Hi all, this is probably going to be a strange scenario relative to what normally gets posted here and I'm not really sure how to title it.
My mother passed away suddenly a few weeks back. We're working through all of the process now but my largest concern is that my brother lived with her and I'm worried about his well being once everything gets settled here. Basically we're weighing a lot of options to make sure he is taken care of and not left in a really crappy situation. Let me be clear in saying that it is just my brother and myself dealing with assets, we are not arguing about anything, he will basically go with anything I suggest as the best course.
Assets:
Monetary - There was around $400k in an IRA. I already gave the majority of this to my brother and that's where the rest of the story will play out from. For the purposes of this discussion let's say he received $300k of it. If I'm not mistaken we have to pull all of this over the next 10 years. Note: She was not yet 73 so I believe we don't have to do specific yearly payments but do have to empty it by year 10. There were no other assets and from what I can find there is minimal debt (less than $10k). I paid for all funeral expenses and other misc expenses.
Home - This is not paid for and is the main crux of the problem because my brother lives in the home. We have around $100 - $125k in equity with a remaining principal balance of around $265k and 27-27.5 years remaining on a 30 year at 5%.
Situation:
My brother's income is very low. Let's just round down and say it's $40k a year. He cannot afford this home as it is but could definitely limp along by slowly bleeding that IRA down over the next 10 years. Alternatively, he could sell the house and move into an apartment. The problem is apartments are not cheap either and once we make that call he is left at the whim of rising rent prices and no equity remaining. At some point the money will run out. I do not believe his prospects for wage increases that keep up with inflation are great.
This is where I need help. I'm usually good at thinking through these things but this is just a lot to work through while also trying to deal with the obvious blow of losing my mother. I'm really just looking for some other sets of eyes to weigh through options, possibly see some options I'm just not seeing, etc. The worrisome thing for me is just how important whatever we decide will have on his outlook.
Options:
Option 1 - Sell the house, live off the proceeds plus the IRA account for as long as possible. Hope for better prospects in the future to offset inflation and eventual account drain. I'd say apartment cost with insurance will be in the $1300-$1500/mo range.
Option 2 - Keep the house as/is. Similar to above situation but would at least be able to sell the house later. The only issue I have with this is since it's a 30 year the majority of the payments are going to interest so we're still bleeding cash over the next decade or so. House payment is $1788 with taxes and insurance included. Add another $150 for HOA and we're at $1938/mo.
Option 3 - Keep the house. Pull some large amount from the ira to recast the mortgage. Let's say $125k to pay around $100k towards the mortgage plus the taxes on the income, recast the payments down to something far more reasonable. I know this is a pretty large tax bill to swallow but on the other hand it's probably better than throwing away a larger % towards interest for several years.
Option 4 - I can't see it and really need some help.
Note: Options 2 - 4 assume the mortgage company will even allow us to keep the mortgage as/is.
Really appreciate any advice you all might have on this. Thanks for your time.
My mother passed away suddenly a few weeks back. We're working through all of the process now but my largest concern is that my brother lived with her and I'm worried about his well being once everything gets settled here. Basically we're weighing a lot of options to make sure he is taken care of and not left in a really crappy situation. Let me be clear in saying that it is just my brother and myself dealing with assets, we are not arguing about anything, he will basically go with anything I suggest as the best course.
Assets:
Monetary - There was around $400k in an IRA. I already gave the majority of this to my brother and that's where the rest of the story will play out from. For the purposes of this discussion let's say he received $300k of it. If I'm not mistaken we have to pull all of this over the next 10 years. Note: She was not yet 73 so I believe we don't have to do specific yearly payments but do have to empty it by year 10. There were no other assets and from what I can find there is minimal debt (less than $10k). I paid for all funeral expenses and other misc expenses.
Home - This is not paid for and is the main crux of the problem because my brother lives in the home. We have around $100 - $125k in equity with a remaining principal balance of around $265k and 27-27.5 years remaining on a 30 year at 5%.
Situation:
My brother's income is very low. Let's just round down and say it's $40k a year. He cannot afford this home as it is but could definitely limp along by slowly bleeding that IRA down over the next 10 years. Alternatively, he could sell the house and move into an apartment. The problem is apartments are not cheap either and once we make that call he is left at the whim of rising rent prices and no equity remaining. At some point the money will run out. I do not believe his prospects for wage increases that keep up with inflation are great.
This is where I need help. I'm usually good at thinking through these things but this is just a lot to work through while also trying to deal with the obvious blow of losing my mother. I'm really just looking for some other sets of eyes to weigh through options, possibly see some options I'm just not seeing, etc. The worrisome thing for me is just how important whatever we decide will have on his outlook.
Options:
Option 1 - Sell the house, live off the proceeds plus the IRA account for as long as possible. Hope for better prospects in the future to offset inflation and eventual account drain. I'd say apartment cost with insurance will be in the $1300-$1500/mo range.
Option 2 - Keep the house as/is. Similar to above situation but would at least be able to sell the house later. The only issue I have with this is since it's a 30 year the majority of the payments are going to interest so we're still bleeding cash over the next decade or so. House payment is $1788 with taxes and insurance included. Add another $150 for HOA and we're at $1938/mo.
Option 3 - Keep the house. Pull some large amount from the ira to recast the mortgage. Let's say $125k to pay around $100k towards the mortgage plus the taxes on the income, recast the payments down to something far more reasonable. I know this is a pretty large tax bill to swallow but on the other hand it's probably better than throwing away a larger % towards interest for several years.
Option 4 - I can't see it and really need some help.
Note: Options 2 - 4 assume the mortgage company will even allow us to keep the mortgage as/is.
Really appreciate any advice you all might have on this. Thanks for your time.
Statistics: Posted by glamdring269 — Fri Dec 20, 2024 8:42 am — Replies 28 — Views 1235