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Stephano

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Post by Stephano » Fri Sep 17, 2010 6:45 am

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Last edited by Stephano on Sun Sep 26, 2010 10:48 am, edited 1 time in total.

Valuethinker
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Re: Moms gambling and she's about to lose her house !

Post by Valuethinker » Fri Sep 17, 2010 6:54 am

Stephano wrote:My elderly Mom has a severe gambling problem. She has lost all her savings and is now at risk of losing her house. (She has already taken out a home equity line of credit.) Recently I was alarmed to learn she began looking into a reverse mortgage. Worse, she would not have gotten anything close to the true value.

My thought is this:
I want get a loan to buy Moms house and pay off her mortgage. A plus is that she would pay no capital gains tax. However, if I give her the cash proceeds from the sale of the house I’m afraid she will gamble away the money.
If I buy Moms house can I put her money into a trust allowing me to control her access to the proceeds ? Since I already have a mortgage on my house and this loan wouldn’t qualify as my primary residence, would there be any major tax implications ?

Distressed Daughter
Giving her money would be like giving booze to an alcoholic. She is an addict.

Don't pay off her mortgage unless *you* gain control of the asset so she cannot tap it again.

Can't advise on the second route.

I would consider buying her an annuity which would pay her rent, groceries, utilities. Problem then is inflation unless you do an inflation linked SPIA (which are rarer).

You could buy her an annuity which ends when she is eligible for SS.

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Post by The Wizard » Fri Sep 17, 2010 7:19 am

If the mom is "elderly" then she's already getting SS, I suspect.
I agree with VT on most points.

There's not really much you can do unless you can be named her guardian, and I would guess that's not likely. Talk with a lawyer if you want but if she's still competent, then you can't stop her from destroying her life...

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Quasimodo
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Post by Quasimodo » Fri Sep 17, 2010 7:27 am

A support group for compulsive gamblers:

http://www.gamblersanonymous.org/

Whether your mom ever gets help for her addiction or not, here is a support group for those with relationships with compulsive gamblers:

http://www.gam-anon.org/

I'm sorry you have to face this. Good luck and God bless.

John
Many wealthy people are little more than janitors of their possessions. | | Frank Lloyd Wright, architect (1867-1959)

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Re: Moms gambling and she's about to lose her house !

Post by 3CT_Paddler » Fri Sep 17, 2010 7:36 am

Valuethinker wrote: Giving her money would be like giving booze to an alcoholic. She is an addict.

Don't pay off her mortgage unless *you* gain control of the asset so she cannot tap it again.

Can't advise on the second route.

I would consider buying her an annuity which would pay her rent, groceries, utilities. Problem then is inflation unless you do an inflation linked SPIA (which are rarer).

You could buy her an annuity which ends when she is eligible for SS.
I second VT's post. Any money you give her, aside from enough to get by on will get used to fuel her addiction. The most important thing she needs is counseling asap, and if she refuses that, helping her will only enable her to live in her addiction. I am sorry you have to deal with such a tough family situation.

Stephano

Post by Stephano » Fri Sep 17, 2010 7:36 am

thanks
Last edited by Stephano on Fri Oct 15, 2010 2:10 am, edited 1 time in total.

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jeffyscott
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Post by jeffyscott » Fri Sep 17, 2010 7:53 am

I'm confused...what is the purpose in buying her house, are going to buy her house and then rent it back to her or???

Maybe you could have her pay several years' rent in advance, enough to get all the money back? I have no idea what the legal and tax ramifications of that would be.
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dm200
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Post by dm200 » Fri Sep 17, 2010 8:47 am

Consult an elder law attorney, experienced in competency issues and related issues in the state of residence of your mother.

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Post by imagardener » Sat Sep 18, 2010 1:53 pm

You need to go to Gamblers Anonymous' support for family and realize that saving her is not in your power. She must save herself. You will become an enabler by "helping" her.
If she recognizes she has a problem and co-operates to create an annuity with the house sale proceeds that is great but you know what will happen, she will SAY what you want to hear then take the money and gamble it.

Yes it will be hard for you to watch but it is not in your control. At least there is a SS safety net.

