29M single and my parents are going to be retiring in the next 1-2 years. They want to move out of their current home which is in an okayish neighborhood which isn't building much equity, into a more desirable one that will. This will most likely be their last home and where they live out their elderly years. They propose that they put down a big down payment (~2/3) and I take care of the remaining 1/3 mortgage. Everything will be in my name. The whole idea is that by combining our finances, they upgrade to a much better house, of which I'll inherit down the road. I have zero intent on living there while they're there, but it'd be in a good area where I'd potentially want to settle down eventually, after they've passed. There's also a very strong likelihood I have no interest in living there and selling it immediately. I can pay the remaining 1/3 of the mortgage very quickly, within ~2 years if I had to guess. I'd still be able to pay for my own expenses, with no changes to my current lifestyle. I essentially see this as investing in my inheritance as I'm inheriting a house regardless, but this one would build more equity. Is this the right or wrong way to look at it? Should I do it? TC: $225k
if you trust your parents, you want them to buy it in their name. that way you get to take advantage of the step up in basis when you inherit the house from them, reducing taxes from the sale.
Risk is they get demented and sign things away or otherwise disown op and he's hosed when they change their heirs
Should be pretty low risk. Definitely EV+ to take the chance of that happening vs the 100% chance of (IIUC) way more taxes if OP buys it themselves
What's the total sales price of the home?
You need to double check all the rules around this kind of thing. If it will all be in your name, I suspect the IRS will view their down payment as basically a massive gift of cash to you and you'll owe taxes on it. (Possibly state taxes too? Idk.) Also be sure the loan company is aware and okay with it. I believe they usually want the down payment to be coming from the person who is responsible for the mortgage, as a way of demonstrating their financial readiness for a massive loan. But given your high TC I think this part will ultimately be okay.
I was thinking of consulting a lawyer before going through with all of this anyway. Is this a real estate / tax / estate planning / other question? What type of lawyer do I reach out to?
I'm not sure. I would frankly recommend posting in r/personalfinance before going to a lawyer, they'll be more helpful than people here.
If you can pay it off in 2 years, it’s a no brainer. If you get married and plan on moving in with your parents, just make sure you and your partner are comfortable living in a joint house.
Someone was just asking a similar question on Reddit about a relative giving them a 0 interest "loan" to try to get around IRS gifting regulations and taxes. Turns out the IRS has heard of this, and if your loan terms truly are below-market interest, the difference between what market rate interest would be is considered a gift! (Or something like that) So again OP, make sure you figure out the rules of all this, or you'll get to deal with the IRS in a bad way.
One question, will your parents have enough left over to finance the rest of their lives? I ask because I considered something similar with my parents, but that would’ve wiped out most of their NW. So instead I bought the house and they pay me “rent”.
Yeah they've been diligent in saving for their retirement. But surprise medical problems are always a possible issue, you know
I am not even sure why you are second-guessing this.
Do you have any siblings?
Only child
Then it might be ok to buy the house with your parents. Check with a lawyer and CPA to protect your interest in case your parents change their will
Another bonus would be if your parents can live out the rest of their days in that house instead of a nursing home. Worth looking for a house they could live entirely on main floor (no stairs) and maybe a detached suite for a live-in caretaker if needed. But yeah for tax rules please ask a CPA to walk through all the possible scenarios to see what nets you the most
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