Should we let MIL pay off our mortgage?

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SuperSaver
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Should we let MIL pay off our mortgage?

Post by SuperSaver » Mon Aug 28, 2017 2:08 pm

Here's the scenario:

My Mother-on-law sold her single-family house a few years back, and parked the proceeds in cash ($400,000). She has >$2M invested in various financial instruments (Balanced Funds, CDs, Annuities, our kids' 529) and wishes to re-invest the $400k in real estate. She DOES NOT want to put more money into "the stock market"...


My wife and I purchased our single-family home (before kids) in 2009 for $410,000. We re-financed last fall at 2.5% (15 year fixed), and have $240,000 equity. Our growing family now needs more space, and are looking for larger house with 1st-floor master for potential elderly parents to move in.

My Wife's plan is to:
1) MIL pays off our mortgage and wife & I keep the house in our name
2) We rent out our existing home in highly desirable neighborhood.
Clear ~$2000/mo after taxes/expenses and put this money into joint account to cover maintenance costs of any big projects
3) My wife & I finance new home in same neighborhood
4) MIL and SIL live in their existing house.
5) MIL and us split the rental proceeds

Benefits would be:
1) Generous gift from MIL allows us to both generate rental income. This would be our 1st foray in a renal property
2) Enjoy larger home while we can with young kids, with potential space for in-laws/parents to move in
3) We trust the background of our existing house to rent out

Quick background
Wife and I are in our 40's
No debt other than mortgage
Maxed out 401k and Back door Roth
Sizable Emergency fund and taxable accounts
MIL has graciously funded kids 529's
Very stable jobs
MIL is retired, widowed with adequate lifetime savings
MIL planning on transferring all assets to grown adult children and grand kids in future

With the exception of making us a landlord, what drawbacks are here?
*would prefer to hear from those who actually have had experience with real estate investing

Thanks!

bloom2708
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Re: Should we let MIL pay off our mortgage?

Post by bloom2708 » Mon Aug 28, 2017 2:24 pm

Is this a gift or a loan? Are there other siblings involved? Are they also getting $400k?

My initial reaction is I would not do this.

First, every family dinner going forward will be different. You will either be in debt or you will be small business (rental) owners together.

Do you want to own and run a small business? Screening tenants, collecting rent, taking repair/maintenance phone calls, evicting tenants that do not pay? One bad tenant, one major repair or issue can sink a whole year or several years of rental income.

You would not be living in the current house, so consider taxes, insurance and other costs.

Does MIL want to start a rental business? What is MIL going to live off of if she transfers her assets in the near future?

We will never know your current scenario enough to give any advice beyond tossing out some scenarios you may not have thought about.

I would pass and enjoy family dinners without that hanging over your heads. Value your time and her money.
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ThriftyPhD
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Re: Should we let MIL pay off our mortgage?

Post by ThriftyPhD » Mon Aug 28, 2017 2:27 pm

Thinking about the investing with family side more so than the real estate question, here are some conerns I would have.
  • Is this a gift, a loan, or investment from the MIL? The answer here could impact taxes as well assets from MIL's estate. For example, if MIL now owns half of your home (an investment from MIL) and passes, would SIL now own a quarter (assuming wife and SIL each get half of estate? If it's a loan, what are the terms? If it's a gift, how does that impact gift taxes? You've said 'gift' and 'invest'. It's important to know which. I don't think it can be both.
  • I would want to VERY clearly, in writing, agree on who is in charge of what. If you have a tenant willing to pay $2500/month but MIL thinks it should be $2700, who should get final say? Who is going to pay for repairs/maintenance/taxes/insurance/background check/cleanup? Who will handle the sweat equity side of the equation; showing the property, handling the paperwork, taxes, etc? What if MIL wants to get out of the real estate business? What are her options for demanding her money back? How much would she get back, the amount she gave or a portion of the current value? If you go 4 months without a tenant, does MIL still get paid? Does she give more cash to pay for upkeep/expenses?
  • Do you want to become a landlord? If you magically had $200k fall on your lap, would you choose to become a landlord?
The main issue is you're mixing money and family. This can lead to a lot of resentment, hurt feelings, torn relationships if you haven't worked through all of the possible problems. Couple this with the shared investment in an illiquid asset and you could be on the way to big headaches. Would it make more sense to sell your current property and have MIL buy a different one that she rents out on her own?

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dm200
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Re: Should we let MIL pay off our mortgage?

Post by dm200 » Mon Aug 28, 2017 2:27 pm

Do you really want to become "entangled" in the rental business with your MIL?

I would not -- but that is just me.

dbr
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Re: Should we let MIL pay off our mortgage?

Post by dbr » Mon Aug 28, 2017 2:30 pm

It sounds like a mess. Can't you all think of some simpler way for your mother to invest and everyone help each other out without all the entanglement? It sounds like people making everything complicated based on some idea that if something is convoluted enough it must be really smart.

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mrc
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Re: Should we let MIL pay off our mortgage?

Post by mrc » Mon Aug 28, 2017 2:36 pm

and wishes to re-invest the $400k in real estate.
Great reason to find a nice low-cost REIT.

They say you shouldn't invest in instruments you don't understand. The terms of this arrangement are not crystal clear, subject to change without notice, and hard to liquidate.
Last edited by mrc on Mon Aug 28, 2017 2:38 pm, edited 1 time in total.
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dm200
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Re: Should we let MIL pay off our mortgage?

Post by dm200 » Mon Aug 28, 2017 2:37 pm

With the exception of making us a landlord, what drawbacks are here?
This reminds me of the question: "Other than that, Mrs. Lincoln, how was the play?"

delamer
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Re: Should we let MIL pay off our mortgage?

Post by delamer » Mon Aug 28, 2017 2:51 pm

You are the same guy who was considering selling your house to your MIL in an earlier thread. Why don't you just sell it to her at a slightly below market rate (no realtor commission) and then offer to manage the tenants for a monthly fee? You seem to be tying yourself up in knots to make her and your wife happy on this. I would not want to be so financially entangled with my MIL just because she does not want to invest in the stock market.

Where are you getting the downpayment for your new home?

You can't split the rental proceeds and put the net after taxes and expenses into a maintenance account. You'd be spending the same dollar twice.

If you MIL isn't going to be co-owner, how will gift taxes work -- both with her paying off your mortgage and you giving her half the rental income from a property she does not own?

JGoneRiding
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Re: Should we let MIL pay off our mortgage?

Post by JGoneRiding » Mon Aug 28, 2017 3:01 pm

As a LL I can tell you if a house worth >410k was only going to rent for 2k/mos that is NOT an investment I would want mortgage free or not. Also if it has been your primary residence there are tax incentives to sell now vs waiting and while I like real estate, own 5 properties and have close to a mil in loans out, I think that you should mostly only rent out things that you thought hmm this makes a good rental. Large expensive properties rarely make sense as a cash flow, which is why people sometimes come on here and say "we can't rent anything in the nice neighborhood"

Min qualifications: Property must be easy to maintain, on its own water system (or city no shared well) and I won't ever by another one on septic. Should rent for 0.8% or if I have a really great loan 0.6% of FMV (1% only exists currently in slummy LCOL areas). and finally it must make sense from a tax perspective.

