Reluctant Trustifarian
October 29, 2008 10:32 AM   Subscribe

My parents have offered to *give* me between $100K and $120K to go in on a house with them. I will accept this gift, but I need some help figuring out how to handle the strings that are certainly attached. Long story.

(Yes I'd get a lawyer. I just want to know what issues to consider once I consult one.)

Last night my parents called me and told me that they had recently come into an unexpected and large lump sum of cash from a retirement settlement. They've been wanting me to get a house, and I have been wanting a house. I make a pretty paltry salary, however, and so my abilities to buy a house on my own are limited. They'd offered me money for a downpayment in the past, but I decided that it would still be too much of a financial stress. This offer changes things.

They discussed the best way give me this $100-120K for a house with their lawyer, and it seems that they have a trust that is set up to go to me and my sister upon their deaths. Their intent, however, is for me to get some of the money now, rather than in 20-30 years when they die. So the trust would own 2/3 of the house, and I would own 1/3.

There are a few conditions, however.
First, they want a house with at least 3BR and 2 baths, for them to stay in when visiting. They live 800 miles away, so it's not like they'd be dropping in often. Also, I asked them what amount of time they were expecting to spend there, and told them in no way would I want them to be there for weeks at a time. They don't want that, either. I'm OK with this string.

Second, they want veto power over the house I choose. This is to protect what they see as their investment, and their considerations would be neighborhood, condition of the house, age of the house, etc. We probably agree on these things with little concern, so I'm OK with that as well.

Other issues we discussed: I could have a housemate, as long as they could still stay there when visiting. I'd like to get a dog, and they're OK with that, too. I'd be responsible for property taxes, and we have not discussed who'd be responsible for maintenance and repairs. I'd assume that would be me. If I moved, they'd buy me out. The equity from their contribution would eventually go to me anyway, upon their death.

Overall, the preliminary discussion was reasonable. I was able to express my worries about it seeming like a business deal in the family. They understood. I asked if they'd freak if I got a lawyer for me. They were all for it--due diligence, they said.

My immediate concerns:

1) that my mother will nag me to death about house upkeep or any other things she doesn't like that I do. She does this. It's like she can't help it. I'm admittedly not very good at doing things quickly. I'm also very messy.

2) I have several step-siblings that my parents have broken all ties with.None of them did anything extremely horrible, by the way. It's been at least 8 years since my parents last had contact with these siblings. That means my full sibling and I are the only ones who are getting any of my parents money, and we're to split it 50/50. Deep in my heart, I wonder if I'd ever get the boot, too. I don't think so, but I want to protect myself just in case. It's a hot mess.

3) My mother has a history of manipulation through money. I went to an expensive private university far from home for undergrad, which they bankrolled entirely. After my first year, my mother tried to get me to move back to the area by offering to buy me a brand new luxury car if I'd transfer to the highly ranked state school nearish to them. I set my boundaries and gave a firm "No" to that suggestion. In addition, I went to grad school in a field that they did not like, and they didn't contribute. However, they repeatedly offered to pay for me to go to medical school, which I was never interested in. Final example: I have some issues with depression, and my mom is on my case at all times to exercise more. On my suggestion, she bought me a gym membership recently so that I'd do so. Money=love.

4) My sister (the only other still in good graces), has always called me the "favored child." This offer doesn't help that. My parents are aware of this problem, so the offer is a secret for now while they work out how to make this equitable. I don't want her to resent me. She lives a few blocks from them and has children. She benefits from that in many ways that aren't as tangible as a large sum of cash. Unlimited access to a beach house. Expensive dinners. Free babysitting. Spoiled grandchildren. I don't begrudge her those things at all, but it does rankle occasionally that she thinks I get everything and she gets nothing.

5. My mom is concerned that she'll die first, that my stepfather will get remarried (which she'd want) and that my sister and I will end up penniless (other than what we have from ourselves). I know that's in part her motivation to give me money now. My stepfather is 100% with her on this gift, however, as we had a conference call about it last night.

In sum, this is what advice I'm seeking:

What kinds of things should I include in a legal agreement? Is it appropriate to put limits on how often they visit, who's responsible for what, how to resolve conflicts, and such? What else should I consider that I haven't thought of? Also, what can I do to allay my fears of them rescinding in case I fall out of favor like my other siblings have? To be clear, they're saying this is a *gift* not a loan. Do I broach my mom's concern that stepfather will change his will if she dies first?

How do I navigate the interpersonal issues? I'm pretty good at setting boundaries, but I worry that such a big gift will make them think they have influence over the choices I make in life that are unrelated to the house. Or that they'd use the house as a way to try to control me.

I know that's a lot of information. I hope it's enough. If anyone wants clarification, you can contact me at

Also, I know that I'm extremely privileged, and I hope I am sufficiently humble about it. This level of privilege embarrasses me, actually, but that's another question for later, maybe.
posted by anonymous to Human Relations (44 answers total) 5 users marked this as a favorite
You are right that this is not a gift. It is a business deal within your family. Gifts don't have these kinds of conditions. This is your mother saying, "I want to get some of my money to you, but you don't know how to use it." Your acceptance of these terms endorses that message.

