Need to liquidate 50,000. Which account?

[Goldendoodlebug]

Hi,
We need to pay back my brother-in-law 50,000 for money he has given us to partially pay for House of husbands Mother.
Long story short (hopefully)
Mother-in-law died almost 4 yrs ago. Brother is executor.
He wanted to buy her house, but didn’t have the money or income to get a mortgage, a friend offered to loan him the money. Over about 2 yrs , he sporadically sent money, 3x totaling 50,000. He still owes 75,000, but hasn’t since any money in about 2 yrs

Husband finally obtained an attorney, and a judge will rule on the house in September. Attorney said we will win and brother-in-law will have to sell the house and proceeds to be divided equally, however we will have to pay back the 50,000.

My question is where should we pull the money from.

Choices are:

TSP, probably not a good idea as we will have to pay taxes on WD.

Roth IRA, it has about 80,000. In the account.

Obtain a HELOC

Any other ideas/suggestions?

Thanks for the help

 

[38Chevy454]

Why do you have to pay back the $50K now before the sale, since you could just deduct that from your proceeds of the house sale once that is completed? Just consider look at the math, using made up numbers:

House was worth $125K when inherited and purchased by brother. So each of you would have gotten $62.5K if it was just sold at that time.

Four years later let's say house is now worth $150K, so when sold it would be $75K for each. Just deduct the $50K from your $75K and you get a net of $25K, and brother gets $125K; of which you can think of brother getting his $50K paid back and the net he receives is $75K.

 

[ivinsfan]

Well, what your lawyer said will happen and what actually happens could be two very different things. Otherwise what 38Chevy said..just wait until something actually happens.

 

[Goldendoodlebug]

I’m not going to liquidate the money until I’m told I have to.
I’m pretty sure the attorney is telling us what the judge will recommend.

I just want to know what account to draw the money from, when I have to. To be prepared.

The house was worth according to b-i-l, 250,000. 4 yrs ago.
It is now worth ~400,000. ( hard to say how much as he won’t consent to an assessment). In fact, attorney showed up with the assessor and bil would not let them in.

 

[Goldendoodlebug]

I think, the attorney believes, giving back the money will make it a “clean slate” and then house can be sold and the money divided up.

The attorney is a probate attorney so I trust what he says

 

[tulak]

I wouldn’t pay anything until I got the proceeds from the house.

I’m wondering under what terms he gave you money? Was there a contract or something in writing?

You should wait to see what the judge says. If the judge rules that you need to pay back the 50k, then I would try to get this done from the sale of the house. Your attorney should push for that. At least that’s what I’d do.

 

[Goldendoodlebug]

I think people are missing the point of my thread.
Of course I would rather use the money from the proceeds of the house to pay back brother-in-law. Our attorney gave us a heads up, we will probably have to pay back the money before the house is sold. He asked us if we could come up with the money. We gulped and said sure.

I’m really asking where to get the money from.

The whole saga of the house and probate is worthy of a long, drawn-out, sad book

 

[ivinsfan]

I think people are missing the point of my thread.
Of course I would rather use the money from the proceeds of the house to pay back brother-in-law. Our attorney gave us a heads up, we will probably have to pay back the money before the house is sold. He asked us if we could come up with the money. We gulped and said sure.

I’m really asking where to get the money from.

The whole saga of the house and probate is worthy of a long, drawn-out, sad book

Wait lawyer said husband's brother who has the house he hasn't actually paid for should be given 50K before the house gets sold. No and he** no, no way I would put myself in that situation. Find another lawyer... this doesn't sound like its in your best interest. Is BIL living in the house, renting out the house...you want to be made whole here not end up out another 50K.....I understand it's a long story but the BIL executor has already shown bad behavior.

 

[tulak]

So you got 50k, where did it go?

I wouldn’t pull it out of the Roth or the TSP if you can avoid it. Depending on how quick you’d get the money back from the sale, you could look at borrowing.

Personally, I’d tell the lawyer that you don’t have the cash to pay back and you have to wait for proceeds from the house. And I’m assuming you don’t have to pay anything back until there’s an order from the judge. I never saw a response on how you received the money. If nothing was in writing, than that might provide more flexibility?

Lots of details missing, but if it was me, I wouldn’t do anything unless ordered by the court.

 

[SnowballCamper]

Choices are:

TSP, probably not a good idea as we will have to pay taxes on WD.

Roth IRA, it has about 80,000. In the account.

Obtain a HELOC

Any other ideas/suggestions?

Need more info...

TSP--What's your marginal tax rate?

Roth-- What were your plans for this? Not a good idea as I presume you can't put put anymore back in once you take it out.

HELOC-- possibly, if the interest is below your taxes on the TSP withdraw, and you're going to get proceeds from the forced sale to pay it off. Will the proceeds of the sale count as taxable income?

 

[ncbill]

So brother-in-law has been squatting in his mother's house since she died and has periodically sent the OP money as what BIL said was compensation for hubby's share of the equity in the home?

Sounds like BIL is now broke and so is desperate to continue to squat there.