If you want to get into real estate with MIL go and look for a property that makes sense to rent. Someone posted a great spreadsheet to plug in numbers too and get to calculate if a property makes sense. In this case you would be much further ahead to sale and get the tax free gains out.

edit: I feel like I should add one of the places I own I own with my mother (I wasn't married at the time) We have had that place for about 7 years now, it has worked out great. We did sign a one page partnership at the time of purchased (I can't even remember what it says) Mom does books/taxes, I do screening basic tenant interactions. We have worked together on repairs/maintenance. So that is to say it can work well only you know your family dynamics but the issues talked about upstream should be put in writing if you are going to do this, that said I just flat think this is a bad house to do it with. Find something smaller that still rents for 2k. If that doesn't exist in your area then maybe your area isn't a good place to jump into rentals in. In my area rents are high vs buy. In my brothers area (1 hr away) you can get that magic 1% plus because so few people can afford to buy. (so I would say rent vs buy is sky high there) In your area if they can rent a 400k house for 2k they should rent that is a sweet deal but bad for you.
Last edited by JGoneRiding on Mon Aug 28, 2017 3:10 pm, edited 1 time in total.

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Pajamas
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Re: Should we let MIL pay off our mortgage?

Post by Pajamas » Mon Aug 28, 2017 3:04 pm

Setting aside the investing with family issues, it doesn't sound like a great rental property. If you are going to become a landlord, don't do so accidentally. Look for properties with the highest rate of risk-adjusted return.

staythecourse
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Re: Should we let MIL pay off our mortgage?

Post by staythecourse » Mon Aug 28, 2017 3:20 pm

Honestly, there has to be a point you act like an adult and NOT a child of someone's parent. Having mommy or daddy buy you a house is a sign of the latter and not the former.

Be adults and pay for you own debt.

Good luck.

p.s. It is human nature the relationship will change if you allow your MIL to "help" you like this. The change is never going to be good.
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celia
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Re: Should we let MIL pay off our mortgage?

Post by celia » Mon Aug 28, 2017 3:24 pm

SuperSaver wrote:
Mon Aug 28, 2017 2:08 pm
Benefits would be:
3) We trust the background of our existing house to rent out
This is NOT a benefit, but rather a negative, since you are assuming (for now and for the future).

Lots of other negative have been listed above.

If your family is "growing", why do you/your wife want to complicate your life financially? Unexpected things happen. Landlording takes time away from family.

If your MIL wants to invest in real estate, that is ok, buy why would you let it impact you? I would recommend Vanguard's REIT fund, for simplicity.

SuperSaver
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Re: Should we let MIL pay off our mortgage?

Post by SuperSaver » Tue Aug 29, 2017 10:50 am

Thanks for all the replies. To clarify the issue

1. Yes, this is a gift from MIL. Not a loan
2. My MIL is the most selfless, generous human being I've ever met. Her only goal is to give all her money away to her surviving heirs to make our lives easier. She did not want this inheritance. She wants my departed FIL to come back. By giving away the money to us, it is one small thing that makes her happy.
3. Yes, other sibling getting equal amount similar to my wife. Not an issue. No resentment, jealousy, etc. This is not an issue.
4. Rental income expected to be $3,000/mo. Best elementary and high school district in the state. No shortage of renters.
5. yes, my MIL explicitly wants to invest in real estate.
6. MIL has enough assets to live on after paying off our mortgage
7. MIL explicilty trusts my wife to make all financial decisions on her behalf.
8.We are not "going into business" with my MIL. Any rental income will be ours in the future
9. REIT not a good option. My MIL doesn't work, and majority of assets in in taxable account. Also, REIT returns would pale in comparison to 10% annual appreciation in home values in my area for last 25 years.

SuperSaver
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Re: Should we let MIL pay off our mortgage?

Post by SuperSaver » Tue Aug 29, 2017 10:54 am

staythecourse wrote:
Mon Aug 28, 2017 3:20 pm
Honestly, there has to be a point you act like an adult and NOT a child of someone's parent. Having mommy or daddy buy you a house is a sign of the latter and not the former.

Be adults and pay for you own debt.
This is a bit snarky, isn't it? We have zero debt other than our home. We could pay it off ourself with one click. My MIL's only modicum of happiness after losing her husband is to make her kids and grandkids happy. She subsides on $5,000/year. The inheritance is an unpleasant reminder of a life taken too soon, and she derives no pleasure from having this money. I would take my father-in-law back in an instant rather than this payment. BUT, if she wants to do this, while investing in real estate to diversify, why should we stop her?

Your comment was childish and unnecessary.

ThriftyPhD
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Re: Should we let MIL pay off our mortgage?

Post by ThriftyPhD » Tue Aug 29, 2017 11:07 am

1. Yes, this is a gift from MIL. Not a loan
5. yes, my MIL explicitly wants to invest in real estate.
5) MIL and us split the rental proceeds
8.We are not "going into business" with my MIL. Any rental income will be ours in the future
This sound contradictory. This sounds like a mix of gift, loan, and investment. Make sure you understand which. The reason you're getting a lot of advice to not do this is because this sounds very murky.
9. REIT not a good option. My MIL doesn't work, and majority of assets in in taxable account. Also, REIT returns would pale in comparison to 10% annual appreciation in home values in my area for last 25 years.
Is this going to be MIL's money, or yours? If homes have gone up 10% a year for 25 years, do you expect that to continue for the next 25 years?

aristotelian
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Re: Should we let MIL pay off our mortgage?

Post by aristotelian » Tue Aug 29, 2017 11:17 am

Seems like you have a bunch of complicated mental accounting going on. MIL is giving you $240K. In return she is getting $1K monthly - I assume indefinitely until she dies. What you do with the money is irrelevant to her, and where it "comes from" is irrelevant to you. Essentially, you are giving her a $1k annuity backed by your new rental house. Based on immediateannuities.com calculator assuming she is age 70, $240K should get her a monthly return of $1405. So this appears to be a good deal for you, but if she keeps ticking perhaps not so much.

Do you want to be in a position of rooting for MIL to die early?
Last edited by aristotelian on Tue Aug 29, 2017 11:18 am, edited 1 time in total.

cpants
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Re: Should we let MIL pay off our mortgage?

Post by cpants » Tue Aug 29, 2017 11:17 am

It's not a gift if she is considering it a real estate investment and expecting money back from rent payments. A gift would be she pays of your mortgage and that's the end of it, or gives you cash.

metrunt
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Re: Should we let MIL pay off our mortgage?

