Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Paying off someone else's mortgage
Old 06-23-2019, 10:08 PM   #1
Recycles dryer sheets
slowsaver's Avatar
 
Join Date: Aug 2013
Location: Norcal
Posts: 136
Paying off someone else's mortgage

My father passed away recently, and I learned he put his his house in a trust with his wife (not my mom). She is living there, but is having a hard time figuring out how to pay the mortgage, and thinks she will have to move. The house is worth about $700k and the remaining mortgage is $192k. The only asset in the trust is the house.

Her son is planning to move in with her to help take care of her and also pay her some rent. He is entitled to 50% of the house in the trust, and I'm entitled to 50%. I'm guessing she will live 10 more years, at least.

I could easily pay off the $192k mortgage, but I'm not really interested in "giving away" money, of course. I was wondering if there is some way I could "buy out" some of the son's share of the trust, so they don't have to move. The idea being that I would get my money back after his mom dies and we sell the house.

Do you guys have any ideas how feasible this is? Given my dad has passed, I think the trust can't be modified. What pitfalls should I watch out for?
__________________

slowsaver is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 06-23-2019, 10:22 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 22,017
What you might do is to loan the trust the amount by which they can't pay the mortgage, have that loan accrue interest and then the loan is settled when the property is sold... effectively you are providing a reverse mortgage to the trust.

So let's say that there is $500 a month on the mortgage that they can't pay... you provide the shortfall.. let's say it goes on for 10 years and you agree to a 5% interest rate... at the end of 10 years you have fronted $60,000 and the loan balance is $77,641 including interest.

The house sells for $700k... you get the first $77,641 and the remaining $622,359 gets split 50/50... so you get $388,820 and he gets $311,180.

Have it all done up by a lawyer and signed by the parties, and record the loan as an encumberance (like a HELOC or reverse mortgage would be) to ensure that you get your loan back from the house sale proceeds.

As an aside, my understanding is that a trust can be modified if the parties all agree (that being you, his widow and her son)... another reason to talk to a lawyer.
__________________

__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...60/35/5 AA
pb4uski is offline   Reply With Quote
Old 06-23-2019, 10:32 PM   #3
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 3,491
Quote:
Originally Posted by pb4uski View Post
As an aside, my understanding is that a trust can be modified if the parties all agree (that being you, his widow and her son)... another reason to talk to a lawyer.
Yup. It's called TEDRA. It's expensive - either the attorney is learning on your dime or the attorney has already learned and is a rare TEDRA specialist, a skill for which they can charge a lot.

I like pb4uski's loan idea better. It'd be a lot cheaper and work just as well. You may want to add covenants that the trust pay for upkeep so your security interest is against something that retains it's value. Also, realize it may be 10 years or it may be 25, so that's something to consider. My Dad was probably going to die at 55, but he's 83 and still doing well. My Mom should have lived to 95, but died at 77 of an unexpected lung disease. You never know.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Old 06-23-2019, 10:36 PM   #4
Recycles dryer sheets
slowsaver's Avatar
 
Join Date: Aug 2013
Location: Norcal
Posts: 136
Quote:
Originally Posted by pb4uski View Post
Have it all done up by a lawyer and signed by the parties, and record the loan as an encumberance (like a HELOC or reverse mortgage would be) to ensure that you get your loan back from the house sale proceeds.
Interesting idea. What kind of lawyer would do this? One that specializes in real estate, or one that specializes in trusts?
slowsaver is offline   Reply With Quote
Old 06-24-2019, 12:32 AM   #5
Full time employment: Posting here.
 
