happen, not just what will probably happen. If the plan can sustain the worst, then go for it.
If your daughter receives the cash inheritance and writes a check to her brother, she is gifting that money. There are ways she can decline the inheritance so that the cash goes directly to your son as his inheritance.
Thanks you all. I appreciate the ideas and thoughts.
I know it's not the simplest thing to do financially but it is something we truly want to do.
The homes are 2 addresses one lot.
Quote:
Originally Posted by rrah
A lot of your post is contradictory and confusing. You said your daughter and SIL can't afford a house right now. What makes you think they will be able to swing it in the future to buy out your son? If they can't afford to do that, they will be without a home. Allowing your son to refuse the buyout throws her family in the street.
And you're right. It's not equitable to your son. She benefits from a current day appraisal and gets to buy out her brother in the future at the current day price. She benefits from any appreciation.
One idea-the entire estate is divided equally between both of your children. Your daughter has the right to take her portion of the estate as the value of the real estate at the time both you and your spouse pass away. She'll have to pay your son any difference between the value of the real estate and the other assets. Again, will she and her husband be able to afford that? You don't know.
The other option is that your daughter and SIL start paying you "rent." Treat it like a "rent" to own situation and you and your estate are the bankers. They're paying for a portion of the real estate prior to your deaths and building up some stated percentage of ownership.
Good questions. SiL is an only son and is "almost" certainly going to inherit a home worth $900,000 or so from an ailing 95 yr.old grandfather. And they do have savings. They want to get out of their living arrangement sooner rather than later. They could wait and save more. I should say they cant afford where we live now. They COULD qualify for a smaller home in the area we are buying, but we all got together and thought if we upped the budget we could do this.
As my Wife and I are retiring this year, the original plan was for my Wife and I to sell our home here, and buy one nice larger home in this area and retire. But illness and wanting to be near the grandchildren made us talk about this idea. We are not doing this solely to help them, it is helping us as well.
Your idea of the value being divided equally is what we have been discussing - my wife and I - this weekend. It is a good idea and simplifies things. The kids have been in on this and they all know we have not yet decided how we are going to arrange this. We also are open to the "rent to own" idea which is what my Daughter and Son-in-law proposed. Add that up at the end and they get a credit for that when they buy my Son out.
Quote:
Originally Posted by twingles
I'm curious who this has been discussed with. Your son and daughter, or just your daughter? Because your daughter is benefitting from this arrangement from the get-go. How does your son feel about THAT? Are they both in on the estate planning?
Yes all have been in on the discussions. We have said that if needed we would compensate my Son separately.
Quote:
Originally Posted by jackmichigan
You didn't mention that the daughter would own a specific percentage, only that they couldn't afford to buy a house now. Ownership would be another complication.
Most often, Trusts don't continue to own the property after you die. Most disburse the assets and then are dissolved.
What do your daughter and son have to say about this? What if your daughter and family wish to move to their own house prior to your death? Are you putting her in a position of feeling guilty if her plans change in 10 or so years? What if her husband gets a job elsewhere?
Obviously, i have more questions than answers for you. Do you think it would be equitable to your son if your daughter benefited from the appreciation of a property which you primarily, or solely, purchased? Setting a price now seems inconsistent which tying to be equal in any future distributions.
We would (our trust) would own the home while we are alive but we are going to assign a % of the value as my Daughters LOAN that is due on our demise.
They have no ownership. And you are right, likely the trust will be disbursed entirely. We intend to discuss this with our attorney this weekend.
We are leaning towards the house has to purchased from the estate upon our demise. An appraisal must be made and that will be used to pay trust back. If at any time my Daughter wants to move before we pass, an appraisal is made, and we either buy them out, or we choose to sell. If we sell they get their %. And the rest goes into the estate.
Yes they will be caring for us as we age. That has been and is the understanding. As a note, my Son and Daughter are in their 30's and are very close.
I will reply back here after we meet with the attorney this week. Again thank you very much.
I know this is a somewhat complicated question. I'm looking for advice based on any experience as to how to structure the arrangement.
We have made the decision and put an offer to purchase a "Family Compound" of sorts - 2 houses on a lot. A family dream for a long time. We are retiring and we have our reasons to wish to be with the grandchildren for the remainder of our time.
Please, I don't want to be talked out of the IDEA or told how foolish we are as we have made up our minds. I WOULD appreciate advice on how to structure the deal.