Post by metrunt » Tue Aug 29, 2017 11:20 am

Your MIL is financially free. With $2.4M, at least, in assets, living on $5,000 a year, she doesn't need to diversify. She should put more money into safe investments and gift each of you 11K a year.

You're asking fort the disadvantages are. Others have already mentioned being a landlord and being involved with family in business.

I see a little bit of blindness here. It sounds like you want this deal to happen and aren't looking at evidence pointing to it not being a good deal.

1) Does your MIL explicilty trust your "wife to make all financial decisions on her behalf"? What if your wife said, don't invest in real estate. Just keep it in CDs and cash and low yield safe equities?

2) If you're overstating the appreciation side, you're making a terrible deal. If you're fudging the appreciation, you're making a mediocre deal. Either way, it's a warning sign. If real estate really appreciates at 10% a year, then your house, bought for $410K in 2009, is now worth about $800K. $3,000 a month on a $410K house is not a great deal. $3,000 on a $800K house is financially irresponsible.


3) Ultimately, it sounds like you're going to push through with this regardless of the advice you get. The only question that matters is will this deal make you and your family happy? And it sounds like you think you already know the answer to that

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8foot7
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Re: Should we let MIL pay off our mortgage?

Post by 8foot7 » Tue Aug 29, 2017 11:46 am

This plan is unsound from the get-go. You should be renting out your 410k house for about $4,000 a month. If you can't get that, it's not a good rental property, regardless of where you get the financing.

SimplicityNow
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Re: Should we let MIL pay off our mortgage?

Post by SimplicityNow » Tue Aug 29, 2017 11:57 am

It's a bad idea on so many levels, most of which have already been mentioned.

If she derives pleasure from spending this inheritance by spending it on her kids and grandkids then let her put the money in 529's for her grandchildrens college education.

She can pay for a trip to Disneyworld, a cruise to the Caribbean, shopping in Paris, etc.

NotWhoYouThink
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Re: Should we let MIL pay off our mortgage?

Post by NotWhoYouThink » Tue Aug 29, 2017 12:00 pm

Your MIL can pay off your mortgage if she wants to, she just needs to report the gift to the IRS.

You can buy a new house, rent out your old house, and send some of the money to your MIL every month if you want to, and if you consider it a gift you and spouse can each give your MIL $14K a year without having to report it. You will still have to report the rental income on your tax return.

What the 2 statements above have to do with each other is a mystery to me, which you have done nothing to clarify.

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bottlecap
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Re: Should we let MIL pay off our mortgage?

Post by bottlecap » Tue Aug 29, 2017 12:11 pm

What I don't get is that MIL is not investing in real estate.

She's giving you a gift. Or, if she is going to get some of the rent, she's giving you an interest-only loan.

That's why so much in your posts is contradictory.

I'm sure both of your hearts are in the right place, but giving away $160,000 for rental income is not a gift, it's an annuity. Or loan of some sort. Plus it sounds like her part of the net money isn't even going to her, but is socked away for future expenses.

If you really want to be a landlord and spin off some of the rental income to your MIL, go ahead.

However, you need an agreement as to what happens if, in a year from now, you decide it's not worth the trouble. Does MIL get her money back if there is not longer the prospect of rent?

Good luck,

JT

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Watty
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Re: Should we let MIL pay off our mortgage?

Post by Watty » Tue Aug 29, 2017 12:24 pm

SuperSaver wrote:
Mon Aug 28, 2017 2:08 pm
2) We rent out our existing home in highly desirable neighborhood.
One huge problem with this is that if you rent it for more than a few years then you will lose the homeowners capital gains exemption. Converting a residence to a rental property will also make your depreciation a lot more complex and likely less favorable than if you bought a house as an investment property.

If you have a burning desire to be a landlord then because of the taxes it would likely make sense to sell that house and buy the identical house next door.

There is lots of problems like your MIL might outlive your wife, or you might get divorced, or the MIL might get remarried and then die while her second husband it still alive. What to do with the house would be a mess then. For example if your wife dies and you remarry things could be very awkward with your MIL and your next wife might feel uncomfortable with having the MIL so closely involved with you.

Another problem to consider is how who will pay for large expense like when the house needs a new roof or the kitchen needs to be remodeled.

I think if the MIL wants real estate but does not want a REIT then she should buy an investment property and have a property management company take care of it.

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Pajamas
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Re: Should we let MIL pay off our mortgage?

Post by Pajamas » Tue Aug 29, 2017 12:28 pm

I think it's fine to let your MIL pay off your mortgage, but that seems to be part of a complicated plan in which a lot can go wrong and which has a lot of potential implications for familial relationships. It would be a lot cleaner if she just made a cash gift to your wife period or possibly a cash gift with the only stipulation and expectation being that it be used to pay off the mortgage. The problem is that it is almost impossible for cash gifts between individuals to be so "clean". I would think hard about it before accepting.

staythecourse
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Re: Should we let MIL pay off our mortgage?

Post by staythecourse » Tue Aug 29, 2017 7:24 pm

SuperSaver wrote:
Tue Aug 29, 2017 10:54 am
staythecourse wrote:
Mon Aug 28, 2017 3:20 pm
Honestly, there has to be a point you act like an adult and NOT a child of someone's parent. Having mommy or daddy buy you a house is a sign of the latter and not the former.

Be adults and pay for you own debt.
This is a bit snarky, isn't it? We have zero debt other than our home. We could pay it off ourself with one click. My MIL's only modicum of happiness after losing her husband is to make her kids and grandkids happy. She subsides on $5,000/year. The inheritance is an unpleasant reminder of a life taken too soon, and she derives no pleasure from having this money. I would take my father-in-law back in an instant rather than this payment. BUT, if she wants to do this, while investing in real estate to diversify, why should we stop her?

Your comment was childish and unnecessary.
Sorry if it hurts, but there are PLENTY of folks who have had parents offer to pay of their debts. Most are mature and would instantly so no. I may be in the minority, maybe not, that think if you took on the debt then you should pay it. That doesn't some reasonable to you?

If you ask a question don't get upset if it isn't the opinion you want to hear. I am sure others thought of saying the same thing when you asked the question, but are too polite to say what I said. I can bet if you asked any of your friends they will question the same thing.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

denovo
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Re: Should we let MIL pay off our mortgage?

Post by denovo » Tue Aug 29, 2017 7:34 pm

staythecourse wrote:
Tue Aug 29, 2017 7:24 pm
SuperSaver wrote:
Tue Aug 29, 2017 10:54 am
staythecourse wrote:
Mon Aug 28, 2017 3:20 pm
Honestly, there has to be a point you act like an adult and NOT a child of someone's parent. Having mommy or daddy buy you a house is a sign of the latter and not the former.

Be adults and pay for you own debt.
This is a bit snarky, isn't it? We have zero debt other than our home. We could pay it off ourself with one click. My MIL's only modicum of happiness after losing her husband is to make her kids and grandkids happy. She subsides on $5,000/year. The inheritance is an unpleasant reminder of a life taken too soon, and she derives no pleasure from having this money. I would take my father-in-law back in an instant rather than this payment. BUT, if she wants to do this, while investing in real estate to diversify, why should we stop her?