Join Date: Sep 2011
Location: Placerville
Posts: 846
Buy out step mom, (1/2 equity= $254,000) Assume the home and rent it back to stepmom and son.
Quote:
I learned he put his his house in a trust with his wife (not my mom).
Because the home is in trust w/ step mom and HER son is moving in, anything can happen to cut you out of the deal. She can change the trust any time she decides to and who knows how her son living there might influence her?
Quote:
He is entitled to 50% of the house in the trust, and I'm entitled to 50%.
How so? You originally stated your father put his house in a trust with your step mom. If so, then how is 100% of the house in a trust with you and your step brother?
Is that perhaps in her will, or the trust is written that way when she dies? If so, then I still think she's able to change the trust to anything she wants.
skipro33 is offline   Reply With Quote
Old 06-24-2019, 12:48 AM   #6
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 3,491
^ Dad probably gave wife a life estate. She gets to live there until she dies, then kids split it. Pretty common arrangement I thought.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Old 06-24-2019, 08:34 AM   #7
Recycles dryer sheets
slowsaver's Avatar
 
Join Date: Aug 2013
Location: Norcal
Posts: 136
Quote:
Originally Posted by skipro33 View Post
How so? You originally stated your father put his house in a trust with your step mom. If so, then how is 100% of the house in a trust with you and your step brother?
I meant to say the house would be split between us when she dies, so yes, it's totally her house right now.

I appreciate your comment about how I should worry about mother/son cutting me out; however, some other commenters said it is very hard to change a Trust after one person has died -- and I would likely have to sign something whenever that were to happen.
slowsaver is offline   Reply With Quote
Old 06-24-2019, 08:44 AM   #8
Recycles dryer sheets
slowsaver's Avatar
 
Join Date: Aug 2013
Location: Norcal
Posts: 136
Let's say I pay off the mortgage ($192k), and then can I just put a lien against the house so that I'll get my money back once it's sold?

My first worry is that me paying off the house would look like income on her taxes, and income tax would need to be paid.

Second worry is that I would not get any sort of interest on the $192k, and she may not move (or die) for a long time.
slowsaver is offline   Reply With Quote
Old 06-24-2019, 08:48 AM   #9
Thinks s/he gets paid by the post
Teacher Terry's Avatar
 
Join Date: Jun 2014
Posts: 3,741
You need to find out if wife has a life estate. My understanding of that is she can live there until she dies but can’t sell the house.
Teacher Terry is offline   Reply With Quote
Old 06-24-2019, 09:01 AM   #10
Thinks s/he gets paid by the post
ivinsfan's Avatar
 
Join Date: Feb 2007
Posts: 4,217
It doesn't sound like this worked out the best for your SM. She has a house she can live but can't afford the house payment. But she no equity and so if she moves she has to pay 100% of her new rent payment. It's not really feasible for her to move.

Do the three of you have a decent relationship? Such as you can sit down in a room and talk this over? That's the first place to start. Depending on the SM income a possible solution might be SM pays 1/3 of the payment, her son pays 1/3 as rent and part owner and you pay 1/3 as part owner. If you go that route I'd suggest you try to have the payment done as autopayment. This keep the payments current and takes the least amount possible out of your pocketbook. And can be changed at any time without a lot of hassle. Once again that solution depends on if you have any good feeling toward each other. Of course it's in your interest to make sure the payments don't fall into default.
ivinsfan is offline   Reply With Quote
Old 06-24-2019, 09:14 AM   #11
Recycles dryer sheets
 
Join Date: Apr 2013
Location: Beach and Mountain
Posts: 431
I want to recommend something but you have not stated who the trustees of the trust are. You said that she could sell the house so it sounds like she is a trustee. Typically, but not always, a person that puts their house in a trust grants a life estate to spouse #2, but has the proceeds go to his kids from spouse #1. You have his house in trust but proceeds going to kids from both marriages. Also, many times trust documents plan for events like this where spouse #2 can no longer live in house. Or spouse #2 needs to borrow.

