Making a rent-free house for one son fair to the other son

[racy]

We have 2 sons both mid-30s both married. We plan to buy a house for the younger, not working, disabled son to live in rent free. We'll own the house and will add it to our revocable trust assets. So, upon my & DW's death the trust will distribute equally to the 2 sons. (Maybe the younger son keeps the house as part of his share). So, I think the value of the house gift is taken care of as to the fairness issue.
However, the younger son will also benefit by not paying rent, which he currently does ($650/month). So, how do we make this fair for the older successful son? An annual check of $7800? A lump sum now factoring in my wife's 19 more years of life expectancy? Or, other better ideas?
(BTW, the older son knows what we're doing for his younger brother and is OK with it).

 

[pacergal]

"Fair is not always equal"
That was a common saying at our house while raising our two.
Over time, expenses all seemed too even out.
If the older one is OK with your choice, I wouldn't worry about it. But if you feel you want to even things out, the $7800/year to older son seems reasonable and well below the annual gift limit.

 

[Jerry1]

Does the older son have to become disabled in order to qualify for his fair share? Of course not. Life isn’t fair and neither do you need to be. There must be, or there will come, other ways that you’ll be able to help your older son. Personally, I’d be more concerned about the house being split upon your passing. What’s the younger son supposed to do then? Maybe you can even things up with your will by giving the older son a higher percentage of the estate and the younger son the house.

 

[OldShooter]

Not strictly to your question, but in doing this planning you should consult an expert trusts & estates attorney to understand how your disabled son's government benefits may be affected by various ways of distributing assets to him. The typical approach is a special needs trust, but how that plays with transferring real estate is far, far, beyond what this SGOTI knows.

Another factor might arise if you have both tIRA and Roths. We have one grandson who will be the beneficiary of a special needs trust and our estate plan specifies that it will be funded from the Roths. If it were funded from the tIRAs then the tax efficient way would be to distribute the total value within the 10 year limit, then end the trust. Using the Roths, the trustee can provide distributions without worrying about avoiding tax at the large (35% +/-) trust tax rate.

 

[pb4uski]

We have 2 sons both mid-30s both married. We plan to buy a house for the younger, not working, disabled son to live in rent free. We'll own the house and will add it to our revocable trust assets. So, upon my & DW's death the trust will distribute equally to the 2 sons. (Maybe the younger son keeps the house as part of his share). So, I think the value of the house gift is taken care of as to the fairness issue.
However, the younger son will also benefit by not paying rent, which he currently does ($650/month). So, how do we make this fair for the older successful son? An annual check of $7800? A lump sum now factoring in my wife's 19 more years of life expectancy? Or, other better ideas?
(BTW, the older son knows what we're doing for his younger brother and is OK with it).

I wouldn't do anything for older son for now. Who knows, at some point older son may need some financial help or help with a down payment of may have kids that go to college and you can consider those as an opportunity to square things up.

As others have wrote, fair isn't necessarily equal.

 

[Aerides]

I wouldn't do anything if the able-bodied son felt it was unfair. I'd be more concerned with helping the younger son only to the point that it's reasonable based the extent you can help with any lack of income due to his disability. And still only to the point that this younger son doesn't feel you're discounting his ability for income.

 

[brett]

We have never understood this need to make everything even between siblings from a monetary perspective. Neither do our children. It is all about need/assistance or choices.

We spent more on our son's education than our daughters. A great deal more. We paid for our daughter's resort wedding. No so for son. Our daughter wanted a trip to Hawaii so DW took her for a week. Son, on the other hand, wanted three weeks with me in Europe. Do either of them care about these differences? No.

We have made provisions to fund the post secondary studies of each of our daughters three children, our grandchildren. Our son has no children. If he did we would do the same for them. . Are we adjusting our estate accordingly? No....did not even consider doing so.

None of us tallies up the monetary differences between these. It is a non issue.
We try and do the best for our children at the time. That is our focus.

Besides, it is our money to do with as we see fit.

 

[anothercog]

Agree with others. You may actually cripple your son’s success by helping when he doesn’t really need it. My parents have already told me that I’ll inherit less than my other siblings because I’m successful. They need the money more. I’m fine with that. It’s not my money.

 

[Jerry1]

Agree with others. You may actually cripple your son’s success by helping when he doesn’t really need it. My parents have already told me that I’ll inherit less than my other siblings because I’m successful. They need the money more. I’m fine with that. It’s not my money.

Yep, my dad has done things for other family members, on his wife’s side, that he has not done for me or my children. There have been times when I felt negatively about that but then I have to realize that it’s absolutely his money and I just need to get over it, which I do. I feel the same way about my money. It’s mine to do with as I please. Personally, I do like to balance things out, but I don’t keep a ledger and my daughters may not agree that my actions have been balanced, but they have never said anything.

For example, for one daughter I bought a house and the other I paid a full ride at a four year college. They both cost around $100K. Different but fair in my mind.

 

[youbet]

Racy......