Addictions are one reason I never give money to panhandlers of any sort. I will buy them a meal but no money given out.

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Post by ourbrooks » Sat Sep 18, 2010 3:02 pm

I strongly second those posters who suggest that the highest priority thing to do is to get your mother some help with her addiction. Until that problem is solved, she'll constantly pressure you into giving her money in one form or another.

While you're waiting for the help to take effect, a possibility is to buy your mother's house by getting only enough of a loan to pay off the home equity loan and then having her give you a mortgage for the rest. Worst case, she'll only be able to gamble with one month's payment at a time. Whether this is possible depends on your state's laws on second mortgages.

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Post by tallylynne » Sat Sep 18, 2010 3:08 pm

DM200's advice is your best hope. Contact a guardianship attorney in your mother's state for suggestions as to how to proceed if you think her behavior might possibly be due to dementia/Altzheimers. (Is she becoming confused or irrational in other areas of her life?) You may need to have her evaluated for mental competency (each state has their own legally-required process) and if she's found to be mentally incompetent, a legal guardian will need to be appointed, possibly you. The legal guardian then has sole control of the Ward's finances and physical care decisions (although there are usually annual reporting/accounting requirements that go along with this responsibility.) Good luck--

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Post by kenbrumy » Sat Sep 18, 2010 3:22 pm

Unless you can get a diagnosis of "diminished capacity" and you have a DPOA, you are probably going to not be able to stop your mother from destroying herself. She will have to hit bottom all on her own. You can talk with her and see if you can reason with her but she has to choose whether she hits a "high bottom" or a "low bottom."

I wouldn't give her a penny at any time for any thing. If you think she's hungry, bring her some groceries but don't stock her pantry. That just frees up cash flow for gambling. If she looses her house help her get a low cost apartment within her budget. If she gets evicted for non-payment, point her to a homeless shelter or let her move in with you with strict rules. I'd actually recommend against letting her move in but you sound like a softie. In case it's not obvious I'm a hardass.

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Post by EO 11110 » Sat Sep 18, 2010 4:00 pm

kenbrumy wrote:Unless you can get a diagnosis of "diminished capacity" and you have a DPOA, you are probably going to not be able to stop your mother from destroying herself. She will have to hit bottom all on her own. You can talk with her and see if you can reason with her but she has to choose whether she hits a "high bottom" or a "low bottom."

I wouldn't give her a penny at any time for any thing. If you think she's hungry, bring her some groceries but don't stock her pantry. That just frees up cash flow for gambling. If she looses her house help her get a low cost apartment within her budget. If she gets evicted for non-payment, point her to a homeless shelter or let her move in with you with strict rules. I'd actually recommend against letting her move in but you sound like a softie. In case it's not obvious I'm a hardass.

i agree with kenbrumy. council/advice is the best and only thing to give her. assuming her mental capacity is sound -

her liberty trumps any intervention -

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Post by nisiprius » Sat Sep 18, 2010 5:58 pm

Stephano, I'm sorry to hear about your situation. It's a tough one.

From a distance, I'd say that if a loved one has a gambling addiction, your first priority has to be, not for her, but for yourself. You must separate your own finances from those of that person. You must not let your finances get more entangled in hers, and you absolutely must not go into debt on her behalf.

It's practically certain that you will a) do more than you ought to do, while b) feeling guilty about not doing enough; that's a given.

You need more help than an Internet forum can give you; you need to start calling on friends, relatives, professionals, anyone you can find, but people you can talk to face to face.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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gamblers anon

Post by Sotol » Sat Sep 18, 2010 6:04 pm

I agree strongly with the suggestion that you help her decide to begin going to gambling anon meetings, and look yourself at their website to see what they offer to family members.it is a 12 step program. Gambling can turn into a serious addiction and not only could she loose everything she has, she could begin to engage in very destructive behavior, like stealing, in order to satisfy the habit. there is more going on than the gambling addiction; I agree as well that therapy is warranted.

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Re: Moms gambling and she's about to lose her house !