I'd probably have BIL removed as executor & evicted if he continued not to co-operate with getting the house appraised and otherwise ready for sale.

BIL's continued squatting is likely diminishing the equity for hubby and any other beneficiaries of the estate.

 

[pb4uski]

I think people are missing the point of my thread.
Of course I would rather use the money from the proceeds of the house to pay back brother-in-law. Our attorney gave us a heads up, we will probably have to pay back the money before the house is sold. He asked us if we could come up with the money. We gulped and said sure.

I’m really asking where to get the money from.

The whole saga of the house and probate is worthy of a long, drawn-out, sad book

You're missing the point... when the proceeds from the house are settled, you should then be able to pay the $50k back from the proceeds.

Other alternative is to withdraw from Roth and put the mney back into the Roth when you receive the proceeds from the sale as long as the replacement is within 60 days.

https://www.investopedia.com/ask/an...n put funds back,only permitted once per year.

• You can put funds back into a Roth IRA after you have withdrawn them, but only if you follow very specific rules.
• These rules include returning the funds within 60 days, which would be considered a rollover.
• Rollovers are only permitted once per year.

 

[OldShooter]

... Attorney said we will win and brother-in-law will have to sell the house and proceeds to be divided equally, however we will have to pay back the 50,000. ...

I think you are misunderstanding the attorney. The way I read this sentence is that he is saying that you will win the court case and your BIL will have to sell the house. At this point you and BIL will split the cash proceeds and, from your share of the cash, you will have to give him back the $50K. You don't have to come up with the $50K cash ahead of the house sale.

If the court says you have to pay the $50K ahead of time that would be very unusual, but for sure wait until it happens before you make any moves at all. Your attorney should be arguing to the court that the $50K should come from the proceeds. If BIL has been living in the house, your attorney should also be asking that you be awarded equitable rent for BIL's 4-year exclusive use of a house that is half yours.

This is also an example of why a family member as executor or trustee can be problematical. But that's another thread.

 

[pb4uski]

... This is also an example of why a family member as executor or trustee can be problematical. But that's another thread.

Unless you select a family member as executor or trustee that is already independently wealthy and doesn't need the money.

 

[CRLLS]

He wanted to buy her house, but didn’t have the money or income to get a mortgage, a friend offered to loan him the money. Over about 2 yrs , he sporadically sent money, 3x totaling 50,000. He still owes 75,000, but hasn’t since any money in about 2 yrs

I had to reread the post several times to make some sense out of what was stated. If I understand correctly, he didn't take his friend up on the loan offer and you hold the mortgage? There is a mortgage, right? Who has the title? Do you share the title or was it transferred to brother? A lot of info is missing here. I am confused. I am assuming you have the note and he has payed you the 50KIn any case, no way in hell would I give him the $50K back. I would tell my attorney that. And he has accrued back payment interest to boot. And your laywer fees, and......

Imagine an individual buys a house with a bank mortgage, he pays back some of the debt but is well behind. The bank forecloses. The individual doesn't get to sell the house. The bank does. The bank doesn't return the money he had paid up to that point and hope it all works out in the end.

 

[Goldendoodlebug]

Ok, I’ll go into more detail and see if it helps…
Mother in law died 4 yrs ago, had a will left everything to both brothers equally. Made brother-in-law in law executor. (Let’s just call him Gary)
Before she died, she said more than once it would be an issue with Gary and the house, but she didn’t want to deal with him. He had been living in his Moms house part time for the last several years. He had inherited a house and property in MN, but it was old and there was a fire, so he was living in the garage in a travel trailer. That’s when he began to spend the winters with his Mom.

When she felt like she needed to move into a retirement community Gary strongly objected and even got her pastor involved so she wouldn’t move. However she did move about 6 months before she died.

Gary wanted to buy his Mothers house, buy out my husband, felt like the house should be his….

So… he is the executor, the money she has and the insurance all divided up equally, no problem.

He then wanted my husband to let him pay for the house over a ten yr period. Husband says no. Gary tries to get a mortgage but he is not employed and does not have much income about ~ 15, 000. Per yr.

However, he has several properties, but he doesn’t want to sell them or any of his antiques.

Anyway, he looks in a penny saver and says looks like Moms house is only worth 250, 000. He gave husband a certified check for 35, 000. Then over the next yr or so, two more checks, one for 10,000. And then 5,000.

His friend agreed to lend him the 75, 000. But wanted my husband to put in writing if something happened to Gary, the house would go to the friend and not my husband.

Husband wrote a letter stating when he got the money, he would release his hold on the house.

Gary now claims he has a contract and is using that paper as evidence.

Our attorney states it is not a contract,but believes the judge will request repayment of the money sort of to prove it, then the house will be assessed and then sold and the proceeds divided.
Whew, I’m condensing 4 yrs and lots of bull… as Quickly and suciently as possible

 

[Goldendoodlebug]

So brother-in-law has been squatting in his mother's house since she died and has periodically sent the OP money as what BIL said was compensation for hubby's share of the equity in the home?

