My sister and I are moving into my father's home with him and helping to renovate it so he can live on a single floor and age in place. As none of us has much money, we are also all enjoying the financial benefits of co-housing. We all contribute to mortgage payments and the home equity loan he took out for renovations/repairs, and we figure we will be able to pay all of this off in about three years.
My father is seventy-five, has medical problems and a family history of dying young, as well as not always making the best financial decisions (he has personal debt and no life or disability insurance). He is worried about my sister and me having to go through probate and losing the house if he dies. He is meeting with an attorney this week to place the house in a revocable trust, with my sister and me as beneficiaries upon his death. I am concerned that he might need state-funded nursing home care at some point and that the state will take the house, so I am trying to think of a solution that minimizes risk and makes the most financial sense.
The options I have come up with so far are:
a) My sister and I buying the house from him at a low price with owner financing. Could he sell it to us for the cost of the remainder of the principal left on the mortgage and the cost of the home equity loan, providing him with a little income and sheltering the house as an asset, even if he still lives there?
b) The three of us becoming co-owners of the house and entering into a "Joint Tenancy with Right to Survivorship" situation. I believe this means that if one owner dies, the other two would "inherit" the house without needing to go through the probate process, but does it protect the house if one of the owners needs to go to a nursing home?
c} Setting up an irrevocable trust for the house. This seems to have the advantage of protecting the house from being seized after a period of five years from the establishment of the trust, and of avoiding estate taxes. However, his estate will not be large enough to require us to pay federal or state taxes anyway, and I have read that establishing an irrevocable trust is much more complicated and costlier than establishing a revocable one, and I fear he is likely to need nursing care sooner than five years from now.
d) Going through with the revocable or irrevocable trust and finding a way to pay a little more each month in order to take out disability insurance on him. How expensive is disability insurance on somebody like my father as I have described him?
This is my first post, and I have just started to become aware of the intricacies of financial management, so I apologize if I have not provided enough information or am venturing too far into the realm of asking for legal advice.
Thank you in advance to anyone who has the patience to read this and share any feedback! This is a wonderful subreddit!
Submitted July 22, 2019 at 08:12PM by springformpan https://ift.tt/30SdNwt