So, my recommendation is to read that trust document, if you have it.
Z3Dreamer is online now   Reply With Quote
Old 06-24-2019, 09:26 AM   #12
Recycles dryer sheets
slowsaver's Avatar
 
Join Date: Aug 2013
Location: Norcal
Posts: 136
Quote:
Originally Posted by Z3Dreamer View Post
So, my recommendation is to read that trust document, if you have it.
Yes, I need to do this. I don't have a copy yet. Hopefully I will understand it when I read it.
slowsaver is offline   Reply With Quote
Old 06-24-2019, 09:42 AM   #13
Recycles dryer sheets
 
Join Date: Apr 2013
Location: Beach and Mountain
Posts: 431
Quote:
Originally Posted by slowsaver View Post
Yes, I need to do this. I don't have a copy yet. Hopefully I will understand it when I read it.
If and when I am 85 or so and widowed, and find a young hottie of maybe 75, I would put the house in trust, specify that she gets a life estate. If she can no longer live there or no longer wants to live there, the proceeds of the sale will be used for her but not in one lump sum. The annual benefit will be in the 4% to 10% of the trust balance at the discretion of the trustee, who would be one of my offspring. At her passing, 100% of the proceeds would go to my offspring.

Other standard provisions would apply.
Z3Dreamer is online now   Reply With Quote
Old 06-24-2019, 09:48 AM   #14
Thinks s/he gets paid by the post
ivinsfan's Avatar
 
Join Date: Feb 2007
Posts: 4,217
Quote:
Originally Posted by slowsaver View Post
Yes, I need to do this. I don't have a copy yet. Hopefully I will understand it when I read it.
I am sorry for your loss and see that your Dad has just recently died. You should be getting more information that can help you make a good decision.

You can see from the replies to your question that many things could be in play here..
ivinsfan is offline   Reply With Quote
Old 06-24-2019, 10:44 AM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 22,017
Quote:
Originally Posted by skipro33 View Post
.... Because the home is in trust w/ step mom and HER son is moving in, anything can happen to cut you out of the deal. She can change the trust any time she decides to and who knows how her son living there might influence her?
How so? You originally stated your father put his house in a trust with your step mom. If so, then how is 100% of the house in a trust with you and your step brother?
Is that perhaps in her will, or the trust is written that way when she dies? If so, then I still think she's able to change the trust to anything she wants.
Wrong... trustee can't change the trust... trustee has to administer the trust based on the provisons of the trust.

You misunderstood.... the house is the sole asset of the trust... once step-mom dies then the assets of the trust are distributed to the successor beneficiaries (OP and step-mom's son)... common arrangement... my mom became the successor beneficiary of my dad's trust when he died, when she dies the the trust is instucted to distribute the assets to her children (me and my sisters).
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...60/35/5 AA
pb4uski is offline   Reply With Quote
Old 06-24-2019, 06:19 PM   #16
Full time employment: Posting here.
 
Join Date: Sep 2011
Location: Placerville
Posts: 846
Quote:
Originally Posted by pb4uski View Post
Wrong... trustee can't change the trust... trustee has to administer the trust based on the provisons of the trust.

You misunderstood.... the house is the sole asset of the trust... once step-mom dies then the assets of the trust are distributed to the successor beneficiaries (OP and step-mom's son)... common arrangement... my mom became the successor beneficiary of my dad's trust when he died, when she dies the the trust is instucted to distribute the assets to her children (me and my sisters).

OP needs to know for sure what the document provides in order to protect any interest and especially before spending any money towards it. The attorney that wrote it is a place to start.
__________________

skipro33 is offline   Reply With Quote
Reply

Tags
mortgage payoff, trusts


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Just paid off the mortgage. Putting the pay off the mortgage question to rest. FUEGO FIRE and Money 65 06-08-2015 05:08 PM
A new debate on paying off the mortgage (or not). Nords FIRE and Money 87 05-01-2010 07:49 PM
Logistics of paying off balloon mortgage, then selling house 1-2 months later RunningBum FIRE and Money 9 05-28-2008 11:04 PM
Another paying off the mortgage thread..... nun FIRE and Money 17 12-17-2007 09:51 PM
Paying off mortgage with an SPIA donheff Life after FIRE 5 12-19-2006 10:56 AM

» Quick Links

 
All times are GMT -6. The time now is 08:08 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.