My Daughter and SiL live in his parents large home with the parents who are away caretaking a camp 6 months of the year, so it's rather workable but not ideal. They can't afford a home right now and have 3 small children. We want to help them and be as close to them as we can be. Both have great jobs. They are not charity cases by ANY means, but it's expensive here and it will be a few years before they can save enough to do this themselves. And this dream of ours for this lifestyle, well, we have to make it happen now.
We will be downsizing into the small house, and our Daughter, Son-in-Law and three Grandchildren in the main house.
Our current house is mortgage free and the agent we are talking to feels it will sell for $900,000 to $1,000,000.
Comps in recent weeks show very high demand and over asking sales in less than 2 weeks.
California east bay - Livermore.
Making an offer on a house at $900,000 - 2 houses on the lot, 2 hours from here.
We have talked to our attorney about how to do the deal and after some discussion of options they have suggested we could do this in the manner I describe below but, I would appreciate hearing from anyone that has done this.
My wife and I will buy the house - in our trusts' name.
There will be a "Contract of Sale" that requires that upon both of our deaths, they purchase the property from our trust at a set price. We will determine that price today based on an agreed percentage of what their investment would have been if we were 2 parties buying per sq.ft. today. $600,000 / $300,000 (33%) is what we are discussing.
During the time we live in the homes they will pay the same % of all costs, such as insurance and utilities. but not pay towards the mortgage.
This Daughter and our Son are the beneficiaries of our estate, IRA's etc, which is in our trust.
This is where I get a little confused. We are going to talk to the attorney again on Monday to clear this up.
Upon our deaths, the contract is triggered. My daughter may choose to:
1- Leave $600,000 of her portion of our estate in the trust essentially writing a check and giving it to her brother.
Our portion of the remaining value that was OURS (the $300,000 - 33%) would then be half hers and half my son's.
2- She can again, choose to use an additional $150,000 of her portion of the estate, or using her own money, write a check to her brother to buy him out, or do nothing, and through our trust, he will live on owning 50% of our portion, ($150,000) the other 50% is still hers. To be distributed to upon any refinance or sale.
3 - Use whatever funds, hers or a combination of her inheritance and her own money, and pay my Son $900,000 to entirely buy him out.
All of this seems fine so far except...
The thing that seems a bit unfair to my Son is that if at the time this event occurs, he may not benefit from the possible sale of the home in the future like my daughter might. Unless he can refuse the buyout or we write this up so he always owns 33% and an appraisal during a refinance or a sale of the home determines his buyout price/proceeds.
I really hope I don't get any negativity here for asking this.
Thanks
See now THIS is the correct thinking. Wants to make sure everything is FAIR for his son and daughter. Very intelligent sir, I commend you for doing this the Correct way
We would (our trust) would own the home while we are alive but we are going to assign a % of the value as my Daughters LOAN that is due on our demise.
They have no ownership. And you are right, likely the trust will be disbursed entirely. We intend to discuss this with our attorney this weekend.
We are leaning towards the house has to purchased from the estate upon our demise. An appraisal must be made and that will be used to pay trust back. If at any time my Daughter wants to move before we pass, an appraisal is made, and we either buy them out, or we choose to sell. If we sell they get their %. And the rest goes into the estate.
Yes they will be caring for us as we age. That has been and is the understanding. As a note, my Son and Daughter are in their 30's and are very close.
I will reply back here after we meet with the attorney this week. Again thank you very much.
More questions to consider:
If an actual purchase is required, will that trigger the need to pay any state transfer taxes?
Would a purchase increase the property taxes by releasing any cap that might be in effect?
If the house is to go to the daughter, it might be preferable for the estate to simply pass along the house but to adjust any other disbursements from the Trust to the daughter in an amount equal to the appraised value at the time.
What happens if you need assisted living or a long term facility for dementia? It's almost impossible for your daughter to care for her children and a parent with dementia at the same time. I hope you have enough cash for this possibility as well.
Why don't you just split the lot so there are two complete properties, then either deed one of them to your child free and clear, or sell it to them on easy terms?
Why not have your daughter as a tenant, and "rent" the house from the trust, after your passing she presumably becomes a part owner and can at that point buy her siblings out?
Much smaller and simpler, but in one situation I'm familiar with, a sibling lived with his mother as an adult. When she passed, he bought the home from the estate even though he was 50% heir.
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