Collective boglethink ahead of time is always appreciated! I WILL CONSULT AN ELDER ATTORNEY BEFORE MAKING ANY DECISIONS.
Parents are 88 and 85 yo and want to stay in their house as long as they're both living. Their health is declining and care expenses increasing. Monthly income is $3000 and they still pull $3000/mo from savings to cover expenses (care, taxes, insurance, food, utilities). Their savings is down to $50,000.
Savings - $50k
House - $400k
Monthly Net - $3000 negative
HELOC - $0 outstanding, $40k available to draw
The thinking is:
If mom dies first, dad will go to nursing facility. Paid by whatever savings/equity is left then Medicaid.
If dad dies first, mom will go to Assisted Living until she runs out of money then to Medicaid nursing. OR she may stay in house with her sister.
Would a life estate be at all applicable for them? My understanding how it would work:
Their life interest in the house is (say) 30% based on life expectancy factors. I'd buy the house for 70% of FMV giving them a $280k cash infusion. This is immediate cash for them, no bridge loans if going into AL or preparing a house for open market sale which would be very stressful. They keep their house and if something changes they have a known amount of money to draw from. As opposed to waiting and doing this transaction in the moment. It also removes credit risk with the HELOC. Their credit is good but draw ability is still up to bank. Previously they had one closed based on "financial review" and it was a pain to open elsewhere. HELOC good to have but I don't want that to be the only cash. Reverse mortgages are meh based on
what I've read.
Please educate me. Any pitfalls for me? Also, in this situation, I assume I'm the remainderman?
Parents are 88 and 85 yo and want to stay in their house as long as they're both living. Their health is declining and care expenses increasing. Monthly income is $3000 and they still pull $3000/mo from savings to cover expenses (care, taxes, insurance, food, utilities). Their savings is down to $50,000.
Savings - $50k
House - $400k
Monthly Net - $3000 negative
HELOC - $0 outstanding, $40k available to draw
The thinking is:
If mom dies first, dad will go to nursing facility. Paid by whatever savings/equity is left then Medicaid.
If dad dies first, mom will go to Assisted Living until she runs out of money then to Medicaid nursing. OR she may stay in house with her sister.
Would a life estate be at all applicable for them? My understanding how it would work:
Their life interest in the house is (say) 30% based on life expectancy factors. I'd buy the house for 70% of FMV giving them a $280k cash infusion. This is immediate cash for them, no bridge loans if going into AL or preparing a house for open market sale which would be very stressful. They keep their house and if something changes they have a known amount of money to draw from. As opposed to waiting and doing this transaction in the moment. It also removes credit risk with the HELOC. Their credit is good but draw ability is still up to bank. Previously they had one closed based on "financial review" and it was a pain to open elsewhere. HELOC good to have but I don't want that to be the only cash. Reverse mortgages are meh based on
what I've read.
Please educate me. Any pitfalls for me? Also, in this situation, I assume I'm the remainderman?
Statistics: Posted by WaffleCone — Tue Aug 27, 2024 11:13 am — Replies 1 — Views 118