Question about paying off dad's mortgage...

[Starsky]

I'm very sorry for your family's challenges. It brings back memories of a similar time.

I'm in the camp of not paying it off - or if you do feel you have to, giving your dad a loan for $80K due and payable upon his passing. (Just to protect your money.) It's not worth putting your hard-earned money at risk, and possibly even changing your current year income tax situation depending on the source of funds. (With a loan, you could justify charging the Trust interest on your money - less than 7.5% - and collecting the interest from the trust before funds are calculated for distribution.)

I don't know if you've considered the option of selling the property now. Since his wife passed, the property's basis has likely been re-upped so there are no capital gains taxes, and you could pay off the loan and have all the leftover cash in a [irrevocable] trust account at the bank to use or distribute as you see fit. Selling now also lets you control the timing of the sale to get the best price, rather than being forced into a quick sale during the winter or at another bad time.

By getting rid of the loan, it would also be a lot easier to settle the trust when it's time. If Dad declines his trusteeship and makes you the [current] trustee of the trust, you should be able to handle the whole thing. Your trust attorney can advise you.

 

[jazz4cash]

Best wishes to you CindyBlue as you bravely face up to a series of challenges.

I really don’t know but is a reverse mortgage an option here? Has it been considered? I didn’t see it mentioned in the thread.

 

[Paulz]

I have nothing of substance to add, but wanted to share my condolences for the rough year. Please update us when you get a chance. I've learned so much through this thread. I knew I was ignorant on this topic, but the wealth of knowledge and advice is amazing!

 

[CindyBlue]

Thank you, everyone, from the bottom of my heart. You are right, it's a very difficult time. I'm still juggling like crazy - dealing with the trust and loan issues, and dad and his physical and mental health, and his new nursing home and how to make the payments, dealing with MediCaid, and putting the property back into shape after years of neglect (he wouldn't let us do much of anything. It's actually in pretty sound condition structurally, just a lot of mowing, and fences and barn doors to fix, endless trips to the dump to clean out the house, barn and property, etc. Already got the line from the well to the houses replaced and the septic field replaced and repairs to the septic tank and his house plumbing done...sigh...) This is family property - not long in the big scheme of history, but we've lived here in the valley since 1958, and if at all possible, we hope to remain here, as long as we are physically capable of the upkeep. There are two houses on the property, and in case anything happens to my sister's finances (they are independent contractors, and who knows what will happen in this new economic reality!), we always will have a place for her here. That was always our parents' plan, and we think it's a good one. We all aren't getting any younger!

We have finally made the decision. After seeking a lot of advice, from our lawyer, my sister, friends, and including the invaluable thoughts and advice from the members of this forum...we have decided that we will pay off the loan.

Our lawyer told us to write a both a letter of intent and a promissory note to be signed by us and by my sister, who is in complete agreement and grateful that we are doing it, stating that we are paying the loan off with our personal funds and that those personal funds (plus other property expenses) will be paid to us before the valuation of the property for division and disbursements of funds to myself and my sister. The part about property expenses being taken off the value of the property before evaluation for fund disbursement is also clearly stated in the trust. It's a big chunk out of our savings, but we believe we can survive without it.

Paying off the loan solves a lot of other problems in dealing with the payments to MediCaid. It will save us a ton of interest. The only downsides that we could see are the possible problem of making sure we get it back eventually, and not having it in case we need it for a financial emergency. We've decided that we do have enough in cash to cover a property emergency (such as the well failing and having to drill a new one, God forbid.) We hope we have enough for any of our medical emergencies that might arise and we've done the best we can to plan for that, but who knows...sigh... We've made lists and planned as best as we could for each possible extra expense. If a natural disaster destroys the houses, we could be in trouble (hope the insurance comes through! I will contact the insurance and and see about updating the property insurance plan) but we decided that we have to take some things on faith after doing everything we can to plan and prepare.

Making and executing the plan to pay off the loan has been a real hassle, what with the virus shutdowns and not being able to get ahold of anyone at dad's bank. The fellow at his local branch who was helping us for the past two years of dad's decline is amazing, but I just could not get ahold of him, since our local branch had closed and he'd been reassigned...and then that bank had a fire and he was moved again...OMG, what a mess. Took me two weeks of calling every day, every phone number I could find that was related to that bank, to finally connect with him...but then he had the whole thing set up and ready to go in less than two hours. We will pay it off, if nothing goes wrong, on the 28th of this month, before the next automatic payment is due (which would mess up dad's account and the MediCaid payments and limits yet again. It's so complicated!!)

You people here keep me sane. I just don't know how to adequately tell you how much I appreciate your thoughts and help and advice. I've learned so much since I started reading the posts on this forum back in 2014 as I started to seriously plan for retirement (not anticipating this latest mess, of course!) Whether I agree with a post or not, I always learn something. I am so very grateful!

We plan to make a copy of the payoff receipt and have a "mortgage burning" celebration with my sister (socially distanced, course, down in the corral!)

And, of course, I will post here to celebrate with you!!

 

[pacergal]

Best of luck to you. It is always nice to have a thought out plan.

 

[Gremlin]

You made your decision after careful consideration and examining the pros/cons to the best of your ability. You can’t do any better than that! Good luck to you.

 

[CindyBlue]

We did it...

...paid off the loan this afternoon.

I felt very relieved after...I’m as sure as I can be that it was the right decision. Time, of course, will tell.

Now we just have to wait for the final documents from the county, which will be delayed, I’m sure, due to the virus situation. Hopefully, it will be done within a month. Then I will have a mortgage burning ceremony (copies, of course!!)

If dad was aware, I know he’d be happy, and glad that the property is fully paid off. I sure wish he could understand...sigh...

Thanks, everyone - I sure appreciate you all!!