Post by kenbrumy » Sun Sep 19, 2010 8:37 am

Stephano wrote:My elderly Mom has a severe gambling problem. She has lost all her savings and is now at risk of losing her house. (She has already taken out a home equity line of credit.) Recently I was alarmed to learn she began looking into a reverse mortgage. Worse, she would not have gotten anything close to the true value.

My thought is this:
I want get a loan to buy Moms house and pay off her mortgage. A plus is that she would pay no capital gains tax. However, if I give her the cash proceeds from the sale of the house I’m afraid she will gamble away the money.
If I buy Moms house can I put her money into a trust allowing me to control her access to the proceeds ? Since I already have a mortgage on my house and this loan wouldn’t qualify as my primary residence, would there be any major tax implications ?

Distressed Daughter
You obviously didn't hear what you wanted to hear. Being specific to your suggestions, I don't recommend anything that would let your mother have access to more money. She will gamble away the money. The only way you could keep the money away from her is if she voluntarily signed it over to a spendthrift trust and appointed you as the manager. You could then dole the money out but it would still be "hers" in her mind and she would blame you (very vocally and strongly) when you actually kept "her money" away from you. If you officially owned the house, you'd be responsible to taxes, repairs, insurance, etc and the imputed rent would be a gift to your mother. Anything over the gift tax limit would be taxable or applied against your lifetime limit.

Elder gambling addiction is becoming very common. They seem to lose their inhibitions for financial foolishness and enjoy the "excitement." Good luck to you but you can not stop her from destroying herself. The best you can do is offer alternatives.

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Re: Moms gambling and she's about to lose her house !

Post by JDCPAEsq » Sun Sep 19, 2010 8:51 am

kenbrumy wrote:...and the imputed rent would be a gift to your mother. Anything over the gift tax limit would be taxable or applied against your lifetime limit.
Do you have any authority for this?
John

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Re: Moms gambling and she's about to lose her house !

Post by sscritic » Sun Sep 19, 2010 9:23 am

JDCPAEsq wrote:
kenbrumy wrote:...and the imputed rent would be a gift to your mother. Anything over the gift tax limit would be taxable or applied against your lifetime limit.
Do you have any authority for this?
John
Probably not. From what I can find from a quick google search, the issue is whether you can treat the second home as a rental and depreciate it and deduct the usual expenses of upkeep and repair. If you want to treat it as a rental, then you have to charge market rent (or within 10% from what I read).

However, you are allowed to own a second home or vacation home. You can allow a family member to stay there, just as you could yourself. The home is for personal use and cannot be treated like a rental on your income taxes. You can deduct mortgage expenses and property taxes to the same extent you can deduct mortgage and property taxes on a second home.

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Re: Moms gambling and she's about to lose her house !

Post by kenbrumy » Sun Sep 19, 2010 12:46 pm

JDCPAEsq wrote:
kenbrumy wrote:...and the imputed rent would be a gift to your mother. Anything over the gift tax limit would be taxable or applied against your lifetime limit.
Do you have any authority for this?
John
This if from the FAQ site for the IRS about the Gift Tax.
What is considered a gift?
Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return.
Buying Mom's house and letting her live there rent free might fly below the IRS radar but there is then the issue of deducting the property tax and second home mortgage interest.

The best financial way to handle this would be to treat it as a rental. The"rental" to a relative would have to be for "fair market value" which is easy to determine. This would provide the OP with a clearly legal deduction for depreciation, interest, taxes, insurance and repairs.

It's one thing to have a vacation home and let family members use it occasionally. It's easy to make the case the "imputed rent" would have not exceeded the gift tax. It's also hard for the IRS to know who was there and for how long. The OP's mother will be living there full time. She will be getting mail and she'll use this address for her own tax returns or, at least, the SS/Medicare address.

The IRS (IMHO) has many hardheaded jerks in their organization and it sometimes takes a long time to get your point across to them. However, they are very meticulous in matching all sorts of irrelevant information together and then saying you owe tax on something. I suspect that despite the OPs best efforts the IRS will eventually find out. I also believe it will clearly be seen as a "gift." She might as well go for the deduction. That's perfectly legal. If you do it this way up front, the IRS will smile at you because you followed their rules.