Your comment was childish and unnecessary.
Sorry if it hurts, but there are PLENTY of folks who have had parents offer to pay of their debts. Most are mature and would instantly so no. I may be in the minority, maybe not, that think if you took on the debt then you should pay it. That doesn't some reasonable to you?

If you ask a question don't get upset if it isn't the opinion you want to hear. I am sure others thought of saying the same thing when you asked the question, but are too polite to say what I said. I can bet if you asked any of your friends they will question the same thing.

Good luck.
So are you going to give away your inheritance? Can I have it then? :wink: Many people pass away and give things to their children who may use it to pay off debts or for other consumption. Some may decide to pass along some assets before they die because they've accumulated enough and aren't worried about eating cat food during retirement.

That said, I think it's bad for OP to entangle himself with MIL in a rental business, but that's irrelevant to your point.
"Don't trust everything you read on the Internet"- Abraham Lincoln

bubbadog
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Re: Should we let MIL pay off our mortgage?

Post by bubbadog » Tue Aug 29, 2017 8:50 pm

It seems like the OP had already made up his mind about what he was going to do prior to posting and was just looking for confirmation of his decision. Not much need to offer advice at this point.

Church Lady
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Re: Should we let MIL pay off our mortgage?

Post by Church Lady » Tue Aug 29, 2017 9:08 pm

She subsides on $5,000/year.
Really? If this is true, it's mind boggling. $5K doesn't even pay my annual medical premiums, and yet your MIL buys medical insurance, prescriptions, food, car, insurance, clothing, rent, cell phone, cable/internet, utilities, and perhaps a splurge at McDonald's. Wow. I shudder to think what her living conditions must be.

No, she should not pay your mortgage. She should buy herself a dignified lifestyle.
He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity. Ecclesiastes 1:8

2pedals
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Re: Should we let MIL pay off our mortgage?

Post by 2pedals » Tue Aug 29, 2017 9:34 pm

SuperSaver wrote:
Mon Aug 28, 2017 2:08 pm
Here's the scenario:

My Mother-on-law sold her single-family house a few years back, and parked the proceeds in cash ($400,000). She has >$2M invested in various financial instruments (Balanced Funds, CDs, Annuities, our kids' 529) and wishes to re-invest the $400k in real estate. She DOES NOT want to put more money into "the stock market"...
How old is your MIL? Sounds like to me she needs some financial Bogleheadish type advice to make sure she does not become a burden to her children. Giving away big chunks of money may leave her with very little in the future.

staythecourse
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Re: Should we let MIL pay off our mortgage?

Post by staythecourse » Tue Aug 29, 2017 11:31 pm

denovo wrote:
Tue Aug 29, 2017 7:34 pm
staythecourse wrote:
Tue Aug 29, 2017 7:24 pm
SuperSaver wrote:
Tue Aug 29, 2017 10:54 am
staythecourse wrote:
Mon Aug 28, 2017 3:20 pm
Honestly, there has to be a point you act like an adult and NOT a child of someone's parent. Having mommy or daddy buy you a house is a sign of the latter and not the former.

Be adults and pay for you own debt.
This is a bit snarky, isn't it? We have zero debt other than our home. We could pay it off ourself with one click. My MIL's only modicum of happiness after losing her husband is to make her kids and grandkids happy. She subsides on $5,000/year. The inheritance is an unpleasant reminder of a life taken too soon, and she derives no pleasure from having this money. I would take my father-in-law back in an instant rather than this payment. BUT, if she wants to do this, while investing in real estate to diversify, why should we stop her?

Your comment was childish and unnecessary.
Sorry if it hurts, but there are PLENTY of folks who have had parents offer to pay of their debts. Most are mature and would instantly so no. I may be in the minority, maybe not, that think if you took on the debt then you should pay it. That doesn't some reasonable to you?

If you ask a question don't get upset if it isn't the opinion you want to hear. I am sure others thought of saying the same thing when you asked the question, but are too polite to say what I said. I can bet if you asked any of your friends they will question the same thing.

Good luck.
So are you going to give away your inheritance? Can I have it then? :wink: Many people pass away and give things to their children who may use it to pay off debts or for other consumption. Some may decide to pass along some assets before they die because they've accumulated enough and aren't worried about eating cat food during retirement.

That said, I think it's bad for OP to entangle himself with MIL in a rental business, but that's irrelevant to your point.
If you want to know... yes. I have already told my folks I will not be taking a dime from them when they pass away. I told them to give it to charity, spend it lavishly on themselves, etc... I guess I am a dying breed where I think once a person is an adult it is THEIR responsibility to take care of themselves. Hard to teach your kids that if your mommy or daddy are still taking care of you financially as an adult. I know I am in the minority, but have stuck with that up to now and still do.

Again the OP can do whatever they want as it is their life. I just said what I thought.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

mega317
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Re: Should we let MIL pay off our mortgage?

Post by mega317 » Wed Aug 30, 2017 12:27 am

Church Lady wrote:
Tue Aug 29, 2017 9:08 pm
She subsides on $5,000/year.
Really? If this is true, it's mind boggling. $5K doesn't even pay my annual medical premiums, and yet your MIL buys medical insurance, prescriptions, food, car, insurance, clothing, rent, cell phone, cable/internet, utilities, and perhaps a splurge at McDonald's. Wow. I shudder to think what her living conditions must be.

No, she should not pay your mortgage. She should buy herself a dignified lifestyle.
Could be a typo 5k/month. Or could be 5k after social security and pension. Sounds like she lives with SIL, who might be paying for most of the above?
The inheritance is an unpleasant reminder of a life taken too soon, and she derives no pleasure from having this money.
If MIL hates having the money why does she want to invest it? Just give it away and be done.

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celia
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Re: Should we let MIL pay off our mortgage?

Post by celia » Wed Aug 30, 2017 1:23 am

SuperSaver wrote:
Tue Aug 29, 2017 10:50 am
9. REIT not a good option. My MIL doesn't work, and majority of assets in in taxable account. Also, REIT returns would pale in comparison to 10% annual appreciation in home values in my area for last 25 years.
Ummm, I own Vanguard's REIT Index fund (VGSIX), the one that's grown 8.98% over the last 5 years, 7.04% over the last 10 years, and 10.53% since inception in 1996. Of course, it is not invested in your great neighborhood, but in "real estate investment trusts—companies that purchase office buildings, hotels, and other real estate property". (from fund description).

Your current home. If you bought your house in 2009 for $410K and it has appreciated 10% a year since then, it would be worth $878K now. Is that anywhere close to currently selling prices for a house your size in your neighborhood these days? If not, the appreciation in your neighborhood pales in comparison to the REIT fund.


