In-laws in late 70s have net worth of $600 to 700k but 99% tied up in house that they own mortgage free. Savings almost depleted and fixed income will not cover basic, recurring expenses. If there are any unexpected expenses for home or health they are even deeper in the red. In theory, they could downsize and buy a nice condo or coop, put some proceeds away and also have much lower monthly costs (given they are currently paying $21k+ in taxes, home insurance, utilities, yard, etc.) on a 90 year old house.
Sale is not being considered however, as they are very slow to purge anything and they are very attached to their home...ie they are no different than many older individuals. Home equity line of credit they qualify for is limited (might last them three years) plus additional monthly payments for the line cannot be covered without outside assistance. Have looked into reverse mortgage but they are very resistant to the $20k closing costs and floating interest rate. There is another product -- Unison -- with low closing costs and no interest...the company invests in the home (no interest accrues) and they take a large % of the appreciation from the time they make the investment until the house is sold. Sounds interesting on paper but there isn't a lot of third party info available on the pros and cons. They do not have a financial advisor, nor do any of their children including me and my spouse/their son. We helped in 2018 with some unexpected expenses and other siblings may have as well, but that is not a sustainable solution given their age and the condition of their house...which probably needs a minimum of $10k of work today which has been deferred for years.
Any suggestions relative to a financial advisor who specializes in these situations and can provide them with a comprehensive view, and unbiased opinion, of all their options? They have asked for input from family members, but there is often too much emotion involved for construction discussion.
This situation is very reminiscent of my folks. They could NOT keep up their huge house and yard, we were all raising small families and trying to deal with our own stuff--having to give up 4+ days a month to simply keep their lawns mowed and the weeds down was about all we could manage. They 2nd mortgaged the house and gave oldest brother $175,000--and there went any chance at a secure "retirement".
We tried to get them to rent out the basement to a family, which would have helped--in the end, they HAD to sell, under the gun and it was horrible.
Your IL's have a lot of options. But taking money from you kids shouldn't be one of them.
We're in the beginning process of "downsizing"--makes me laugh b/c our house is only 1800 sf, but it's a split entry and I simply do not want to have all these stairs. DH is giving me nothing but pushback---but in the end, I will get my way b/c I am sick and tired of shoveling snow off my car (he gets the garage) and hauling everything up and down stairs all day. I've had a cast on my broken foot for the last 5 weeks and thunking up and down those stairs all day is making him nuts....plus it hurts and it's dangerous, but half of the house is downstairs!
I am taking a page from my g-ma's book. Suddenly widowed at age 61, she took a year to grieve and breathe--then she bravely sold her "dream home" and moved to a condo. Never looked back. I know this took incredible courage and I appreciate it more as I am now older than she was when she did this. She lived 100% independently until a couple of months before her death.
Not planning will result in disaster and sadness--almost for sure. Mother and daddy dragged their feet so much it wound up that they had NO options but to move in with brother. 22 years now. And really. nobody is happy with this.
I am 52 and have a two level house, but I could put in a basement suite that would have ground level access. My plan in 10 years is to renovate the house for a suite, then move into the smaller basement suite. That will give me rental income and a no stairs home. I will still have access to the backyard and will not lose my neighbourhood.
I am not so wedded to living in this house that I would not sell it if that made more sense.
For young adults buying a house, it makes sense to take out a long term loan. Their incomes are likely to rise. They have years and years ahead. They will benefit from the increased equity in the house.
For older people trying to maintain a house and lifestyle that are beyond both their needs and their income, it is STUPID. It is STUPID to borrow money to keep up a house that you do not need and cannot afford to live in comfortably.
What if they outlive the cash they derive from the reverse mortgage?
Why doesn't every one of these products come with a specification showing the exact amount of money to be paid to the finance company in fees and interest?
And - this has got steam coming out of my ears - it will "enable them to stay HAPPY in their own home" Happy? Really? Not increasingly frail, disabled, at risk and isolated?
