Would you take a free house...

[JewelFreak]

I thought about this all night! Came up with the same solution Addy suggests. Unless your family is superhuman, I see trouble with this lovely & kind offer. On the lines of, "Here we are struggling to pay our mortgage & do things right, and they GIVE her a house???" Not necessarily fair thinking, but sure is natural. Plus the grandparents' own possible emotional attachment & feelings about any changes you make.

Can you tell them you believe in paying your own way -- "part of us wants to have our own house that no one helped us with or gave us. It's a pride thing." -- well put -- maybe say just that. Ask if you can pay them as the mortgage holders. (For safety's sake you'd have to draw up a document laying out terms clearly.) Figure out what you can afford -- perhaps what you pay now in rent.

My sister's father-in-law bought their mortgage & they paid him instead of a bank -- small amounts geared to their small income. In his will he forgave the rest of the mortgage, so the house was theirs free & clear when he died. It worked out great -- and no resentment from their other kid.

--- Laurie

 

[rosetta]

Interesting. Here's my 2 cents.

I am potentially in a similar situation. My parents will in all likelihood offer us an apartment as a gift. But they are going to offer the same to each of my siblings. If they weren't, we wouldn't dream of accepting. In all honesty, I'm thinking of refusing it anyway. This might insult my parents though, so we shall see. I feel it's risky accepting such a huge, expensive gift. I would feel like a debt was owed (even though it's a gift) but that's just me.

Also in our case, the home is not for us to live in, but as a rental investment overseas. We would not accept a gift of a house to live in, as we want to pay for that ourselves and be proud that we worked hard for it. My FIL would happily let us take over the small mortgage and ownership on one of his houses worth over $1 million, but we have turned him down. We are both doctors in our 30s: we should be old and financially savvy enough to afford our own home, frankly. Or we are doing something wrong.

 

[mrswahs]

I think I would try to work out some sort of agreement with them. Find out if they would be okay with you making the house your own (i.e. remodeling if that's what it would call for, changing paint colors, your own furniture, etc.) and all of the other "must haves" for you. I would also have a contract drawn up. Nothing like this is ever easy, and you can never been too careful. A contract is a must IMO.

If it were us, there would be a lot of variables to it. If the house was our style. If it has enough land, enough space, etc. If it's not a house you'd give a second glance to if you were in the market, then no. If it is, and it's free? Then absolutely yes. Just get a contract to protect yourselves and them.

 

[rubybeth]

I think you need to sit down with a financial advisor and possibly a family therapist.

I would only take it if you can sit down with them and explain your plans to make it your home, remodel (even if only potentially), and how eventually you may decide to buy another house and rent out this one, and see how they react. If they don't like that you'd change things, don't do it. If they are giving you the house as a way to still have access to it, don't do it. And definitely don't buy it from them by paying them back, even for a nominal cost like $10,000. As Dave Ramsey says, the borrower is the slave to the lender, and that will mess with family relationships/friendships.

The other issue is what they're going to do for their other grandchildren. My mom is incredibly 'fair' in her gifting of things to me and my one sister. She's never wanted us to feel like one of us got 'more' than the other, since she had issues in her family with this, and now has an estranged sister because of it. If they aren't going to gift their other grandchildren with similar offerings, you will also want to examine what this will do to your relationships with those people. They WILL see it as favoritism unless they get something, too. And, it can't be that they get a chunk of the inheritance when grandparents die, because until they have the money/assets, you could have hard feelings.

Honestly, the best thing might be to rent it from them for nominal rent (like $100/mo. or something), and don't share with the rest of the family that you are getting a bargain on rent.