Whose idea really is this? Your MIL's? Your wife's? Yours?
If it is NOT your idea, it seems like you could go back and discuss our concerns with the others, but I don't get the impression you've done that. You seem to keep defending the idea. So here is how I would approach the thought process:

1. Is the $400K a gift? If so, can you (your wife?) do whatever she wants with it? (That will test to see if it is truly a gift.)

2. Since the three of you seem intent on putting the money towards real estate, why can't it be invested in the REIT fund? (That will take care of the stock market concerns.)

3. Suppose your MIL wasn't involved at all. Ask your wife what SHE would do if she suddenly won a lottery and had $400K available after taxes.

4. Separately from your wife, think about what YOU would do if you won the lottery and had $400K available after taxes.

If you can bring these answers back, we might be able to make better suggestions.

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Pajamas
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Re: Should we let MIL pay off our mortgage?

Post by Pajamas » Wed Aug 30, 2017 9:00 am

mega317 wrote:
Wed Aug 30, 2017 12:27 am
Church Lady wrote:
Tue Aug 29, 2017 9:08 pm
She subsides on $5,000/year.
Really? If this is true, it's mind boggling. $5K doesn't even pay my annual medical premiums, and yet your MIL buys medical insurance, prescriptions, food, car, insurance, clothing, rent, cell phone, cable/internet, utilities, and perhaps a splurge at McDonald's. Wow. I shudder to think what her living conditions must be.

No, she should not pay your mortgage. She should buy herself a dignified lifestyle.
Could be a typo 5k/month. Or could be 5k after social security and pension. Sounds like she lives with SIL, who might be paying for most of the above?
Or a typo for $50,000. That's what I assumed.

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Re: Should we let MIL pay off our mortgage?

Post by TN_Boy » Thu Aug 31, 2017 8:11 am

celia wrote:
Wed Aug 30, 2017 1:23 am
SuperSaver wrote:
Tue Aug 29, 2017 10:50 am
9. REIT not a good option. My MIL doesn't work, and majority of assets in in taxable account. Also, REIT returns would pale in comparison to 10% annual appreciation in home values in my area for last 25 years.
Ummm, I own Vanguard's REIT Index fund (VGSIX), the one that's grown 8.98% over the last 5 years, 7.04% over the last 10 years, and 10.53% since inception in 1996. Of course, it is not invested in your great neighborhood, but in "real estate investment trusts—companies that purchase office buildings, hotels, and other real estate property". (from fund description).

Your current home. If you bought your house in 2009 for $410K and it has appreciated 10% a year since then, it would be worth $878K now. Is that anywhere close to currently selling prices for a house your size in your neighborhood these days? If not, the appreciation in your neighborhood pales in comparison to the REIT fund.


Whose idea really is this? Your MIL's? Your wife's? Yours?
If it is NOT your idea, it seems like you could go back and discuss our concerns with the others, but I don't get the impression you've done that. You seem to keep defending the idea. So here is how I would approach the thought process:

1. Is the $400K a gift? If so, can you (your wife?) do whatever she wants with it? (That will test to see if it is truly a gift.)

2. Since the three of you seem intent on putting the money towards real estate, why can't it be invested in the REIT fund? (That will take care of the stock market concerns.)

3. Suppose your MIL wasn't involved at all. Ask your wife what SHE would do if she suddenly won a lottery and had $400K available after taxes.

4. Separately from your wife, think about what YOU would do if you won the lottery and had $400K available after taxes.

If you can bring these answers back, we might be able to make better suggestions.
I agree with the overall direction of celia's post here, but am a bit puzzled by 2 ("that will take care of the stock market concerns"). In a stock market crash VGSIX will most likely take a serious beating, as it did in 2008. In fact VGSIX is more volatile than the S&P 500 or a total stock market index. Which is not surprising, as the index holds something like 100 stocks. I mean, I like REITs as a portfolio diversifier, but I sure consider them stocks. Am I misunderstanding the point of this comment?

But as I said, I had the same general questions. What problem are you/MIL trying to solve?

1. MIL doesn't trust stock markets and wants money in "something else" ... like real estate OR
2. MIL wants to give OP family money OR
3. MIL wants to go into real estate/rental business with OP family OR
4. Some combination of 1 - 3

It all seems tangled up and unnecessarily complex. I read the clarifying post and it didn't really clarify things, at least to me.

If MIL wants to invest in real estate, sure help her find some rental properties to buy and (I am not familiar with being a landlord, but many on this board are) select a property management company. And if she wants to transfer assets to the OP family, awesome, fund the 529s more if desirable and perhaps start gifting money every year to family members. I just don't get the point of the plan unless everybody concerned (OP, MIL, OP spouse) has a burning desire to start running a family real estate business. The fact that MIL wants to invest in real estate and OP wants a bigger house doesn't mean the two goals should be combined.

While MIL seems to have plenty of money now (I gather she has something like 2.4 m in assets and lives with SIL?) if she later developed serious health issues and/or needed long term care down the road, it would be unfortunate if she had been busy giving away all her money in previous years (I wasn't clear what "MIL planning on transferring all assets to grown adult children and grand kids in future") in the original post meant. Her generosity will then become a potential problem, as children figure out who pays for what. She should keep a large chunk of that money for herself if needed.

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Re: Should we let MIL pay off our mortgage?

Post by scienceguy » Thu Aug 31, 2017 9:06 am

9. REIT not a good option. My MIL doesn't work, and majority of assets in in taxable account. Also, REIT returns would pale in comparison to 10% annual appreciation in home values in my area for last 25 years.
This doesn't make any sense on various levels - maybe doesn't understand what an REIT is. Also, if the poster thinks that real estate in any area has appreciated 10%/year for the past 25 years, there are bigger problems here. Average yearly real estate appreciation is more like 3% at best, and even in the best areas and markets, 10% yearly appreciation only continues for at most a few years at a time.

My advice - stop trying to maneuver your MIL into giving you a gift. MIL needs a financial advisor who is not her daughter, because currently there is a big COI. Maybe I didn't read the thread carefully enough, but it seems like that is fundamentally what this comes down to.

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Re: Should we let MIL pay off our mortgage?

Post by Dottie57 » Thu Aug 31, 2017 9:32 am

scienceguy wrote:
Thu Aug 31, 2017 9:06 am
9. REIT not a good option. My MIL doesn't work, and majority of assets in in taxable account. Also, REIT returns would pale in comparison to 10% annual appreciation in home values in my area for last 25 years.
This doesn't make any sense on various levels - maybe doesn't understand what an REIT is. Also, if the poster thinks that real estate in any area has appreciated 10%/year for the past 25 years, there are bigger problems here. Average yearly real estate appreciation is more like 3% at best, and even in the best areas and markets, 10% yearly appreciation only continues for at most a few years at a time.

My advice - stop trying to maneuver your MIL into giving you a gift. MIL needs a financial advisor who is not her daughter, because currently there is a big COI. Maybe I didn't read the thread carefully enough, but it seems like that is fundamentally what this comes down to.