I wouldn't do it, no matter how much financial sense it seems to make for you. The intentions are good, I'm sure; but navigating the issues, the conditions, the little injustices, the inappropriate nature of some of the terms will be disastrous for your peace of mind. That's not worth $120K.
posted by ikkyu2 at 10:39 AM on October 29, 2008 [5 favorites]

1) Write into the deal that she pays for a housekeeper. (IANAL and don't know if this can be done.)

A housemate is one thing, but if you end up married with kids? I assume like most mothers, she wants grandkids, but then you'd have a really full house when they came to visit.

Personally, if my parents were this intrusive, I'd forgo the gift. Scraping by would be worth it to me to have my freedom.
posted by desjardins at 10:41 AM on October 29, 2008

IANAL but This doesn't sound like a gift. it sounds like an equity investment on their part that will be included in the part of the estate that you inherit. A simpler approach that might suit your needs better is if they give you an actual gift of the money to buy the house. You own the house in your own name. When they die, your inheritance is reduced by the amount of the gift you already received (which makes it more fair for your sister.) If they give it you as an outright gift, they can't take it back. Also since the house is yours, you will be fully responsible for all expenses, insurance, taxes etc. They can approve the house before you buy it and before they give you money. You can also have a soft understanding about visits.

Let your sister know that you are getting the money sooner but it will be taken out of your share later so she isn't losing out.

Your mother can easily arrange her will so that you kids are protected. Either she can just give you your share outright on her death (for example 1/3 to spouse, 2/3 to be equally split among children with an adjustment for your gift.) or she can put it in a spousal trust that will let him spend it during his lifetime but not be able to change the fact that you kids get what is left of your mother's money after he dies. (She can't control what he does with his own money)
posted by metahawk at 10:51 AM on October 29, 2008 [3 favorites]

I'm with the commenters above that this seems like to be a major can of worms you're opening here, although I think it's debatable whether or not it's worth $120k. It seems like the whole thing would make more sense if they just bought the house themselves and let you live in it rent free for a period of time.

What else should I consider that I haven't thought of?

Are you making sure that you'll be able to pay your taxes now that your income is going to spike $120k more than normal this year? Who is going to pay property taxes, insurance etc. for the house? Do you have enough money to pay for utilities, upkeep, etc. for a house in this price range? What happens if you want to move, can you force a sale, can you just move out and abandon the house?
posted by burnmp3s at 10:54 AM on October 29, 2008 [1 favorite]

I don't think I'd go through this, either. Along with what others have already said, I imagine you'd find this would hang over your head for a very long time, even if the deal went reasonably well.

While not always true, I do think the general rule of not making huge business deals with friends and family is a good one--if you're wanting to keep those relationships intact.
posted by metalheart at 10:59 AM on October 29, 2008 [1 favorite]

Wow. This offer has so many warning bells, it's hard to address which one to start with. Your relationship with your mom sounds troubling. Were this my choice, I'd rent a small apartment until I was financially able to make a go of things on my own. If your mom has a history of using money as a weapon, $100k-$120k is one *hell* of a big weapon.
posted by moof at 11:08 AM on October 29, 2008 [2 favorites]

Their intent, however, is for me to get some of the money now, rather than in 20-30 years when they die. So the trust would own 2/3 of the house, and I would own 1/3.

I don't understand this, and it does make it sound like the money is a loan that could be rescinded and not a gift. It sounds like the trust itself would own most of the house, and as long as your parents could change their minds about who to will the trust to, you are incurring some risk that the house could be sold from under you. (If your parents die and you and your sister both inherit 1/2 of the trust, won't your sister own 1/3 of your house? How is that workable?)

I'd be able to accept the conditions your parents set out -- staying with you when they visit doesn't seem that onerous to me, and if you have a family at some point you could always move if space gets too tight (and hopefully the value of the house would have appreciated, since we're in a low market right now). Before your parents come for any visit, make an effort to take care of outstanding yard work and housecleaning, etc. If you have a house you are going to have to be responsible about repairs and upkeep, and no excuses. Be a grown up about this. It's good for you.

But the main problem I see here is that the house is going to be mainly owned by the trust, and not you, and I'm not sure that's a good idea. Talk to a lawyer about this part. Good luck!
posted by onlyconnect at 11:09 AM on October 29, 2008

I know nothing about the law.

...but I've heard a lawyer on a call in show say that when one of the owners of a jointly owned business or property dies, the ownership is held completely by the surviving partner -it can't be willed to the dead person's heir.

If your parents die while the 120K is tied up in your house, your sister might be legally entitled to zip.