 

[Miss Sparkly]

I like to say that I grew up without a home. My father was in the Navy and to live in one house longer than two years was a big accomplishment. Lucky for me my father was also so high up the food chain that he wasn't deployed or out on ship after I was 2. He used that money to do wonderful things with me. We liked to try new restaurants, go to movies, visit family, go to Disneyland or Seattle for the weekend. He paid for my weekly flute lessons and we both joined a community band. My experiences with him were wonderful. I knew we were not rich but I never felt like I went without. Point is, your family including your son are not going to remember the stunning wallpaper or the rich plush carpet years from now. You will remember the moments in life that helped defined you. Save the money on the mortgage and work to create these moments and memories because that kitchen add on will be nothing compared to watching your son light up in delight as he sees Micky and the gang at Disneyland.

 

[QueenB29]

I think you need to sit down with a financial advisor and possibly a family therapist.

I would only take it if you can sit down with them and explain your plans to make it your home, remodel (even if only potentially), and how eventually you may decide to buy another house and rent out this one, and see how they react. If they don't like that you'd change things, don't do it. If they are giving you the house as a way to still have access to it, don't do it. And definitely don't buy it from them by paying them back, even for a nominal cost like $10,000. As Dave Ramsey says, the borrower is the slave to the lender, and that will mess with family relationships/friendships.

The other issue is what they're going to do for their other grandchildren. My mom is incredibly 'fair' in her gifting of things to me and my one sister. She's never wanted us to feel like one of us got 'more' than the other, since she had issues in her family with this, and now has an estranged sister because of it. If they aren't going to gift their other grandchildren with similar offerings, you will also want to examine what this will do to your relationships with those people. They WILL see it as favoritism unless they get something, too. And, it can't be that they get a chunk of the inheritance when grandparents die, because until they have the money/assets, you could have hard feelings.

Honestly, the best thing might be to rent it from them for nominal rent (like $100/mo. or something), and don't share with the rest of the family that you are getting a bargain on rent.

This. My best friend is in a terrible situation right now with her DH's family over family property her FIL (who they take care of, btw) wants to give them so they can build a new house. There have been terrible arguments with her SILs over it...even though this would mean my friend and her husband would get nothing in her FIL's will and ultimately everything will even out. And did I mention the FIL would still be living with them? So it's not so much a gift as much as it would be his share of the house and the whole situation is still VERY ugly.

So I would make sure that everything was fair for other family members....and also, as other posters have mentioned, that it would be MY house, that I could decorate and remodel, rent or eventually sell, etc.

You also need to talk to an accountant or tax lawyer, because you'll not only have to pay real estate tax, you will probably have to pay the IRS a hefty chunk on the value of the house if you accept their house for $1. It could be tens of thousands of dollars and you need to make sure you can afford that.

 

[Miss Sparkly]

I disagree. It is not YOUR job to make life fair.

 

[Skippy123]

Rubybeth, it doesn't need to be fair.

I would talk to your grandparents about it! They sound so sweet!

 

[Laila619]

I think you need to sit down with a financial advisor and possibly a family therapist.

I would only take it if you can sit down with them and explain your plans to make it your home, remodel (even if only potentially), and how eventually you may decide to buy another house and rent out this one, and see how they react. If they don't like that you'd change things, don't do it. If they are giving you the house as a way to still have access to it, don't do it. And definitely don't buy it from them by paying them back, even for a nominal cost like $10,000. As Dave Ramsey says, the borrower is the slave to the lender, and that will mess with family relationships/friendships.

The other issue is what they're going to do for their other grandchildren. My mom is incredibly 'fair' in her gifting of things to me and my one sister. She's never wanted us to feel like one of us got 'more' than the other, since she had issues in her family with this, and now has an estranged sister because of it. If they aren't going to gift their other grandchildren with similar offerings, you will also want to examine what this will do to your relationships with those people. They WILL see it as favoritism unless they get something, too. And, it can't be that they get a chunk of the inheritance when grandparents die, because until they have the money/assets, you could have hard feelings.

Honestly, the best thing might be to rent it from them for nominal rent (like $100/mo. or something), and don't share with the rest of the family that you are getting a bargain on rent.

That's a really good suggestion, rubybeth. Rent it on the cheap. But they told us they don't want to be responsible for the upkeep or the property taxes anymore, so it might not work. I think they are done being landlords.

