The grandparents can give the entire $140k in equity to the student in one year. They might have to file a gift tax form, but they’ll be way under the lifetime max. They could also give $14k each to him each year, for 20% ownership. This gifting still requires a deed to be filed in the student’s name, at least once if the percentage of ownership is not stated on the deed or multiple times if it is.
Go to a financial planner or real estate attorney. Virginia laws are old and intertwined. You have a good understanding of your issues and desired outcome. The attorney or financial planner is not going to understand FAFSA or your concerns about lowering your award. You need to keep those things in mind, but your question may not be whether FAFSA will change but rather, ‘is this considered a gift’?
People buy second houses all the time. People work for the government and get security clearances with mortgages all the time. Why do people think that owning a home, or part of a house, is so bad? Debt isn’t a deal killer, especially debt that is tied to an asset.
It really sounds like the grandparents just want a way to get this person started and maybe to avoid some paperwork upon death. I think there will still be paperwork, but it is not unusual for children to be added to the deed of their parents’ homes.
I don’t think owning a home is bad. I don’t think owning part of a home is bad.
I think that home ownership PLUS taking on a mortgage (all or part, the bank won’t care) PLUS committing to eldercare ahead of time PLUS assuming that the grandparents can do appropriate estate and tax planning so that there are liquid assets to take care of the surviving grandparent PLUS PLUS PLUS is sub-optimal for a college kid.
If this were a kid with an intact family and involved, solid earning parents who could be backstop in case of a financial glitch I’d still think all of the above was sub-optimal. But under the circumstances, I think there are ways for the grandparents to get what they want (refinance at a lower rate and leave the grandchild the house when the die) that don’t saddle a college kid with a whole lot of “what-if’s”. And committing right now- before the kid is launched into a career- that the plan involves declaring the grandparents the dependents- seems really short-sighted to me.
I’ve got friends who discovered when their oil tank was excavated that they’ve got a huge environmental remediation problem. Big, big dollars. I know people who have discovered asbestos. House gets destroyed by a Sandy-like event, insurance barely covers what they need to rebuild and FEMA sets them up in a lovely trailer 100 miles away from their jobs.
It all seems like a lot for a kid IMHO. Especially since it’s all so unnecessary. Grandparents want to refinance- go and refinance. What does this have to do with the kid needing to commit now to all of the other responsibilities of home ownership and eldercare???
If your grandparents have another child, why isn’t she committed to providing eldercare for her parents? I understand your grandparents wanting to shield their assets, but I don’t agree that it requires you to commit to taking care of them, especially when they have a child who’s barely 40-years-old.
These are 2 separate issues – how to shield the home and how to arrange longterm care for your grandparents – and I think you need to think of them separately. I don’t think it’s appropriate for adults to dangle an expensive “gift” in front of a child and ask for the kind of commitment your family is asking of you. How much will this “gift” end up costing you – $150k? $200k? More?
You don’t actually owe your grandparents anything. It’s our job, as parents, to take care of our children. And if, for whatever reason, our children are incapable of raising their children we need to step in and care for them too, if we can. If anything, you owe your grandparents your respect and gratitude. You do not owe your family the next ~20 years of your life. If your grandparents have adult children, they should be first in line to figure out eldercare for their parents, and that shouldn’t include persuading a 19-year-old to take on the responsibility for them. I wouldn’t make a decision about that, at all, until after you’ve graduated from college.
My aunt and uncle live approximately five minutes from my grandparents and my grandma’s kids (who will not be getting anything) also live in the area. There will always be someone to watch them. I just happen to be the one who will be living with them and paying half of the mortgage and other bills. But, ultimately, this money will find its way back to me - including the additional principal paid to the mortgage. Now, my grandparents are 60 and 67 right now… and I hope to have another 20-30 years with them. They are in very good health - that’s one thing that they’ve always been adamant about - good health, yearly physicals, etc. They even still make my appointments for me, because I wouldn’t go otherwise, lol!
We’ve talked with an attorney and I won’t be on the mortgage or title now. Instead, my grandparents are going to transfer their home in an irrevocable trust, lay down the ground rules and stuff, appoint me as the trustee-beneficiary, and my brother and aunt as the other beneficiaries. This solves everything.
Regardless, my grandparents refuse to ever be placed in a nursing home, anyways. So, I don’t know that they will ever use Medicaid for that reason. Likely, if they can swing it, they will get a private plan.
Most of my grandparent’s liquid assets (cash, etc.) have been exhausted over the past 15 years caring for me and my siblings, plus my aunt. They paid for her cost of college (private) and took all of us (and sometimes, the entire family) on very extravagant vacations each year. Cruises, two week beach house rentals at Hilton Head Island, etc. All in all, they put all of us before them, and I had a very nice upbringing thanks to them.
good news that the mortgage/title idea has been shelved and I’m so happy you’ve met with an attorney.
Best of luck to you- you sound like a wonderful person!
You should know however, that approximately 100% of the population of nursing homes consist of people who refused to every be placed in a nursing home. 100%. But a 70 year old has a stroke- leaving him/her unable to walk and requiring round the clock supervision and 8 or so hours of care and rehab. The choices are to have the spouse (who may not be able to lift/carry/bathe/transfer in and out of the wheelchair from bed) become the full time caregiver; have an adult child quit their job to become the care giver, or pay an LPN for services during the day with family members rotating care at night.
That works for six months. Then what?