I'm with metahawk on this one.
posted by bonobothegreat at 11:10 AM on October 29, 2008

(Although maybe they are doing it this way because any gift of money from them outright over a certain amount [$20,000?] is taxable? That may be the reason for the trust ownership.)
posted by onlyconnect at 11:12 AM on October 29, 2008

What kinds of things should I include in a legal agreement? Is it appropriate to put limits on how often they visit, who's responsible for what, how to resolve conflicts, and such? What else should I consider that I haven't thought of? Also, what can I do to allay my fears of them rescinding in case I fall out of favor like my other siblings have? To be clear, they're saying this is a *gift* not a loan. Do I broach my mom's concern that stepfather will change his will if she dies first?

All of these issues are best left to a lawyer. More specifically, they're best left to your lawyer. There are a ton of ways that this kind of transaction can be structured to cover concerns as to gift taxes, property control and ownership, etc. You aren't going to get anything even remotely resembling good advice on these topics here because they are going to require a good bit of back-and-forth with a licensed attorney to even settle on the best structure, let alone the nit-picky details of how it should be implemented.

How do I navigate the interpersonal issues? I'm pretty good at setting boundaries, but I worry that such a big gift will make them think they have influence over the choices I make in life that are unrelated to the house. Or that they'd use the house as a way to try to control me.

The only real way to take care of issues like these is to make this a one-time event rather than an on-going business relationship. That isn't going to stop them from attempting to use it to manipulate you (although your examples of your mother's supposed "manipulation" are pretty damn weak for that word) but it could stop them from being able to really force you to do anything.

If they really want this to be a gift, then it should be a gift, not an "investment" that needs to be protected.
posted by toomuchpete at 11:14 AM on October 29, 2008

If your parents have used money to manipulate you in the past, don't go in on this with them. It would kill me to have all of the strings that you've mentioned.

I'd say to them, "Listen, if you want to give me a gift of any sum of money, that is great. Otherwise, I'd like to get my own home on my own terms. Thanks."
posted by k8t at 11:21 AM on October 29, 2008 [7 favorites]

I do not understand why they don't simply gift it to you, and I see their idea of a trust as both an unnecessary complication and a bit of a red flag. If it's a gift, make it a gift.

Although maybe they are doing it this way because any gift of money from them outright over a certain amount [$20,000?] is taxable?

No, and if they're talking to a lawyer they should know better. Each parent can give up to $12000 (?) pa completely tax-free on both sides.

Amounts over that given in a single year fall into the "gift tax exclusion." What this basically boils down to is that if you go over the annual limit by $10000, then the size of your maximum estate-tax-free estate goes down by $10000 -- you "use up" some of your estate-tax-free estate before you die. But unless anonymous's parents expect to have an estate well over $1M, this will have no effect whatsoever on them or the taxation of their estate. If the gift reduces your estate-tax-free estate from $2M to $1.9M, but your estate is "only" $500K, then it doesn't matter.
posted by ROU_Xenophobe at 11:21 AM on October 29, 2008

Well, your parents may differ, but if my own family experience is any indication:

1 - This will never change. You would be nagged about this even were it 100% your house, because parents who like to tell their kids how to live will do so no matter what. Only way to end this would be to not talk to them.

2 - Don't worry about this. No, seriously. You have no control over their will-related whims. My parents, step-parents and grandparents have changed their wills almost as often as their clothes in the last couple decades, and it's simply too much misery to try and play their shifting loyalty games.

3 - This will never change. See #1. You're already going to suffer this, forever, based on ever accepting a single dollar from them. Again, only way to lose it is to lose them.

4 - This will also never change, whether you do this or not. My sister is like this, and even if she got 100% of everything in our parents' wills, it wouldn't change her mind.

5 - Possibly legitimate, I don't know the ages and health involved. But if it did happen, 2/3 ownership of the house would just pass to him anyway, wouldn't it?

It really comes down to whether you are comfortable with this, because as long as they're in your life, you're stuck with their behavior anyway. You can have your lawyer put in basic things to protect you, something to keep them from ever selling the house from under you and such... but in the end you're really choosing between giving them a stick to whack you with forever, or just waiting around to see what other thing they come up with to whack you with forever.
posted by Pufferish at 11:21 AM on October 29, 2008 [1 favorite]

I wouldn't accept this "gift", either. Your parents sound a lot like mine, with regard to expressing their love--or, rather, approval--through financial support. I can understand where you're coming from, and I'd be hesitant to turn down $100k as well. If it were my parents, though, I'd never be able to do anything on my own terms.

I can't say whether or not your parents would try to exercise control over your personal life after bestowing such a large gift on you, but that's turned out to be the case with mine (although the gift wasn't quite as large). I didn't think my parents would ever cut off contact with me, either, but they did...and over a choice I made regarding my personal life, completely unrelated to any of the things they had assisted me with.
posted by kiripin at 11:32 AM on October 29, 2008

This doesn't sound like a gift. It sounds like the machinations of two people who want to keep you under their control for the rest of their (or your) life.

I'd say thanks, but no thanks here.
posted by reenum at 11:42 AM on October 29, 2008 [6 favorites]

They live 800 miles away, so it's not like they'd be dropping in often. Also, I asked them what amount of time they were expecting to spend there, and told them in no way would I want them to be there for weeks at a time. They don't want that, either.