I also don't recommend the OP buy her mother's house and "give" it back to her as a gift of free rent.

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Post by LadyGeek » Sun Sep 19, 2010 2:11 pm

Concur with getting an elder law attorney. It sounds like she has a long list of creditors.

When you (both) see the attorney, the first thing he'll need is a complete financial picture. You'd be surprised at what an experienced attorney can do to help.
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Post by jstat » Sun Sep 19, 2010 3:35 pm

I want get a loan to buy Moms house and pay off her mortgage. A plus is that she would pay no capital gains tax.

I think you can buy the house and have her retain a life estate on the property, letting her live there for the rest of her life. That way you can buy it from her for fair market value minus the value of the life estate on the property. You need a real estate lawyer to know what is possible.

Also, there are medical conditions and medicines that are sometimes associated with compulsive gambling. See, for example, http://loveandcasinowar.com/blogarch/000267.php

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Re: Moms gambling and she's about to lose her house !

Post by sscritic » Sun Sep 19, 2010 9:52 pm

kenbrumy wrote: It's one thing to have a vacation home and let family members use it occasionally. It's easy to make the case the "imputed rent" would have not exceeded the gift tax. It's also hard for the IRS to know who was there and for how long. The OP's mother will be living there full time. She will be getting mail and she'll use this address for her own tax returns or, at least, the SS/Medicare address.
Do you impute rent for your children living in your house? Do you impute rent for your mother-in-law living in your house? What if your teenager or mother-in-law lives in a room over the garage? What if your teenager or mother-in-law lives in a granny flat out back?

In fact, it may be illegal to charge rent on a granny flat.
wikipedia wrote: some localities only prohibit the renting out of secondary suites, and allow occupation by a relative or guest, leading to the use of the term "mother-in-law" house or apartment. Local jurisdictions may have rules regarding allowing certain relatives to live there and rules about what, if any, rent may be charged.
Rahm Emanuel moved into Rep. Rosa DeLauro's house in Washington D.C. rent free, and the issue of whether the owner owes a gift tax is in dispute:
Prof. Paul L. Caron of the University of Cincinnati College of Law, who maintains the popular TaxProf Blog, told Tax Analysts that in Dickman v. Commissioner (465 U.S. 330 (1984)), the Supreme Court "clearly held that the rent-free use of property (there, an interest-free loan) constitutes a gift for gift tax purposes."

The determination of whether a transfer is a gift is factual and based on the intent of the transferor. A statement given to the Hartford Courant on behalf of DeLauro characterized the rent-free occupancy as "hospitality between [Congress] members." Emanuel represented the 5th District of Illinois before being selected as Obama's chief of staff.

But that argument "falls apart since that is not how [DeLauro] in fact treated it," Caron said. That is, DeLauro filed no gift tax return. "To me, it is a straightforward issue -- the rent-free use of an expensive home for five years, owned by a person who provided hundreds of thousands of dollars of services for the lucky tenant, makes it very hard to argue that this is purely a gift," he concluded.

DeLauro denies that any taxes are owed. "Our house has no rental apartment and no part of the house was rented when Mr. Emanuel started staying with us in D.C.," DeLauro said in a statement sent to Tax Analysts. "There are no tax issues."

Prof. Joseph Dodge of the Florida State University College of Law also argues that there should be no tax impact at all. Dodge told Tax Analysts that the gift tax exists to back up the estate tax by preventing a taxpayer from depleting his estate. Therefore, only the transfer of income-producing property should result in gift tax. "If I let my son live in my vacation home, I'm not shifting any income to him," he said, but "if I loan you my house for a year, and you rent it out, the rents are probably a gift from me. My son can't rent it out unless I let him; it's my decision." "The failure to rent out personal use property -- failing to augment my estate -- has never been viewed as a concern of the estate or gift tax," Dodge added. "Those taxes are on property I actually have, not on property I could have had with maximum economic exploitation."
http://taxprof.typepad.com/taxprof_blog ... ences.html

I guess we have to wait and see what the IRS does with Rep. Rosa DeLauro and Rahm Emanuel.

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