Regardless- best of luck to you and good luck with FAFSA now that you don’t have to worry about the house complicating your assets!!!
An irrevocable trust? A QPRT, or something else? “This solves everything” is rarely the appropriate interpretation of “I have been named trustee of a trust of which both I and multiple family members are beneficiaries.”
Right… we learned that an irrevocable trust won’t work, since the house has a mortgage. The next potential thing is to mortgage the home in my name and put me on the title - and give a majority share of the home to me - 99%. Is it possible to do 1% for now and change that later?
You are now getting into complicated real estate and financial planning and need more than just some internet opinions, you need real professional help. Sure it’s possible for you to own 99% of the house, but then you might not qualify for a mortgage. Virginia real estate ownership is pretty complicated.
Your original question was if ownership would complicate your financial aid. Probably not if it is your primary residence but be careful as you are an independent student and the rules are a little different.
^^ Hello ??
YOU as a HS student dont / cant’ qualify for a Mortgage!!
A mortgage is $$ lent to a person by a bank and banks ONLY lend to qualified people these days- those that have lots of financial assets[ i.e.$$ in a bank] and / or are employed and making lots of $$ and thus can demonstrate the ability to PAY THE $$ BACK to the bank .
Do you know a BIG part of the reason for the financial crisis? Banks approved mortgages to unqualified people who could NOT pay them back.
The banks NOW have very strict requirements and make it very difficult for even the most qualified people to get mortgages.
What did the attorney tell you? If they put you on the title so they can get a mortgage, you will have to either list the asset, or the income from the gift, when you complete your FA application. So if they list you as 1% owner now, then once you are done with FA applications in a couple years, they then give you the remaining 99%, it should alleviate the Financial aid concerns, but putting you on the mortgage now, before you are able to pay towards it is still risky.
Your may think your grandparents did very well for you, and I am not trying to denigrate them when I say this, but please understand the possibility that some of their decisions (lavish vacations, luxury pool upgrades, etc) may have not been the best examples for young people to follow - at least, not from a financial planning perspective. And now, like a great many baby boomers, they may be starting to think of the consequences and they hope the younger generation will bail them out in case something terrible happens.
I hope it works out well for all in that generation, but chances are pretty high that a significant portion of the baby boomer generation will end up falling short.
It’s very complicated, but this is what will happen: mortgage is taken out in all three of our names and as “tenants in common,” each with equal shares (required by mortgage company for closing). Then, we can change the proportions following closing. It will be changed so that I have a 1% share and they hold the remaining shares, until 2018.
You can change things after the deed is transferred and the mortgage and loan papers are signed and recorded, but anything you file after that (you quit claiming your share of ownership back to the grandparents and recording that) won’t change anything until after the mortgage is paid off. Think of it as a big timeline. You each own 1/3, then you mortgage the property to the bank. Until that mortgage is released, nothing behind it really matters. Time is frozen for the property until the loan is paid. You also need to be careful about the terms of the loan. If you aren’t on the loan, but are on the mortgage, and you transfer your interest in the property, that could trigger a due on sale clause in the mortgage. Keep it simple. Set up the ownership for the loan and mortgage as you plan to continue. All these transfers of ownership can backfire.
I don’t think there is anything wrong with your owning 1/3. Yes, there are risks to being a homeowner, and that’s why people buy insurance. There are benefits too. If you want the benefits, you take the risk.
@twoinanddone 1/3 will only protect ~33% of the home. The remaining 2/3 held by the grandparents could be recovered by Medicaid should my grandparents ever need long-term care / assisted living. That’s really the biggest problem at this point. I was going to be on the mortgage and title, and the mortgage lender made it seem like we could make changes with the percent of ownership after we signed the papers.
We are going through a friend of the family who doesn’t specialize in elder law / property laws, so he doesn’t really know for sure. If this house didn’t have a mortgage, this would be easy. The rich people have no problem sheltering their paid-off homes and assets, but those who aren’t able to pay off their homes and such just get screwed.
Time to get real. Your grandparents paid $125,000 to put a pool in. They spent $75,000 on a kitchen renovation. They paid private college tuition for relatives and took all of you on “very extravagant” vacations each year. In other words, they had disposable income/assets and made choices about what to do with that money. They could have spent it on paying down the mortgage, but they chose not to, which is fine. But please don’t then complain about “rich people” who are sheltering their paid off homes because they made different choices.
@BelknapPoint The fact of the matter is, my siblings and I are at fault, and ultimately me lousy parents. My grandparents never intended to have to care for three more children after my aunt - the average cost of a child is $250,000 over 18 years? That’s $750,000 that they could have otherwise had. When they refinanced the house, $100,000 went to paying off expenses related to my siblings and I - specifically, court costs and attorneys. It was a big battle… divorced parents, tracking and trying to find my brother and I… I’ll stop there. And, the total cost for the vacations was probably $50,000 (they started doing this back in 2008-2013. Now, they do not go on vacations). The pool was put in back in 1987 when they owned a restaurant and had more resources available (paid for with cash)… I did not even exist at that point, nor my siblings. My aunt was only 4. My grandma loves cooking and wanted a nice kitchen… she worked all of her life, so she deserved to treat herself. It’s not like they go out and buy a new vehicle each year like some people do. They are still driving their 2003 Pontiac Vibe…
I understand that raising kids is expensive, and divorce and child custody proceedings can be expensive. But swimming pools, $75,000 kitchen renovations and annual very extravagant vacations are not necessities.