DH's mom basically told us they would be so insulted and hurt if we turned this offer down. They will totally not understand why we would want to rent when we could own it outright.

As for the other grandchildren, DH isn't close with his cousins anyway. None of them lives in the same state as DH and the grandparents, so even though they may be jealous or feel like there is favoritism, the reality is that DH is their only local grandchild, so it makes sense as to why we would be the ones to live there.

 

[Laila619]

I like to say that I grew up without a home. My father was in the Navy and to live in one house longer than two years was a big accomplishment. Lucky for me my father was also so high up the food chain that he wasn't deployed or out on ship after I was 2. He used that money to do wonderful things with me. We liked to try new restaurants, go to movies, visit family, go to Disneyland or Seattle for the weekend. He paid for my weekly flute lessons and we both joined a community band. My experiences with him were wonderful. I knew we were not rich but I never felt like I went without. Point is, your family including your son are not going to remember the stunning wallpaper or the rich plush carpet years from now. You will remember the moments in life that helped defined you. Save the money on the mortgage and work to create these moments and memories because that kitchen add on will be nothing compared to watching your son light up in delight as he sees Micky and the gang at Disneyland.

Aww, this is a very sweet post.

 

[Laila619]

Everyone, THANK YOU so much for all your replies!! Even if I haven't responded individually, I have read everyone's words and given them a LOT of thought. I appreciate all your advice and wisdom! PSers are the best.

DH and I are leaning towards taking it, but we're still a tiny bit nervous.

 

[swingirl]

I am late but here's my 2 cents. Take it. Your grandparents have something they don't want/can't use/don't need. They would be thrilled to know someone close to them can enjoy it as much as they did. I would love to see my house kept "in the family". Of course, you want to make sure there are no strings attached and that you are free to remodel, rent or sell (although I'd hold off on selling for a few years out of courtesy). But, wow, what a nice generous offer!!

As far as pride goes, maintaining or upgrading a house isn't cheap so you can put your own money into it or save for something else (like college, vacations, etc).

 

[lulu66]

Everyone, THANK YOU so much for all your replies!! Even if I haven't responded individually, I have read everyone's words and given them a LOT of thought. I appreciate all your advice and wisdom! PSers are the best.

DH and I are leaning towards taking it, but we're still a tiny bit nervous.

well, keep us posted. and just remember to have a sit down & lay out everyone's expectations. i *really* think that is going to be key in making everyone comfortable with this generous gift (maybe even include dh's parents in the convo too). good luck!

 

[Laila619]

You also need to talk to an accountant or tax lawyer, because you'll not only have to pay real estate tax, you will probably have to pay the IRS a hefty chunk on the value of the house if you accept their house for $1. It could be tens of thousands of dollars and you need to make sure you can afford that.

Yikes, I didn't realize QueenB. Thanks. Like an inheritance tax of some sort?

 

[JewelFreak]

I don't think it would count as a gift if you paid them, even $1, for it. You might check w/a tax acct. to see if there's an amount that would trigger IRS attention, but if you pay any money for a house, it isn't technically a gift. (Historical societies sell antique rundown houses for $1 all the time if buyers fix them up or move them. Perfectly legal.) Also since you are now renting, there's no tax liability on property you sold & didn't re-invest the proceeds.

So I gather your DH is the only child in his family? And not close w/cousins, their other g-children. In that case, especially considering they'd be hurt if you refused -- and IF you like the house, etc. -- go ahead & GO. It's a great opportunity & they sound like sweethearts.

--- Laurie

 

[jewelerman]

i would take it in a minute!

 

[amc80]

Yeah, I'd take it. The only thing I'd want to work out is how long you're obligated to own the house and what happens when you go to sell it. What if you guys need to move across the country for work? Can you sell the house? Do you get the proceeds, or do you give it to them? What about reimbursement for any improvements you made?

But a free house? That's pretty hard to pass up. I'd give up a little bit of freedom and pride to be able to live mortgage/rent free.

