Well…it would be cheaper than having this kid inherit this house before she has a job, and is unable to make the payments herself.
You inherit a house you can’t afford and you sell it. Being given a house is not a terrible thing even if OP ends up having to sell it down the road. OP is not buying a house for $400k. Can OP end up not being able to afford to take care of the grandparents and have to sell? Sure. Can the mortgage be foreclosed if grandparents get too old to pay and OP is not able to pay? Yes. Can the grandparents retain ownership, but have it be taken for Medicaid repayment if they do nothing now? Yep (just like almost any homeowner who might need Medicaid).
Having insurance on a homeowner is not going to prevent a clawback by Medicaid. The home is still owned by the person who got Medicaid, and while the insurance can list the beneficiary as the grandchild, the home is still in the estate and creditors can make a claim.
This is a lot of gymnastics for possibilities that may never happen.
The OP needs to see a lawyer who is well versed in estate planning, elder law, and the like. That person should shoild be able to advise them how to best preserve this asset for the granddaughter…if that is the goal.
For some reason, I am unable to edit posts. The lawyer should also be well versed in real estate.
@BelknapPoint they do indeed have life insurance. A $250,000 policy through work and a whole-life policy that they’ve had since the 80s. I don’t know the value of it.
Please, please find a lawyer with expertise in real estate and estate planning. Being given real estate versus inheriting it can have very serious income tax impacts if you have to sell the house in the future. This is due to a possibly large difference in cost basis depending on how long your grandparents have owned the house. It may be possible to get around this by having the grandparents maintain a life estate in the property, but your family needs some expert help to avoid very costly mistakes.
thumper1 was the poster asking about life insurance.
That was a mistake, I was going to message you last night but gave up. So it was still there when I typed the message and I forgot to remove that.
What happens to the $250,000 life insurance policy through work once they stop working?
@thumper1 It goes away, but that’s why they have the whole-life policy - I think that is worth about $150,000.
Twoin one- I agree with everything you’ve said- but I don’t think you’ve identified the problem here. Grandparents are gone, kid inherits house, kid sells house. Yup- all good.
The family plan seems to be that the surviving grandparent- whose assets are primarily THE HOUSE is going to need a place to live. A 250K life insurance policy- each of them have that? One of them has that? What happens if the lesser insured individual goes first? I’m assuming that the social security cash flow can pay for food, heat… but who is paying for everything else? The kid. Who might be in grad school at this point. And if he/she sells the house, does he/she find a cute studio apartment for kid and grandparent?
I’m not seeing how this makes sense. There’s an Aunt in the picture who can afford to help her parents pay off the mortgage. Great. Why is the grandchild the one to step up to the plate now- while he/she still has to get through college, when there is an adult child who has the resources to fix this?
I’ve done the math in my head and I’m not seeing how a college kid who is worried about the impact on FAFSA on having a partial interest in a house (suggesting that this kid needs the full amount of the award to swing tuition) is suddenly the financial backstop.
people refinance houses all the time without saddling a college kid with becoming the de facto eldercare solution by being on the title.
OP- one more time. Get a lawyer. Not a friend, not a neighbor, not someone who focuses on IP or litigation. But someone who understands your states laws on property transfer and eldercare.
^^ THIS!
@kingpin2, I can probably count on one hand the number of threads on CC where virtually everyone agrees. This is one of those threads. You and your grandparents need to go together to speak to the lawyer. If he charges you a couple of hundred dollars for the consultation, it could save you and your family hundreds of thousands down the road.
If you don’t know where to go to find a lawyer who specializes in property transfer, ask the bank and/or realtor who will be doing the mortgage for a recommendation. I know a guy in Montgomery County MD I could recommend to you, but you need someone on the other side of the Potomac who knows the ins and outs of VA property law.
Property law AND estate planning…since it seems the grandparents want both.