It doesn't sound great for MIL. Rent is 24k per year. Split evenly between two parties that would be 3% return on money. I don't see a real benefit for MIL. She would do better in standard mutual funds. Bond fund?

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Re: Should we let MIL pay off our mortgage?

Post by mega317 » Thu Aug 31, 2017 12:23 pm

Enjoy larger home while we can with young kids, with potential space for in-laws/parents to move in
This is something in the OP that I don't think has been commented on. Maybe the potential for MIL moving in in the future is part of the reason for this convoluted plan. I will gift you this money as long as you use it for a house I might live in.

And from there the next step is "mom wants to invest in real estate, we already own a property" so it's a convenient, though bad, answer.

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Re: Should we let MIL pay off our mortgage?

Post by Engineer250 » Thu Aug 31, 2017 1:09 pm

staythecourse wrote:
Tue Aug 29, 2017 11:31 pm
denovo wrote:
Tue Aug 29, 2017 7:34 pm
staythecourse wrote:
Tue Aug 29, 2017 7:24 pm
SuperSaver wrote:
Tue Aug 29, 2017 10:54 am
staythecourse wrote:
Mon Aug 28, 2017 3:20 pm
Honestly, there has to be a point you act like an adult and NOT a child of someone's parent. Having mommy or daddy buy you a house is a sign of the latter and not the former.

Be adults and pay for you own debt.
This is a bit snarky, isn't it? We have zero debt other than our home. We could pay it off ourself with one click. My MIL's only modicum of happiness after losing her husband is to make her kids and grandkids happy. She subsides on $5,000/year. The inheritance is an unpleasant reminder of a life taken too soon, and she derives no pleasure from having this money. I would take my father-in-law back in an instant rather than this payment. BUT, if she wants to do this, while investing in real estate to diversify, why should we stop her?

Your comment was childish and unnecessary.
Sorry if it hurts, but there are PLENTY of folks who have had parents offer to pay of their debts. Most are mature and would instantly so no. I may be in the minority, maybe not, that think if you took on the debt then you should pay it. That doesn't some reasonable to you?

If you ask a question don't get upset if it isn't the opinion you want to hear. I am sure others thought of saying the same thing when you asked the question, but are too polite to say what I said. I can bet if you asked any of your friends they will question the same thing.

Good luck.
So are you going to give away your inheritance? Can I have it then? :wink: Many people pass away and give things to their children who may use it to pay off debts or for other consumption. Some may decide to pass along some assets before they die because they've accumulated enough and aren't worried about eating cat food during retirement.

That said, I think it's bad for OP to entangle himself with MIL in a rental business, but that's irrelevant to your point.
If you want to know... yes. I have already told my folks I will not be taking a dime from them when they pass away. I told them to give it to charity, spend it lavishly on themselves, etc... I guess I am a dying breed where I think once a person is an adult it is THEIR responsibility to take care of themselves. Hard to teach your kids that if your mommy or daddy are still taking care of you financially as an adult. I know I am in the minority, but have stuck with that up to now and still do.

Again the OP can do whatever they want as it is their life. I just said what I thought.

Good luck.
Have your same attitude. I doubt there will be anything left my parents anyways if they presumably have to go into assisted living at some point. They have a pension, an IRA that's probably a third the size of my retirement accounts, and a house with a lot of equity. I suspect my Dad might be trying to preserve that IRA as an inheritance. They live very frugal lives. I keep telling them they should travel as much as they want or buy the things they want. Maybe even take out a reverse mortgage if they need more money. I've told them I want them to live long, happy, retired lives and I don't need any of their money. They worked hard to raise me and my sister and we are both successful and will probably be financially better off most of our lives than my parents ever were. They also did an amazing job at living within their means and being ready for retirement unlike some parents I see on here. Unfortunately we may be on the hook for financial assistance to my younger in-laws when they retire as they have not planned as well.
Where the tides of fortune take us, no man can know.

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Re: Should we let MIL pay off our mortgage?

Post by JBTX » Thu Aug 31, 2017 1:20 pm

SuperSaver wrote:
Tue Aug 29, 2017 10:54 am
staythecourse wrote:
Mon Aug 28, 2017 3:20 pm
Honestly, there has to be a point you act like an adult and NOT a child of someone's parent. Having mommy or daddy buy you a house is a sign of the latter and not the former.

Be adults and pay for you own debt.
This is a bit snarky, isn't it? We have zero debt other than our home. We could pay it off ourself with one click. My MIL's only modicum of happiness after losing her husband is to make her kids and grandkids happy. She subsides on $5,000/year. The inheritance is an unpleasant reminder of a life taken too soon, and she derives no pleasure from having this money. I would take my father-in-law back in an instant rather than this payment. BUT, if she wants to do this, while investing in real estate to diversify, why should we stop her?

Your comment was childish and unnecessary.
Agree.

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Re: Should we let MIL pay off our mortgage?

Post by Dottie57 » Thu Aug 31, 2017 1:22 pm

Engineer250 wrote:
Thu Aug 31, 2017 1:09 pm
staythecourse wrote:
Tue Aug 29, 2017 11:31 pm
denovo wrote:
Tue Aug 29, 2017 7:34 pm
staythecourse wrote:
Tue Aug 29, 2017 7:24 pm
SuperSaver wrote:
Tue Aug 29, 2017 10:54 am


This is a bit snarky, isn't it? We have zero debt other than our home. We could pay it off ourself with one click. My MIL's only modicum of happiness after losing her husband is to make her kids and grandkids happy. She subsides on $5,000/year. The inheritance is an unpleasant reminder of a life taken too soon, and she derives no pleasure from having this money. I would take my father-in-law back in an instant rather than this payment. BUT, if she wants to do this, while investing in real estate to diversify, why should we stop her?

Your comment was childish and unnecessary.
Sorry if it hurts, but there are PLENTY of folks who have had parents offer to pay of their debts. Most are mature and would instantly so no. I may be in the minority, maybe not, that think if you took on the debt then you should pay it. That doesn't some reasonable to you?

If you ask a question don't get upset if it isn't the opinion you want to hear. I am sure others thought of saying the same thing when you asked the question, but are too polite to say what I said. I can bet if you asked any of your friends they will question the same thing.

Good luck.
So are you going to give away your inheritance? Can I have it then? :wink: Many people pass away and give things to their children who may use it to pay off debts or for other consumption. Some may decide to pass along some assets before they die because they've accumulated enough and aren't worried about eating cat food during retirement.

That said, I think it's bad for OP to entangle himself with MIL in a rental business, but that's irrelevant to your point.
If you want to know... yes. I have already told my folks I will not be taking a dime from them when they pass away. I told them to give it to charity, spend it lavishly on themselves, etc... I guess I am a dying breed where I think once a person is an adult it is THEIR responsibility to take care of themselves. Hard to teach your kids that if your mommy or daddy are still taking care of you financially as an adult. I know I am in the minority, but have stuck with that up to now and still do.