My oldest grandchild has cerebral palsy and will not be able to support himself. In our planning, his lifetime needs came first. His special needs trust came right off the top of our FIRE portfolio in our retirement planning. (Refer to OldShooter's post above regarding the legal planning issues that have to be considered.) Our gift to our son and DIL, his parents, was that this removed much of the burden of providing for their disabled son and could focus on their own retirement. No one else was asked for any inputs into this planning and we're not concerned if anyone ever feels there is any unfairness.

In your case, if your assets are sufficient so that you can adequately provide for your disabled son with each son eventually receiving half, that makes it easy. If the disabled son is going to need more than 50%, then that's just the way it is.

Have you talked to your older son about how you and he together need to be prepared to help?

 

[brett]

In their later years my parents gave my sister far more than they did me.

The reason was simple. She needed it, I did not.

I was not in the least bit resentful about it. The opposite was true, I was happy that they had the resources to do it and help my sister when she needed it.

When it came time to splitting the estate the fact that my sister was given more during my parents lifetime was never an issue with either of us. It was not as if either of us brought out a ledger or scoresheet history of my parents gifts to her.

 

[Doribe]

I would put the house in the second son's name. You can help the first son with something he needs. The estate should be divided 50/50 without negotiations.

 

[Dash man]

I wouldn’t worry about making it equal. You have your reasons for different treatment and that’s enough. We also have two boys, married, in their thirties. The older one moved into a rental we had, also our former home, and only pays electric and gas. We bought a similar home for the younger son when he wanted to bring his family to be near us. He pays us $650/month to cover HOA, property taxes, insurance and sewer. They pay everything else directly. Younger son and his wife are more successful and will do well. The older son and his wife had twins and were struggling until we stepped in to help. We’re working with them to get more self sufficient, but it’s a slow process. Things don’t have to be even, just fair. They’ll both end up with a bundle in the end. We just hope older son will learn how to manage it.

 

[Al in Ohio]

Maybe you can even things up with your will by giving the older son a higher percentage of the estate and the younger son the house.

That is not fair or equal imo. Does not take into account the additional power and value difference of present worth versus future worth. In these instances there’s only one fair remedy. Provide the exact same benefit to ALL children at the same time. Factor in what you can afford annually and divide by number of offspring. It’s that simple. Getting fancy never works. It’s never equal ( even if you think it is on paper). Someone will silently resent you for it.

 

[racy]

Thank you everybody for your thoughtful and helpful comments. I appreciate it.
Racy

 

[427Vette]

Maybe it would be a good idea to have a family meeting with everyone present so you can have complete transparency. It would be better to get everyone’s input now rather than later.

 

[OldShooter]

I would put the house in the second son's name. ...

Do not do this without getting legal and tax advice.

 

[Midpack]

Making things equal when you and DW are gone is commendable, but makings things equal now and ongoing isn’t necessary or advisable IMO. But it’s your family. A lot can change between now and the end of your estate anyway.

 

[marko]

Speaking as someone with a disabled brother, (its just the two of us), my take is whatever my brother needs to make his difficult life easier is fine with me. I'd hope your other son sees it that way as well.

I'm fine both physically and financially and we are both in our late 60's but that wouldn't change the calculation a bit had we been younger. If my parents had skewed the inheritance or help toward my brother, I'd have been fine with it.

As someone noted 'fair doesn't always mean equal.

OP: do what you can and just don't worry about the rest.

 

[jollystomper]

Personally, I’d be more concerned about the house being split upon your passing. What’s the younger son supposed to do then? Maybe you can even things up with your will by giving the older son a higher percentage of the estate and the younger son the house.

I agree. The younger son will still need a place to live after you are gone. It would make more sense to take care of that all now, and not leave any possibility of controversy over the house later. Just do whatever you feel you want to "balance" the inheritance to your older son.

 

[brett]

I would forget about 'equal' or other peoples perception of what is 'fair'. As above, these can be two very different things.

Make the best decision you can for each of your children given their respective circumstances and move forward with it.

If some do not agree with that...so be it. All that matters is that you are at peace with your decision. The rest is noise level.

 

[kcowan]

We had similar situations with both my father and my MIL. When they passed, my brother and my wife made it right with their siblings. By the time they passed, all the unknowns and "what ifs" were resolved.

 

[Stormy Kromer]

I would recommend keeping it even as you go.

My parents had two children, DB and me. DB struggled with a disability since a teenager (alcoholism and chemical dependency). Parents poured more money into his treatment and failed recovery attempts to the point they were broke. I was told how lucky I was that I didn't have this terrible illness and I could make my own money, he couldn't. The trouble was it was a family farm that we grew up on and worked for nothing but a promise. DB got his share, and mine, and whatever else the family had.

I was told that things would even up in their wills. There was a codicil in DDs will to leave me a portion to even things up a bit when he passed. Trouble was there were no funds left when he did.

Mom feels awful that I've been left out and hopes that I'm not mad. I'm not, I've come to accept it. They had their hands full with DB.

This may not be a similar situation to yours but it is an example that if your intent is to keep things even you have to do it as you go. A will is not the place to even things up.