I think you need to seriously revisit this assertion with some reality-goggles on. Your question raised a whole load of red flags in my mind--as someone with a family member who also shows love through buying things, which often come with invisible strings attached that I don't see until later, there's no way I would go into this sort of transaction with my parents--and this condition seems to me to be a much, much larger issue than you're making it out to be.

I know it's relatively unpleasant to think about the aging process, and the fact that our parents are likely to get older, frailer, and possible more demented. However, you really really need to consider the strong possibility that your parents (or even just your mother) will eventually age to the point where she is not able to take care of herself. This type of situation--figuring out whether to put Mom in a nursing home, or how to pay for a home health aide, or whether to move her in with one of her grown children--will dramatically change the dynamics of the negotiation with your sibling about what each of you "owe" your mother, and who should become her caregiver when she gets too old to take care of herself. If you're living in a house that your Mom owns half of, and which has an extra room that would make it very easy for her to move in, you should realize that you might be signing up for more than just a couple of visits a year.

Are you prepared to have your mother move in with you in 10 or 20 years, and to care for her in her twilight years? I'm not saying that you wouldn't want to, or that refusing this house means that you won't end up taking on a lot of that caregiving by choice later. But I think that you should realize one big string hanging off this transaction is the possibility that it will be a foregone conclusion that your mother will move in with you when she is no longer able to live alone, and you will not be able to back out at that point. Be 100% sure that you'd be okay with this before moving forward.
posted by iminurmefi at 11:53 AM on October 29, 2008 [1 favorite]

This screams "red flag" to me. Money can tear a family apart and the way this is setup, it's likely to do it to yours.
posted by scabrous at 11:59 AM on October 29, 2008

Danger! Danger!

IMO, say 'thank you, but no thanks' politely but firmly. These conditions are wild! You shouldn't enter into this arrangement with your family- they get VETO power over your house? She is going to nag you about housework? There has to be an open bedroom at all times should they decide to descend on you?

This sounds like a situation destined for failure, and probably messy failure.

Circumvent the process, thank your mom for her kindness but say that you cannot take money with strings attached like this.
posted by stewiethegreat at 12:18 PM on October 29, 2008

This is madness. I know $120K sounds like a lot to you now, but it is a small amount to give up in exchange for being an autonomous adult. My grandfather did this shit with his kids, and his kids did it with their kids, and it's done nothing but cause pain and resentment for everyone concerned. It is soooooo tempting to think it will work but it never does, ever.
posted by HotToddy at 12:22 PM on October 29, 2008

I have always lived by the motto- "Take what is offered." Especially if it is a dollar for dollar investment on a home. You can protect yourself in all the ways needed; that's where the attorney comes in. Tell him you want to cover your ass completely.

In my opinion this is a no-brainer, its $120K- what is there to think about? They live 800 miles away. They come to visit, you nod your head back and forth for a week and smile a lot. Sis gets snotty just agree with her, "Yeah, they do give me a lot of stuff. I wonder why?" One telephone call from them a week and half you can let roll into VM.

You have been living under this model for a long time. I should hope you have figured it out by now. Heck, at this rate, they should probably offer you a yacht next time around.
posted by bkeene12 at 12:34 PM on October 29, 2008

Based on the enormous red flags I see here, I would only enter into this agreement with the idea in my head that I will be in this house for a few years and then exercise the "buy me out" clause and go buy another house in 2014-2015. Make blank-damn sure that clause is front and center in any contracts drawn up, with no loopholes, no "both parties must agree to dissolve" or anything like that.

That way, it goes like this. You get a house now, you start building additional equity, and in 5 years (or whatever your timeline is), you get a nice chunk of change to help go buy the no-strings house you really want.

And as for point 1, they're 800 miles away. They won't know if your place is messy, so who cares, and if you're living there you really should be keeping up with general upkeep for your own sake.
posted by barc0001 at 12:57 PM on October 29, 2008

I had a similar situation with my parents, and I accepted the house. It passes to me entirely on their death. My mother is annoying and controlling (and also loves me very much), and we do fight about the house sometimes. But we always have something to fight about anyway. And I get to live in a house!
posted by Maisie Jay at 12:58 PM on October 29, 2008 [1 favorite]

No, no no no no. For all the reasons given above, but also because this may not be as big a bargain as it appears. They would be kicking in $100,000, but they would also be demanding that you buy much more house than presumably you would buy on your own. This is going to increase your costs -- the bigger the house, the nicer the neighborhood, the bigger your mortgage payments, property tax, and maintenance costs (all your responsibility, no?)

In other words, if on your own you could only afford, say, a $150,000 mortgage, if they say "we'll kick in $100,000 but you have to buy a $300,000 house" the deal really does not work in your favor. You end up spending $50,000 more than you have, and on top of that you have to add in the increased property tax & maintenance.
posted by footnote at 1:02 PM on October 29, 2008

Your question reminded me a little of this NY Times article from last year.