Reverse mortgage/equity release products are needless debt sold to emotionally vulnerable people through empty promises that prey on their fears. I can't think of a legal financial product that's more cynical in all its premises.
I'm sure there are cases where the sentimental benefits may outweigh the common sense defects (wanting to stay in a certain neighborhood close to friends and family, perhaps), but in general, it doesn't make good financial sense to do a reverse mortgage in your older years.
There really isn't any magic formula except that you need to spend less than you bring in every year.
They are spending more of their income than they should and soon will have to tap the equity in their home. How they do that is up to them. And it sounds like they won't even consider it until they are convinced they can't keep going as they are. I agree with the advice to stop giving them money. People will resist the truth longer if they don't feel the consequences. Step back.
Midkid is so right. You set the precedent in 2018 of helping with some unexpected expenses. The other sibs may have, as well. As time goes on, though, chances are all sibs won't keep ponying up cash for the elders. Will your H insist on continuing to help them?
NO ONE should be helping them financially. Don't make that mistake again. As long as they can guilt their kids into doing it, there won't be any forward progress made in getting them to be more realistic.
Help them prepare for that eventuality by asking if you can have this or that that you know they would not take to a smaller house, and dispose of it - donate or sell if you like. If you are ever asked, "I don't know exactly where it is, but thank you so much for that!" The work that needs to be done on the house can be with the line of credit, now, so that the house is ready to be sold. Medical payments can be stretched out over time, but the need for house repair can come suddenly.
Since you are in the real estate field, do you think you could show your MIL some downsizing options? I thought some of the continuing care communities were especially attractive. I think that it's hard to envision a life other than the one you currently live.
Full disclosure: I did this myself. I found a couple of places to show my (almost 90 year old) mother. We did tours and had lunch. It didn't really help. She still lives alone. What can you do?
I am faced with that with Mum right now. Step Dad just died and she has considerably less income to work with. She owns her own home. When she complains that she will not have enough money I unemotionally state you have more than enough equity in your house to live very comfortably for the next decade. I do not offer her any financial support.
Mum is showing signs of age related decline, she talks about needing to write everything down on her calendar, but no diagnosed dementia at this point. She is still capable of learning new software on the computer, balance the check book etc. Her mother and mil lived in their own homes until a very short hospital stay prior to death, but she has outlived both of them and most her savings.
She wants to go on a trip with her sister to celebrate their 85 birthday this year. If she sold hte house it would be a no brainer.
A LOT of people wind up in this situation, sadly. All their money is tied up--no liquidity.
I've only heard awful things about RM's so I'd be cautious there.
If they can afford 21K per month for upkeep on the house, etc., then they can certainly afford a VERY nice ALF apartment. Or a condo, where all upkeep is included--they may actually find that refreshing! I know, nobody ever wants to leave their home--but it sounds like the house is draining them dry. Selling it would put a nice chunk of cash in reserve.
ABSOLUTELY find someone who specializes in this kind of financial arrangement. We actually use our attorney for a lot of these kinds of decisions.
I agree with not getting family involved if your parents have all their decision making abilities.
The problem is that they don't WANT to move, right? And the house is packed with memories and junk, I bet. They don't want to deal with it, I'm sure.
Take it slow. It took us 3 years to get mother and daddy to realize they could not stay in their home--and during that time we were sloooooowly purging all the junk and trying to get the huge yard in shape.
Sadly, by putting off the decision for so long, they had fewer options. They SHOULD have kept my grandmother's condo and lived there--but they didn't "want to" and in the 2+ years after she passed, things went badly south for the folks and they wound up living with my brother. NOT a good idea--and 22 years later, mother is as unhappy with this situation as she was the day we moved her in.
Failure to plan---this will come back to bite them and they will be left with fewer options.
Initially, one of you family members needs to broach this subject with mom & dad. I'd find some professional help first, a few options and then let them make the appointments and decisions. Just be supportive but don't make the decisions for them (unless that's your JOB)--they will happier if THEY have made this life altering decision.
annually.