 

[NovemberBride]

You also need to talk to an accountant or tax lawyer, because you'll not only have to pay real estate tax, you will probably have to pay the IRS a hefty chunk on the value of the house if you accept their house for $1. It could be tens of thousands of dollars and you need to make sure you can afford that.

Yikes, I didn't realize QueenB. Thanks. Like an inheritance tax of some sort?

Laila,

What an incredibly generous offer.

Tax law is not my area of specialization, but yes, there are tax consequences to both you and your grandparents if you buy their house for less than fair market value. Since you are related, the sale would not be considered arms length and could be subject to both gift and capital gains taxes. In addition, if you only pay $1 for your house, you will have to pay taxes on the entire value of the house when you go to sell it (minus the $1). That would be a significant amount. For this reason, it would be preferable to inherit the property upon your grandparents' death. For example, let's say the house is worth $100k today and $150k when you go to sell it. If you only pay $1 for the house, your cost basis will be $1 and you will owe taxes on the full $150k. Alternatively, if you inherit the property upon death, you get the fair market value of the property at the time of death of as your cost basis and only pay taxes on any amount by which your sale price exceeds the fair market value when you acquired the house. This is a very simplistic explanation, but it is a fairly complicated matter so you will want to retain an attorney so you understand all of your obligations. Your grandparents would also have a significant gift tax burden.

 

[Laila619]

You also need to talk to an accountant or tax lawyer, because you'll not only have to pay real estate tax, you will probably have to pay the IRS a hefty chunk on the value of the house if you accept their house for $1. It could be tens of thousands of dollars and you need to make sure you can afford that.

Yikes, I didn't realize QueenB. Thanks. Like an inheritance tax of some sort?

Laila,

What an incredibly generous offer.

Tax law is not my area of specialization, but yes, there are tax consequences to both you and your grandparents if you buy their house for less than fair market value. Since you are related, the sale would not be considered arms length and could be subject to both gift and capital gains taxes. In addition, if you only pay $1 for your house, you will have to pay taxes on the entire value of the house when you go to sell it (minus the $1). That would be a significant amount. For this reason, it would be preferable to inherit the property upon your grandparents' death. For example, let's say the house is worth $100k today and $150k when you go to sell it. If you only pay $1 for the house, your cost basis will be $1 and you will owe taxes on the full $150k. Alternatively, if you inherit the property upon death, you get the fair market value of the property at the time of death of as your cost basis and only pay taxes on any amount by which your sale price exceeds the fair market value when you acquired the house. This is a very simplistic explanation, but it is a fairly complicated matter so you will want to retain an attorney so you understand all of your obligations. Your grandparents would also have a significant gift tax burden.

Thanks, November! I was just reading about the gift tax. It almost sounds like it would be better for us to just live there (whether we pay rent or rent free) and the grandparents could will it to us when they pass if they want us to have it. Don't you think?

 

[MuffDog]

Take it. Unless there are strings you can't live with. Having a house that you paid for yourself 'for your pride' would be nice, but having a life without a mortgage sounds much better IMO. Think about all the money you can save for retirement, for helping out other family members if they are in a pickle, for an education for your kid(s).

TAKE IT.

And give your grandparents a massive, giant hug and keep doing that for the amazing gift they are giving you. :0)

 

[tammy77]

Why not just have them will it to you to avoid all of that, like you mentioned and in the meantime tell them that you'll pay all of the expenses, etc. so they don't have to worry about it? I realize there's insurance, etc. and a hassle, but it sounds like a LOT of money to be lost to the government.

It's an amazing offer but you definitely need to get a lawyer involved for a few reasons. I'd mainly be concerned about the tax issues and making sure that it's all drawn up properly to avoid drama in the future if the will is contested.

ETA: This would also help (hopefully) with the issue of the other grandchildren, at least short term. For all they would need to know, you'd be paying them rent (and you sort of would be by paying the taxes/insurance/maintenance).