I'm nth-ing the 'Thanks, but no thanks' crowd. If your folks are going to impose all manner of caveats on you as an adult then you're never going to rid yourself of the nagging feeling that they are still treating you like a child who is incapable of looking after yourself and your home, and all sort of resentment follows - on both sides.

Having said that if having somewhere to (more or less) call your own is important, but beyond your financial reach, then a chat with a lawyer may unearth a solution.
posted by highrise at 1:07 PM on October 29, 2008

Maisie Jay's arrangement with the parents is okay because of Maisie Jay's easy-going attitude. I have some trouble with the idea, and it sounds like you might, too. Your parents really do want to help you. Thank them warmly for their offer, tell them how generous it is and that you're amazed by it. And tell them that you're uncomfortable about doing a business deal with family. ( And you should be wary: what if you or they want out later, or you need to sell and relocate. Could be very hairy.) They may well come back later with another idea.

You want to be independent from your parents, and as time goes by, that desire may get stronger. I think you and your parents ought not to enter a partnership that involves your home. There are better ways for them to assist you. You can assure them that they'll be welcome to come for regular visits, and that you intend to take very good care of the place -- but don't let these be part of a contract between you. Either of these two plans would be much better for you:

A. Gift: You receive a large sum that's subject to gift tax, or you get $24,000 a year, the limit on tax-free gifts. You use it as a down payment on a house, because you want a house. Later, if you want a different house or want to relocate, or you need to remind them to mind their own business about your life decisions -- the money is still yours, and you have the freedom to make the choices that seem right to you. You might decide to first find a house you like, and then take their gift after they've decided it's a good house. After that, they can express their opinions as much as you can tolerate, but you have no obligation to follow their advice... the same as if there'd been no monetary gift. You also won't be obligated to host their visits -- though you certainly would if they continued to respect you.

B. Landlord-tenant relationship, with rent low enough to allow you to accumulate a down payment: They buy a house, which they will own and maintain; they'll pay for insurance and taxes. You live there and pay rent in an amount that makes sense to you and them. You and they sign a rental agreement; it can spell out each party's responsibilities and rights, or it can spell out some things and the rest will be handled accoring to tenant law in the area. They can kick you out or you can leave -- either with proper notice. This is business, but it's relatively uncomplicated.
posted by wryly at 1:12 PM on October 29, 2008

Re-reading your question, the only thing I'd add is that if you're determined to go through with this--and I can't exactly blame you, as $100K is a hell of a lot of money, and of course it's easier to be some asshole on a computer telling someone else not to accept it than it is to actually not accept it if it's offered to you--you should think pretty deeply about whether *you* want this to be a purely business arrangement, or a family arrangement.

By which I mean: your parents have offered you something that's not quite a straight gift (hence the strings, like the veto power over neighborhoods) and not quite a straight business deal either (like demanding that there be a room available for them to visit). I think that's the part that raises so many red flags. I'd strongly advise you to at least consider treating this as strictly business, as an investment that you're jointly going into with family, and to talk to your lawyer about what sorts of conditions are appropriate for general partners in an investment to impose and what are not. (I mean, I think it'd be great if you could get your parents to treat it as a straight gift, but that's not something you can likely control.)

Here's what you need to figure out with your lawyer's advice:

1. Do your parents want permanent equity in the house until they die? What will happen to that equity upon their deaths--does it automatically come to you, or does it become part of their estate, to be split as their will specifies? I'd push to have it set up in a way that their will can't change later; if the agreement NOW is that you'll live in the house and contribute towards the costs in exchange for full ownership later, then that should be in the contract. I'd leery of this "trust" idea, which seems like could be used to take away all your rights to the remaining equity later, after you've spent a lot of money on the property. If your agreement about who pays for what is based on the implicit understanding that this house will fully belong to you upon their deaths, put that in the contract, DO NOT let it be something left up to how they decide to split the trust upon their deaths.

If you're going to go with a percentage split in equity that won't change, you should talk with your lawyer about what would be fair in terms of how to split costs for the monthly mortgage payment, regular maintenance and upkeep, and major repairs or renovations. What you definitely don't want is a situation where you're paying the monthly mortgage, the upkeep, and for major renovations, but you never gain any more of an equity stake while you continue to dump money in. I'd be very wary of a situation where the equity splits never change, but you're expected to shoulder the burden of all the monthly costs. I'd specifically ask your lawyer about how this sort of investment would be structured if none of you were related, and then try to get your parents to agree to something like that. The 1/3 - 2/3 split seems a bit arbitrary--is this going to be the case no matter how expensive the house is?--and seems based on family considerations (2 of them, 1 of you) rather than business considerations (like how big the $100K down payment is relative to the cost of the entire house). Don't mix the two; stick with how you'd do it if this was a business deal.

