[USER]

I am looking at selling my current home (equity ~ 550k) and moving in with my inlaws. They are in their late 60s, reasonable health, but rely on us for some household repairs, installations, etc with more coming in the next few years.

They currently have a 2000 sq ft 3 bed/3 bath home with an indoor pool building of an additional 1100 sq ft. We are talking about taking a big chunk of our equity and converting their pool building into a 3 bed/2 bath Auxiliary Dwelling Unit (ADU). Probably for 300k-400k. Their house and property is worth around 600k as is—their basis is around 350k. The property is paid off totally.

The inlaws are financially set with an amazing military pension.

We’re exploring different ownership options and splits. We’d finance the renovation using a HELOC on our house and then pay that off when we sold our house.

The only other factor is my wife’s sister. She’s financially set and savvy and doesn’t care about any inheritance. That said, I want to be as fair as possible.

Everyone is on board with this plan and we just want to make it work. We are trying to do the simplest thing if possible.

My initial thought would be to do the remodel and not take an ownership stake, and then have my inlaws just adjust their will so we would get a larger stake of the house when they pass. I assume we would just buy out the sisters share in that case. However, I’m not even sure we could do this in the first place because it seems like we’d be gifting them equity by paying for this remodel.

Another option would be for us to take an immediate ownership stake and just have that when they pass but that also seems complicated and we’d lose some of the stepped up basis, right?

We could also do a trust of some sort as well.

I really don’t even know what the options are.

I’m not really concerned that we’ll move out before they pass but I at least acknowledge that that scenario would probably cause the most chaos.

Any thoughts or experiences appreciated!

[Bill]

Honestly, that sounds like an absurdly bad plan. Let’s say your in laws require a lot of medical care at some point. Medicaid will absolutely come after the home and take it from you. There will be nothing left to inherit!

You could literally lose a half million dollars. I know you want to help, but this is not the way to do it.

Pay for an estate planning attorney and figure out how to structure this so you are taking on that sort of risk.

[Melissa]

If it were me, I would buy the house from them now and then add on. That way it’s your asset not theirs.

[Autumn]

I would not have them give it to you yet, or your basis becomes their original basis, as opposed to current market value when they pass.

Would sister be interested in splitting the cost of the reno? Are you ok with your investment being tied up in that house for potentially another 25-30 years?

[Lance]

An attorney structured a deal with a 98 year old widow who had run out of money. He would pay her 2,000 euro per month and he would get her fancy house when she died. She ended up living to about 127. Oldest women in the world. Outlived the attorney!

His estate had to continue paying her. Bottom line, this is EXTREMELY risky.

Too many variables and they could live way longer than you think. Don’t expect anything, get direct ownership if you want to do this.

[Author]

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