Again the OP can do whatever they want as it is their life. I just said what I thought.

Good luck.
Have your same attitude. I doubt there will be anything left my parents anyways if they presumably have to go into assisted living at some point. They have a pension, an IRA that's probably a third the size of my retirement accounts, and a house with a lot of equity. I suspect my Dad might be trying to preserve that IRA as an inheritance. They live very frugal lives. I keep telling them they should travel as much as they want or buy the things they want. Maybe even take out a reverse mortgage if they need more money. I've told them I want them to live long, happy, retired lives and I don't need any of their money. They worked hard to raise me and my sister and we are both successful and will probably be financially better off most of our lives than my parents ever were. They also did an amazing job at living within their means and being ready for retirement unlike some parents I see on here. Unfortunately we may be on the hook for financial assistance to my younger in-laws when they retire as they have not planned as well.
Sure I would like to have an inheritance, but I am not expecting one. I hope my mom can continue to live the way she wants (86 yrs old). It would be nice if I don't need to support her. I will try to help if necessary.

TN_Boy
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Re: Should we let MIL pay off our mortgage?

Post by TN_Boy » Thu Aug 31, 2017 2:03 pm

SuperSaver wrote:
Tue Aug 29, 2017 10:50 am
Thanks for all the replies. To clarify the issue

1. Yes, this is a gift from MIL. Not a loan
2. My MIL is the most selfless, generous human being I've ever met. Her only goal is to give all her money away to her surviving heirs to make our lives easier. She did not want this inheritance. She wants my departed FIL to come back. By giving away the money to us, it is one small thing that makes her happy.
3. Yes, other sibling getting equal amount similar to my wife. Not an issue. No resentment, jealousy, etc. This is not an issue.
4. Rental income expected to be $3,000/mo. Best elementary and high school district in the state. No shortage of renters.
5. yes, my MIL explicitly wants to invest in real estate.
6. MIL has enough assets to live on after paying off our mortgage
7. MIL explicilty trusts my wife to make all financial decisions on her behalf.
8.We are not "going into business" with my MIL. Any rental income will be ours in the future
9. REIT not a good option. My MIL doesn't work, and majority of assets in in taxable account. Also, REIT returns would pale in comparison to 10% annual appreciation in home values in my area for last 25 years.
OP, so I'm unable to stop myself here. I think the family should take the long view, and I don't think that is happening. Remember, you did ask! Another poster suggested independent financial planning for MIL, and that's not a bad idea. My comments on the numbered points above (basically, some drawbacks to your plan):

2) Just because her goal is to give away all her money doesn't make it a good idea, in fact, it's probably a terrible idea. More on that below.
6) Yes she has enough assets now, but if she keeps on giving money away and later needs substantial help with living arrangements, then she could become a burden on her children -- I'm sure they will step up, but if I were your MIL, I wouldn't want that to happen. What if she winds up in a memory care facility for a long time?
7) 2.4+ million is a decent chunk of change. What experience/financial expertise does your wife have to essentially manage that? (I don't necessarily mean credentials, I mean has she read much about investing, or real estate management, or inheritance planning, etc).
8) This statement contradicts the original post that the rental income would be split, which confuses the issue a bit.
9) To put it delicately, your confidence that your future home appreciation value will easily beat investing in REITs (or for that matter the broader US market) is a sign that you and your spouse are perhaps overestimating your knowledge of both stock market investing and real estate returns.

Back to 2). Sounds like MIL is still grieving for FIL, and that's of course understandable. But perhaps in time, she will find other interests and activities. For example, a river cruise in Europe with her friends, or some other experiences that she would enjoy (take the family to Disney!). But she''ll need money for that. I'm sure the family is encouraging her to think about herself and try to find new opportunities in life (sadly, I know that many surviving spouses are unable to do that ... but some do. Having money makes that easier).

And if she really wants to maximize the financial gift to her children in the long run, it's quite possible, even likely, that keeping much of it herself and letting it grow, via appropriate investments (versus paying off mortgages and such) will result in a greater wealth transfer when she is gone than giving it away now. She has enough that she could easily be generous with gifts and such now while still letting the bulk of her assets grow.

I hope not to be too err, obnoxious, here, but it doesn't seem that the plan expressed by the OP has much to recommend it.

Swimmer
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Re: Should we let MIL pay off our mortgage?

Post by Swimmer » Fri Sep 01, 2017 2:46 pm

TN_Boy wrote:
Thu Aug 31, 2017 2:03 pm
SuperSaver wrote:
Tue Aug 29, 2017 10:50 am
Thanks for all the replies. To clarify the issue

1. Yes, this is a gift from MIL. Not a loan
2. My MIL is the most selfless, generous human being I've ever met. Her only goal is to give all her money away to her surviving heirs to make our lives easier. She did not want this inheritance. She wants my departed FIL to come back. By giving away the money to us, it is one small thing that makes her happy.
3. Yes, other sibling getting equal amount similar to my wife. Not an issue. No resentment, jealousy, etc. This is not an issue.
4. Rental income expected to be $3,000/mo. Best elementary and high school district in the state. No shortage of renters.
5. yes, my MIL explicitly wants to invest in real estate.
6. MIL has enough assets to live on after paying off our mortgage
7. MIL explicilty trusts my wife to make all financial decisions on her behalf.
8.We are not "going into business" with my MIL. Any rental income will be ours in the future
9. REIT not a good option. My MIL doesn't work, and majority of assets in in taxable account. Also, REIT returns would pale in comparison to 10% annual appreciation in home values in my area for last 25 years.
OP, so I'm unable to stop myself here. I think the family should take the long view, and I don't think that is happening. Remember, you did ask! Another poster suggested independent financial planning for MIL, and that's not a bad idea. My comments on the numbered points above (basically, some drawbacks to your plan):

2) Just because her goal is to give away all her money doesn't make it a good idea, in fact, it's probably a terrible idea. More on that below.
6) Yes she has enough assets now, but if she keeps on giving money away and later needs substantial help with living arrangements, then she could become a burden on her children -- I'm sure they will step up, but if I were your MIL, I wouldn't want that to happen. What if she winds up in a memory care facility for a long time?
7) 2.4+ million is a decent chunk of change. What experience/financial expertise does your wife have to essentially manage that? (I don't necessarily mean credentials, I mean has she read much about investing, or real estate management, or inheritance planning, etc).
8) This statement contradicts the original post that the rental income would be split, which confuses the issue a bit.
9) To put it delicately, your confidence that your future home appreciation value will easily beat investing in REITs (or for that matter the broader US market) is a sign that you and your spouse are perhaps overestimating your knowledge of both stock market investing and real estate returns.