2. If you are to own this house in common with your parents, I think you definitely need to differentiate between what they are contractually entitled to in terms of staying with you, and what you personally agree to try to do because they're family (but is not in the contract). If they want a second room in the house that they can use at their leisure, from a business standpoint that's not any different from having a roommate that travels a lot. Realistically, I doubt you can find a housemate that will agree to vacate her room whenever your parents feel like dropping in--and even if someone agrees to that upfront, they'd likely have tenant law on their side if they changed their mind later--so you should consider including in the contract that they "pay" for usage of that room if it is to be kept open for them at all times. (Maybe this means they pay 1/3 of the monthly mortgage payment, just like a tenant would pay rent.) If they don't want to do that, I think you should be very explicit with them about not wanting the money to be contingent upon having a room available for them--that they're free to expect that you'll put them up on the sofa or in the room if it's available because you're their daughter, but not free to demand you do so because they have part-ownership of the house. (I mean, I own stock in Microsoft, but that doesn't mean I can stroll in to a store and grab myself a free copy of Office whenever I feel like it.)

3. You should definitely figure out with your lawyer what sorts of day-to-day stuff your parents should have veto power over (whether to have a dog, which tenant you select, what color to paint the living room), and then make sure your parents are on board with getting those veto powers and no others. The amount of stuff they have veto power over should be a reflection of how the equity is worked out--if they retain a permanent equity stake, then there's more of an argument for them having a say in decisions that may affect the resale value of the house (e.g., what color to paint the exterior, or whether to install a fountain in the garden), but if they lend you $100K and you pay it back in exchange for full equity, then they should have very little say in those decisions. However, don't put anything in the contract about them getting a say for all decisions "that affect the value of the property"--I mean, conceivably just about anything could, and that seems like a nightmare waiting to happen. Can I just say, it seems weird for them to both be "doing this for you" so you can own the house in the end, but also talking about protecting their investment by having veto power--after all, if the intent is for the house to come to you after they die, they'll never realize the increase or decrease in value from your decisions. Just one thing for you to think about and clarify with your parents--who is going to benefit from the gains in the value of the house, you or them? If it's you, then why do they need to have all these conditions? I'd be worried about them "protecting their investment" in case they decide to disown me later.

4. Definitely talk with your lawyer about putting something in the contract about what happens if either party wants out (this could be either you or your parents--you say they'll buy you out if you move, but what if they want out? Can they sell the house from under you?). Does the remaining party get right of first refusal to buy the entire house--and how quickly do they need to come up with the money to purchase? How will the buy-out price be decided? Can either party force the house onto the open market if they feel the buy-out price is too low? How will equity be decided if you're slowly building more every month as you pay the mortgage, but you decide to leave before you own it free and clear? You say your parents will buy you out, but I find it hard to believe they'd give you 1/3 of the value of the property if you decide to move out 6 months after moving in, when you've paid barely anything towards the mortgage.

The way your parents have suggested structuring this seems very very fraught with conflict, and if their stated intention is that you would gain the house upon your death, I can't figure out why they want a permanent equity stake. If the concern is that they don't want to give you "more" than your sister when they die, I'd strongly suggest seeing if you could get them to do this as a $100K loan at low interest rates instead. You could structure this as your parents lending you $100K for a down payment, which you could pay back at 5% interest or so, and at the end of the time you'd own the house free-and-clear (and they'd have made a nice return on their cash). In that case, you'd be on the hook totally for all monthly mortgage payments, as well as upkeep, but they'd have no say in the day-to-day decisions about the house. If they won't accept that sort of deal--which seems like it would meet their stated intentions of helping you get a house that you'd own outright in the end, as well as avoiding any nastiness with your sibling because of different inheritances--I'd really really think twice about this.
posted by iminurmefi at 1:24 PM on October 29, 2008 [1 favorite]

Some people have noted this as a side comment, but I want to make it explicit (I am house-sitting/renting a large-ish house right now after having lived in apartments for many years, so have recently experienced this transition): if you live in an area that gets cold, your heating bill will probably be something like 2-3 orders of magnitude greater than what you are paying now, assuming you live in an apartment, and your electricity bill will eventually be at least one order of magnitude greater. Not to mention that it will be your responsibility to pay for things like plumbers, electricians, landscapers, painters, and so on (either that or sink a substantial chunk of your time into these things), that probably right now your rent covers. It actually doesn't sound obvious that you can necessarily afford all this, on top of a mortgage + property tax.
posted by advil at 1:30 PM on October 29, 2008 [1 favorite]

Sounds like our family situations are very similar. Because my parents tend to hold these types of arrangements over my head when I do something they don't like, I generally choose not to accept money or financial support or items I would have to pay back. The only way I help now is as a gift. I actually have to sit down with them and say, "Is this a gift? Do you expect or hope I will pay this back? Will it cause problems if I choose to use this money/car/computer in a way you would not?" If they say, "Yes, this is a gift" I can take it with ease and not worry about it.

On a side note: I also used to really hate getting money from my parents because I felt like the favored child, but in the end my mom sat me down and just asked, "Wouldn't you want to help your child someday?" I knew I would so I've stopped angsting about it so much. We're all so much happier now that money isn't used as a guilt trip.