Sounds like BIL is now broke and so is desperate to continue to squat there.

I'd probably have BIL removed as executor & evicted if he continued not to co-operate with getting the house appraised and otherwise ready for sale.

BIL's continued squatting is likely diminishing the equity for hubby and any other beneficiaries of the estate.

We tried to get him removed, but judge just want to get it resolved, after probate going on for 3 yrs

 

[pb4uski]

... This is also an example of why a family member as executor or trustee can be problematical. But that's another thread.

Unless you select a family member as executor or trustee that is already independently wealthy and doesn't need the money.

...So… he is the executor, the money she has and the insurance all divided up equally, no problem.

However, he has several properties, but he doesn’t want to sell them or any of his antiques. ...

The problem was created when your MIL made Gary the executor.

Why didn't Gary use his properties (presumably income producing properties?) as collateral for a loan and use the proceeds to pay off your husband?

Is your lawyer looking to get 1/2 of the value of rent from Gary since he has had use of the property for 4 years (less property taxes, insurance and other operating costs of the property)? He should, at least as a barganing chip to be used later if needed.

 

[CRLLS]

Of course, the judge wants it resolved, and soon. That doesn't mean you have to come up with the money. Are you certain that your attorney is not somehow intertwined with the brother somehow? It certainly sounds like it.

 

[MarieIG]

You know how you gulped and told your attorney sure.

Gulp again, call him back, and tell him it would be an undue hardship for you to raise the money. Have you heard of throwing good money after bad? Please re-read Old Shooter's post. He knows what he's talking about. (PB4uski is, of course correct about the 60 days - but - as a practical matter successfully completing a partition action, selling the property, and delivering the Roth funds back to the custodian within 60 days is very unlikely.)

I suspect your attorney is attempting to avoid having you locked into a $250,000 value for the house via a "partial performance." That notwithstanding, your BIL breached any potential agreement, as well as violated any fiduciary duties of an executor, but - most likely would be credited the initial payments - less any imputed value of his prolonged occupancy. Make your attorney work.

 

[38Chevy454]

*IF*, and that is a big if, the judge says you have to pay back the $50K first, then you should ensure the $50K is held in an escrow account and only available to the brother once house is sold and all proceeds are sitting ready for distribution. Ideally from the same or similar escrow account. Do not let the freeloader brother have any money control of your husband's share.

I also didn't get into the fair rental income of the house for past 4 years that apparently was never received.

Your brother in law is a useless freeloader. Have judge settle the estate, with court ordered documentation. Then say good riddance.

To answer the original question. I would use HELOC.

 

[CRLLS]

If pushed, is it possible that Gary will again have an "accidental fire"? Are you sure the home insurance is paid up to date?

In the matter of the original question, if pushed and there is no alternative, how about offering a promissory note? It would only seem fair considering..... When the estate settles, pay it off. to do so, DH MUST have a document stating that the original 50K paid to DH and then returned was to buy part of his share of the home and is buying his share back. However, if the home sells for < 100K then DH would see nothing.

 

[RetiredAndLovingIt]

WOW, this story is almost identical to another inheritance story that was posted here within the last couple of years that also did not go well.
Consider pushing for the executor to be replaced for failure to perform his duty either through incompetence or misconduct especially if he's been living in the house rent free for three years.
https://www.alllaw.com/articles/nolo/wills-trusts/remove-executor.html

 

[Goldendoodlebug]

The problem was created when your MIL made Gary the executor.

Why didn't Gary use his properties (presumably income producing properties?) as collateral for a loan and use the proceeds to pay off your husband?

Is your lawyer looking to get 1/2 of the value of rent from Gary since he has had use of the property for 4 years (less property taxes, insurance and other operating costs of the property)? He should, at least as a barganing chip to be used later if needed.

OMG!!!
That is the 64,000 dollar question.
She should have changed her will, but she didn’t.
Gary has/had many options but he has refused to use them. He has a property about 20 miles from his Mothers place. He lived there until he inherited the MN Property. He won’t sell it because he said it’s his money for his old age. He is 62! The property is worth more than his Mothers house.
In addition to his property here, he own the property in MN plus a duplex there.
He is a very rigid thinker. He was spending the winters at his Mothers house and he was going to continue.
There are a lot of other things he could do, but refuses and so far has gotten away with it.

 

[ivinsfan]

Well I've read this whole thread twice IMO your lawyer is wrong. You were SOL when your DH cashed the first check from his brother who was living in that house. Does the brother owe you money definitely, but brother also owns half of that home outright. Your lawyer seems to be telling you that he can make it like (the brother giving you cash and not a minor amount of cash) it never happened. Your yourself say you were accepting the payment toward brother buying the house. \\


There almost no way with these facts the judge will order that house sold. The judge might give you a judgement for the balance the brother owes you which will be worth the paper it printed on. If you get a judgement you might be able to file a lien on brothers paid off property in case of a sale. I live in the state of MN and tenants rights are pretty liberal.


Under no circumstances give the brother 50k giving the money back does not entitle your DH to a do over, that's not how it works.