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Old 09-27-2011, 08:44 AM   #21
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There is one thing I do not understand.

Either the father was retired at the time of his death in which case household income has not changed. That does not seem to be the case.

More likely, he was still working and therefore should have had life insurance to cover the loss of his income.

Son, you need to find out what life insurance policies your father had and your mother can use the proceeds to live on. That is what life insurance is for - to replace a breadwinner's income. Do not withdraw everything from the IRA or 403(b) or whatever you call "Dad's retirement" - you want to stretch that out as long as possible.
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Old 09-27-2011, 08:48 AM   #22
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Sorry if I missed it, but what about SS spouse/survivor benefits? He was 65 at the time of passing...
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Old 09-27-2011, 08:51 AM   #23
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Another thought. Since mom is only 54 the high taxes may reflect a 10% penalty on top of normal taxes. Tell Mom to look into 72(t) withdrawals. May need to roll TIAA into IRA first.

Hate to be harsh but if Dad did not have life insurance I see a home sale in your immediate future. Not sure why 25 years in you are not close to paying off the house but it looks like your family tapped the home piggy bank.
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Old 09-27-2011, 08:52 AM   #24
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Originally Posted by rescueme View Post
Sorry if I missed it, but what about SS spouse/survivor benefits? He was 65 at the time of passing...
+1

Have Mom call / visit local Social Security office ASAP.
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Old 09-27-2011, 08:55 AM   #25
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I think she is not entitled to any SS benefit except disability until she reaches retirement age, which would be 62.
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Old 09-27-2011, 09:06 AM   #26
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I think the SS widow benefit starts at age 60:
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If your husband dies, you can get widow’s benefits if you are age 60 or older.
What Every Woman Should Know
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Old 09-27-2011, 09:09 AM   #27
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Originally Posted by REWahoo View Post
I think the SS widow benefit starts at age 60:
What Every Woman Should Know
Right. I only read that twice before posting "62". And this is after morning coffee. I think I'm starting to lose it..
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Old 09-27-2011, 09:10 AM   #28
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I think she is not entitled to any SS benefit except disability until she reaches retirement age, which would be 62.
Actually it's age 60 for you if your spouse (being of any SS age) passes on:

Social Security Online: Widows, Widowers & Other Survivors: Qualify and Apply

I'm just looking at what can be done during an "income gap", regardless if the current debt needs to be paid off immediately. If "future income" will be there in a few years, it might be a consideration for asset lilquidation (and the associated taxes, which are "excessive" for a lump sum cash-out), rather than burning up assets at this time, just to be used for taxes that could be reduced via alternative methods...

Sometimes delaying payoff can be advantagous as in this case. A lump sum (assuming it is from a tax deferred - Traditional IRA or 401(k) account) can be excessive unless other options/techniques are considered. There is a financial price to pay for being debt free in situations such as this...
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Old 09-27-2011, 09:56 AM   #29
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I think the SS widow benefit starts at age 60:
What Every Woman Should Know
I was thinking of survivor's benefits for the OP if he is not yet 18.

Quote:
Unmarried children under 18, or up to age 19 if they are attending high school full time. Under certain circumstances, benefits can be paid to stepchildren, grandchildren, or adopted children.
Also OP may have younger siblings who could qualify or cause Mom to qualify before age 60:

Quote:
receive survivors benefits at any age if you take care of the deceased worker's child who is under age 16 or is disabled and receives benefits on the worker's record.
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Old 09-27-2011, 10:53 AM   #30
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Does your mom have health insurance? She may have been eligible to continue the coverage your father had under COBRA but it might be a bit expensive. Does she have pre-existing conditions that would preclude her from obtaining individual health insurance or make it very expensive? Are health insurance premiums in her monthly budget?
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Old 09-27-2011, 11:10 AM   #31
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How much equity ownership does she have in the home? Does it have a low interest rate on the loan? Can you get the loan payment lowered?

Does she own the rental property free and clear? Is that the home the only debt?


One thing that jumps out: She is living in more house than she can afford... including the ongoing taxes and maintenance. It seems to me that selling the house is probably a good idea. However, timing is the problem. The RE market is poor right now. But if she has to delay for 4 or 5 years... she will have that much sunk into taxes, upkeep, etc.

This may end up being a loss minimization exercise.

Here are some things to mull over. But they are really just more questions.

Is the house upside down... could she do a short-sell? The bank may do that so there is not another default.

Could she move into the rental and make it her home and rent the newer home (to generate income to pay the mortgage and taxes)? If it turns out that she still cannot make it work out and a foreclosure happens... will the home she is living in be shielded in some way... need to talk to an attorney.

Don't forget bankruptcy. The bankruptcy laws are intended to restructure or clear debt that one can no longer afford. Will the retirement assets (490k) be shielded? This would require a discussion with an attorney.

Take your time and analyze all of the alternatives (pros and cons).
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Old 09-27-2011, 11:26 AM   #32
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Quote:
Originally Posted by chinaco View Post
How much equity ownership does she have in the home? Does it have a low interest rate on the loan? Can you get the loan payment lowered?

Does she own the rental property free and clear? Is that the home the only debt?


One thing that jumps out: She is living in more house than she can afford... including the ongoing taxes and maintenance. It seems to me that selling the house is probably a good idea. However, timing is the problem. The RE market is poor right now. But if she has to delay for 4 or 5 years... she will have that much sunk into taxes, upkeep, etc.

This may end up being a loss minimization exercise.

Here are some things to mull over. But they are really just more questions.

Is the house upside down... could she do a short-sell? The bank may do that so there is not another default.

Could she move into the rental and make it her home and rent the newer home (to generate income to pay the mortgage and taxes)? If it turns out that she still cannot make it work out and a foreclosure happens... will the home she is living in be shielded in some way... need to talk to an attorney.

Don't forget bankruptcy. The bankruptcy laws are intended to restructure or clear debt that one can no longer afford. Will the retirement assets (490k) be shielded? This would require a discussion with an attorney.

Take your time and analyze all of the alternatives (pros and cons).
+1 on this post... some of the same ideas I was going to propose... you are in a situation that happens a lot... people living a bit 'large' and having to work to keep it up... without any plans for the spouse to live in case of death... I have seen it with co-workers before... it is not pretty that someone loses their spouse and then has to sell their home because of lack of income... a double hit to them... but that is where you are....

SO, the main point is that you and your mom are living in a place you can not afford... period... (unless of course you find life insurance or some pension that you have not mentioned)...


My sister had her backup plan as moving into their small rental unit that was paid for... and sell the big house.... it probably is the best situation for you...


But, as others have said, take a bit of time to sort things out and see if there is another option available.... I have another sister who did lose her husband and she refinanced the house to a 30 year mortgage and got the payments where she could afford them... her thought was that it was cheaper than renting and who cares if she ever pays it off... but the house was not to big to begin with...
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Old 09-27-2011, 01:45 PM   #33
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Regardless of some of the uncertainties above, I think you have to prepare yourselves to get rid of the house. It is time to downsize. You have to figure how long you can stand the process to take. The only other option I can see is bankruptcy, if your mom lives in a state that exempts a homestead from receivership. This is a hard reality to face, but if you do not come to it, it will come to you.
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Old 10-19-2011, 05:45 PM   #34
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Wonder what ever happened to this family.
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Old 10-19-2011, 09:33 PM   #35
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Sorry to hear about your loss.

Your mother will be eligible for Social Security Widow's Benefits when she reaches age 60 at a reduced rate which is based on your fathers work record. There is now a limit of 14k that she can earn in W2 wages while collecting the benefit.

I would discourage your mother from making any major decisions for at least the next year.
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