If you think that this house is going to cause a lot of heartache and tension, don't go with it. Why needlessly complicate your daily life (extra cleaning or maintenance) and your family relationships?
posted by Mouse Army at 1:39 PM on October 29, 2008

I think the folks who are telling the poster not to accept this gift are missing a few key points:

1. The poster WANTS A HOUSE but cannot afford a house on his own without a little help.

2. The poster (and his mom) are worried that if he does not find some way to accept this gift now, it will disappear altogether. He may have a falling out with his parents and get no inheritance. His mom might die first and leave everything to her surviving spouse, as many spouses do, in which case neither child may get an inheritance. The poster may have missed out on what appears to be his best and only chance of being able to afford a house for the next decade or so.

So telling the poster that he should refuse this gift as a matter of pride is nice to say in theory, but honestly is not terrifically practical advice for him because he can't put a roof and a pup tent in his pride and live in it.

I think you need to talk to your lawyer about this "trust owns 2/3 of the house" arrangement and make sure that (1) you inherit the entire house should both parents die; and (2) parents can not rescind trust during their lifetime and force you to leave the house or pay for their portion, etc (3) what happens to the trust and the house if mom dies and stepfather remains, or vice versa? Otherwise, I think you should suck it up, be nice to your parents (and clean up when you know they're going to visit) and accept the gift.

I'm not sure why someone above is suspicious that your parents might use the house as an excuse to come and live with you if their health starts failing when your sister lives blocks away from your parents and has also benefitted from their largesse in the past (beach house, etc.) and seems more likely to be a target to take them in or help care for them should they need it. And his parents have stated that they certainly don't intend to move in for "weeks at a time," which would seem to negate this retirement home theory. But if the poster sticks to his guns and tells his parents that he's simply not set up to care for them, he should be able to avoid this. Also, since the $120K is only part of their estate (presumably a house, beach house, other assets) it seems like they'd be able to afford long-term decent care for themselves.
posted by onlyconnect at 1:43 PM on October 29, 2008

I could not accept a "gift" like this. It would make me feel beholden to my parents, which would in turn make me feel like less-than an adult.

Red flags, they are a waving.
posted by French Fry at 2:01 PM on October 29, 2008

1. I agree that this leaves a lot of strings in the hands of someone who seems inclined to pull them.
2. A lawyer could suggest a serial gifting arrangement under which they would buy the house and then would give you interests in chunks of $24,000 per year to avoid any concern about gift taxes. Often this is organized as a corporation or an LLC. It could also be done via a promissory note: they give you $125,000 to make the purchase, you sign a note obligating you to repay, they forgive $24,000 per year, and eventually you own the house outright. Note that this would only take five to six years to be played out.
posted by yclipse at 2:08 PM on October 29, 2008

I don't know your parents, but it sounds like a bad situation. This is a lifetime investment and there probably going to be things in your future that your parents will not agree with. If they don't like the girl/guy you plan on marring is it still your house? Difference opinions on raising children? You also can ask them how long they "expect" to stay in the future, but will you have any say in the matter on when and how long they actually do come?
posted by mattsweaters at 2:12 PM on October 29, 2008

I'm not sure anyone has mentioned the most glaring issue if you decided you want to do this: your mother is going to want you to spend more on this house then you can afford. You need to be really careful and figure out whether you can afford the mortgage payments on the house your mom wants.
posted by geos at 2:15 PM on October 29, 2008

I don't think anyone else has addressed the issue of inheritance yet, but don't be so sure that your step-siblings won't get any of it. You didn't say which state you're in, how the step-siblings are related to your parents, or whether your parents have a will. Depending what the estate law is in your parents' state, your step-siblings certainly could get part of your parents' money. Definitely bring up that issue to a lawyer, if you hire one.
posted by snafu at 2:21 PM on October 29, 2008

I only made it 1/3 of the way through your description before I thought "no way should they do this." There's a ton of reasons here which others will cover, so I'll throw one in I don't see

A big problem in this situation is the 1/3 ownership. When the other 2/3 goes to your siblings they can potentially file a partition lawsuit and force sale. At that point you're going to have to vacate or come up with financing. Unless your financial situation then is notably better you're going to have the same kind of issues then that you do with making an independent purchase now.

I'd suggest you tell them thank you, but I've decided that the purchase of a home is just too personal a decision for me to mix it in with all these other aspects and requirements. Something that you pay 25-50% of your salary on every month should be something that is whole-heartedly your choice, not a committee decision.

To be perfectly mercenary, if this is money they're looking to put into inheritances for you and your siblings anyway you'll get it anyway at the time of their death. And you won't have to worry about manipulation or their butting into day to day decisions in your life.
posted by phearlez at 2:40 PM on October 29, 2008

You will be nagged, and you will have "but I'm paying for it" or "it's my investment" hung over your head. If you consider this a small price to pay for having sweet new digs, it sounds like you should take the offer. If it would make you feel like a teenager again, whatever you do, don't do it!