Back to 2). Sounds like MIL is still grieving for FIL, and that's of course understandable. But perhaps in time, she will find other interests and activities. For example, a river cruise in Europe with her friends, or some other experiences that she would enjoy (take the family to Disney!). But she''ll need money for that. I'm sure the family is encouraging her to think about herself and try to find new opportunities in life (sadly, I know that many surviving spouses are unable to do that ... but some do. Having money makes that easier).

And if she really wants to maximize the financial gift to her children in the long run, it's quite possible, even likely, that keeping much of it herself and letting it grow, via appropriate investments (versus paying off mortgages and such) will result in a greater wealth transfer when she is gone than giving it away now. She has enough that she could easily be generous with gifts and such now while still letting the bulk of her assets grow.

I hope not to be too err, obnoxious, here, but it doesn't seem that the plan expressed by the OP has much to recommend it.

I agree that MIL is grieving and it seems like right now she thinks giving her money away will make her feel better. It may in the short term, but what if she regrets her decisions later? I don't see her age but she could live to a ripe old age and need money for her care. I think I would encourage her to avoid any significant monetary decisions for a few years. If she wants out of stocks, put the money in a CD ladder. I would feel terrible if I accepted such a large gift and it was later regretted by the giver, particularly my MIL.

VaR
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Re: Should we let MIL pay off our mortgage?

Post by VaR » Fri Sep 01, 2017 6:07 pm

What about selling the house to the MIL with a transfer-on-death deed? You get the best basis treatment that way - your gains are probably exempted from taxation as your current primary residence and you'll get step-up basis when you inherit the house.

You can then manage the property for her for an exorbitant property management fee.

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Re: Should we let MIL pay off our mortgage?

Post by itstoomuch » Fri Sep 01, 2017 7:14 pm

We would have no problems with accepting gift and plan.
I lost the reply and now got to see 98yo dad. Get back later.
YMMV
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tibbitts
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Re: Should we let MIL pay off our mortgage?

Post by tibbitts » Fri Sep 01, 2017 8:18 pm

With the exception of making us a landlord, what drawbacks are here?
*would prefer to hear from those who actually have had experience with real estate investing
Those two statements are completely contradictory. You don't want being a landlord factored into the comments in any way, so why do you care if someone responding is a landlord?

I'm not a landlord but own a property I don't occupy that could be easily rented but is sitting empty at the moment. I might rent it to someone I knew well but not to someone else. That sums up my feelings about being a landlord, so on to what you wanted to know.

What are the "adequate" lifetime savings? I think that's really what this comes down to. Sometimes with posts like this people say >$2M and they really mean $2.1M. Other times they mean $200M. Given the former, not enough money to get involved in this. You're good with the $200M. With that much, even if you all end up fighting you can afford to pay lawyers to figure it out for you.

itstoomuch
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Re: Should we let MIL pay off our mortgage?

Post by itstoomuch » Sat Sep 02, 2017 1:16 am

itstoomuch wrote:
Fri Sep 01, 2017 7:14 pm
We would have no problems with accepting gift and plan.
I lost the reply and now got to see 98yo dad. Get back later.
YMMV
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See thread on Robert Kiyosaki and Cashflow Quadrant.
Every Landlord's Tax deduction Guide, Stephen Fishman. NOLO Publishing
Your Tax Advisor who owns or has experience with rentals.
YMMV
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

itstoomuch
Posts: 5343
Joined: Mon Dec 15, 2014 12:17 pm
Location: midValley OR

Re: Should we let MIL pay off our mortgage?

Post by itstoomuch » Sat Sep 02, 2017 2:24 am

Not exactly your situation. But the concept is similar.
Inlaws left us a nice inheritance that was intended for the care and feeding their youngest and spectrum son whom we care for, 30 years. We used inheritance to buy a rental. The cashflow allowed us to delay use of our IRAs and to take depreciation. This rental will be passed to Only on our passing. We have LTCi. In the meantime we have utilized the rentals's cashflow and the additional Roth/Discretionary gains for a DP for another rental that closed on Aug 30. This new rental will be our retirement home. This new rental will also be passed to son and other heirs.
Meantime, Son can invest knowing that he will probably inherit. We have more assets on top of an adequate retirement. I have a parent at 98.
YMMV
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

stan1
Posts: 5812
Joined: Mon Oct 08, 2007 4:35 pm

Re: Should we let MIL pay off our mortgage?

Post by stan1 » Sat Sep 02, 2017 7:21 am

I think what's being planned here is a multi-generational co-mingling of assets that all parties seem happy with. OP, spouse, MIL, SIL, and maybe even young children since the day they are born are signing up to shelter, feed, and care for each other through every possible up and down. Family patriarch and matriarch roles are transferring to the next generation. Perhaps it's a different cultural view than some of us have. It's not a business decision.

TN_Boy
Posts: 411
Joined: Sat Jan 17, 2009 12:51 pm

Re: Should we let MIL pay off our mortgage?

Post by TN_Boy » Sat Sep 02, 2017 7:24 am

itstoomuch wrote:
Sat Sep 02, 2017 2:24 am
Not exactly your situation. But the concept is similar.
Inlaws left us a nice inheritance that was intended for the care and feeding their youngest and spectrum son whom we care for, 30 years. We used inheritance to buy a rental. The cashflow allowed us to delay use of our IRAs and to take depreciation. This rental will be passed to Only on our passing. We have LTCi. In the meantime we have utilized the rentals's cashflow and the additional Roth/Discretionary gains for a DP for another rental that closed on Aug 30. This new rental will be our retirement home. This new rental will also be passed to son and other heirs.
Meantime, Son can invest knowing that he will probably inherit. We have more assets on top of an adequate retirement. I have a parent at 98.
YMMV
I don't think anybody was arguing against rental properties in general. It was everything else that people were puzzled about.

TN_Boy
Posts: 411
Joined: Sat Jan 17, 2009 12:51 pm

Re: Should we let MIL pay off our mortgage?

Post by TN_Boy » Sat Sep 02, 2017 7:40 am

stan1 wrote:
Sat Sep 02, 2017 7:21 am
I think what's being planned here is a multi-generational co-mingling of assets that all parties seem happy with. OP, spouse, MIL, SIL, and maybe even young children since the day they are born are signing up to shelter, feed, and care for each other through every possible up and down. Family patriarch and matriarch roles are transferring to the next generation. Perhaps it's a different cultural view than some of us have. It's not a business decision.
Hard to say, the OP has gone away. As several posters have pointed out, the plan for the MIL to give away all her money (starting with big gifts to SIL and OP spouse) has drawbacks; what if the OP and spouse split up, what if MIL needs extensive care later in life, what if MIL actually develops some interests, etc. I can see few reasons for a healthy adult to voluntarily give up the bulk of their assets; it leaves them much more vulnerable to the many bad things that can happen later in life. I would try very hard to talk my parents out of any such plan.

For more context on the MIL, here is an earlier post by OP on another house swapping plan (just 10 days ago). Some of the details in that post seem a little different to me, perhaps I am misreading something:

viewtopic.php?f=2&t=226066&p=3500109#p3500109

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