Dear Quentin,
My mother-in-law, 75, has been married to her husband for almost 30 years.
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They both have adult children from previous marriages. They are over 70 years old and have maintained separate money accounts for most of their marriage. When they married, he moved in with her and a few years later she added him to the deed. They still owe $52,000 on the mortgage and carry a $20,000 HELOC. They both receive Social Security because he is higher. He also receives a pension.
Last year he moved to a residential care center. She continues to live at home and is in poor health herself. She can barely pay her mortgage because all her income goes toward the house payment and living expenses. Her husband’s pension and social security go to his housing facility. He does make the minimum payment on the HELOC. Furthermore, he does not contribute to her finances.
They have granted power of attorney to each of their adult children. He signed a quitclaim deed on the house, but his name is still on the mortgage. He also inherited his mother’s house, but transferred his share to his sister. My MIL inherited farmland and put it into a trust with her sons as remainder five years ago. She needs to get out from under the mortgage and protect her assets. Her house is worth double the land.
I advised her to sell the land, which would pay off the mortgage and provide her with a financial cushion. She opposes this idea because she says it is for her sons (who currently have to make up for all her financial shortfalls). I also asked her to contact her husband’s pension fund, but she says they will not provide her with any information. Her husband says he has “transferred” his pension to his daughter.
I’ve also asked her to consider a reverse mortgage, but her children are against the idea.
I’m running out of options.
Daughter-in-law in North Carolina
Related: ‘He doesn’t talk to me anymore’: My father, 83, suffers from hoarding disorder and dementia. Do I have the right to intervene?
Dear DIL,
You think you’re running out of options, but does this also apply to your mother-in-law?
She and her children can’t have it all. They find themselves at an impasse where the only way forward is to do nothing. But doing nothing – for now – is often underestimated: not selling stocks in a turbulent market, not making a major life change in the first year after a major life change or the death of a loved one and, yes, not selling her belongings now. that your mother-in-law lives alone. Sometimes the more pressure you put on someone, the more they resist.
Her house is more than an asset. It gives her a sense of security, and if she has lived there for years, she will also be surrounded by a community – whether it be neighbors, friends, the postman or even her favorite cashier at the local supermarket who says good morning and exchange of pleasantries. The sale of her land is also linked to the inheritance she wants to leave to her sons. That is why they are the ones who have to intervene (carefully).
Home ownership involves property taxes and/or homeowners’ association fees or maintenance costs such as replacing the roof. The most obvious solution would be to sell her land and pay off her mortgage or – and this would be more difficult to sell – empty her house and live with her husband. Ideally, she stays in her home and her sons have less responsibility in helping her make ends meet. If her sons told her that she’s already given them everything they could ever want, she might not feel so obligated to pass on her generational wealth.
Medicaid Eligibility
A reverse mortgage would allow her to forego her monthly mortgage payments. Reverse mortgages, available to people 62 or older and with an interest rate, peaked at nearly 115,000 during the financial crisis in 2009, and have averaged tens of thousands per year since then. She would have to pay origination costs, mortgage insurance, other closing costs and property taxes. It ends when she dies or moves away, and the family would inherit whatever is left after paying the note.
But maybe she doesn’t want the bank to own more of her house after paying off her mortgage for the past thirty years. In addition, she will not receive a mortgage interest deduction on her income taxes, and this may affect her ability to qualify for Medicaid and Supplemental Security Income programs. If your mother expects to live a long time and/or expects the house to continue to appreciate in value, a reverse mortgage is generally a better choice.
Five-year look-back rule
If she cannot pay off her loan, her husband will have to pay it off. He may not worry about his credit score if he’s in assisted living now, but it’s a red flag for anyone who has a loan and isn’t on the deed. Speaking of beneficiaries, the Employee Retirement Income Security Act does not allow spouses to change the beneficiaries on ERISA-covered accounts like a 401k or 403b without the other’s written consent. (But this probably wouldn’t apply to his pension.)
Your mother-in-law may feel like she is being hunted by others. Hire a third-party financial advisor, or better yet, a senior attorney – someone who can objectively review her income, expenses and assets. Depending on the timeline of events, the five-year look-back rule could allow her husband to go on Medicaid and have his assisted living and even home care for your mother-in-law covered. That could help free up money for her mortgage payments.
It may help to visualize all her choices on one sheet of paper, with her assets (house and land) on one side of the page, her income in the middle and her expenses on the other. I’m a big believer in putting things down on paper, where you can see them, and adding a timeline to it. It can provide much-needed perspective, help prevent obsessive thinking and provide a point of reference. Finally, tell her that she doesn’t have to make a decision right away.
You may see assets that need to be liquidated on that page, but she will see her entire life.
Previous columns by Quentin Fottrell:
‘He was recently taken to hospital’: My elderly neighbor gave me power of attorney. Can his estranged daughter object?
‘Punishing myself wouldn’t help’: My credit card was stolen – the thief revealed many nasty surprises about my finances
‘We’ve had our ups and downs’: My late in-laws left their estate to me, my husband and our son. Should we hire a lawyer?