(I would personally not do it.)
posted by lacedback at 2:54 PM on October 29, 2008

(If your mom is really concerned about leaving money to you, she can easily set up a trust herself for you and her sister and make you the beneficiary. Credit shelter trusts are a great idea to avoid federal inheritance taxes and it's clear their lawyer knows what to do.)

I'm confused by your story. If your parents want you to buy a house and want to give you a down payment, why do they need to own part of it? If they want to invest in a house and think it'd be easy if you lived in it, why do you need to own part of it? The option they presented to you is the most convoluted way of making sure you're financially invested while having little to no power whatsoever. This sounds bad.

If they want to give you money for the house, they can give you a low-interest loan and you can buy the house yourself. Then they won't have to worry about it being an "investment." If they want to invest in a house, and they're really concerned about the upkeep, they should buy one close to where they live so they can keep an eye on it.
posted by timoni at 3:20 PM on October 29, 2008

Gift: You receive a large sum that's subject to gift tax, or you get $24,000 a year, the limit on tax-free gifts.


First, to be clear, the recipient does not pay gift tax in those rare events when it is due. The donor does.

Second, it would be "You receive a large sum that is subject to gift tax if and only if your parents have already given so much in noncharitable gifts that they have burned through their entire lifetime exclusions. Currently, this would mean that your parents had given in excess of one million dollars of gifts."

if you live in an area that gets cold, your heating bill will probably be something like 2-3 orders of magnitude greater than what you are paying now

You are saying that heating bills for free-standing homes are 100 to 1000 times higher than for apartments.

The poster (and his mom) are worried that if he does not find some way to accept this gift now, it will disappear altogether.

Then his mother and stepfather should make him a gift instead of screwing around with all of this trust nonsense. To me, the trust stuff reeks of "...and we'll try and get it back if we disapprove!"
posted by ROU_Xenophobe at 4:13 PM on October 29, 2008

Personally I'd go for it. You know your parents motivations and likely actions well enough to predict and shield yourself from their behavior. You have no control over who they'll give money to when they die (so don't bother obsessing over it). I actually know someone who is in the same situation and the transaction has been a success. She really had no hope of home ownership without the arrangement.

One important point: When dealing with multiple siblings, treating all fairly doesn't necessarily mean treating all equally or the same. Your sister is helped differently from you, in a way that more closely matches her needs. That doesn't make it unfair. She may not see it that way, but I see no reason for you to lose sleep over it. Again, you have no control over how your sister feels about her relationship with your parents.

Good luck!
posted by Breav at 5:44 AM on October 30, 2008

You are saying that heating bills for free-standing homes are 100 to 1000 times higher than for apartments.

yes, I should have said 1-2, as I wasn't factoring in the fact that I just moved from a CA apt. to a house in a cold climate, whereas the OP presumably isn't changing climates.
posted by advil at 7:18 AM on October 30, 2008

Count one more in the "Run away from this deal as fast as you can" chorus.
posted by Citrus at 10:14 AM on October 30, 2008

And another vote for "Run!"

Just looking at the sister aspect: To me, secrets=leverage and manipulation.

(My guess is your sister pays for the perks she gets for living so close to your parents in ways that you can't see. I'm also guessing that not living next to your parents is a choice on your part, so perhaps you have some idea of the price of those perks.)

Out of the dozens of ways your mother can protect you and your sister's interests after her death, and make sure you and your sister's inhertances are equitable, this is one of the most control-freaky and cumbersome of the lot.
posted by small_ruminant at 11:19 AM on October 30, 2008

Heating bills here in Northern California anyway, are 10- 15 times higher in free-standing houses than apartments. (The highest bill I've paid in my current apartment, after leaving the heater on and the windows open several times all day while I was at work, was $35.) In snow country it's probably more extreme.
posted by small_ruminant at 11:22 AM on October 30, 2008

If you're still reading this I was in a similar situation. Your parents are offering you a business deal, a contract. This is not a gift, do not believe it is a gift, treat it like a contract. They have given you an offer, give them a counter-offer. Be generous. I managed to both (1) up the down-payment offer, and (2) get a guarantee on major repairs over a 10 year time frame and what would evoke a major repair (cost, etc.).

Some people will be personally offended by this, but if your parents are like mine, this is how they are used to dealing with things. Like many people in this thread, I said "run" in my head, and made an off-hand remark about what would work (more money, repairs, etc.) ... I was being sarcastic to be honest. They accepted and were impressed that I negotiated effectively. Yeah our family is not big into hugs.

Ask yourself what would make this work, and come to a place where you think both you and your parents will be pleased. Counter them with that and realize that in the end this really is a gift, can you imagine a private company offering you a down payment on a house? Of course, make sure you prepare yourself for the worst, assume your parents are evil and you'll never want to speak to them 12 months down the road. Don't be stupid, but don't be a chump.
posted by geoff. at 12:45 PM on October 31, 2008

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