Mandi works as a pre-op nurse, getting a steady stream of patients cleaned, shaved, and, most importantly, mentally prepared for the procedures that their doctors prescribe. Husband Mike teaches math and history at their kids’ private school and enjoys his additional role coaching football and track. Their eldest son Oliver is in middle school, likes to play sports, and excels in math but otherwise is a B student. Their daughter Natalie is two years younger. She is the brainiac of the family, constantly reading. She’s especially interested in history, is an excellent student, and plays soccer and softball unenthusiastically. Jacob is the baby of the family, just entering elementary school.
They are “house poor,” having purchased their first home just a couple of years ago. It is adequate for their needs, and everyone has their own space, including Mike’s garage-based man cave.
Mandi’s mother now needs their help. She can no longer manage her own household; she lost half of her income when her dad died, and she was never good at managing a budget. She recently got swindled out of her retirement account. Fortunately, dad put Mandi on the bank account, and she got an alert when the money was transferred out. She was able to forestall any additional transfers and protected the emergency reserves dad had set aside in a CD.
They’ve collectively decided to have mom move in with them and need to make some space or move to a bigger house. Mandi and her mom’s history included lots of confrontations, and they both recognize the potential for problems living under the same roof. Mom’s always been involved with her local grandkids, and she’s excited about the upcoming move.
First, we needed to assess the financial situation.
- How much is in mom’s bank account?
- Is there any home equity in mom’s home?
- How much income does she get from Social Security and pensions?
- What debts does she have?
- What are her primary expenses?
Next, we worked with the family to evaluate the choices.
- Selling mom’s property could provide the funds to build a granny flat on their property, but they’d need to build the addition before they sell her house or find other living arrangements for her in the meantime.
- There isn’t enough equity in Mandi & Mike’s house to secure a home equity line of credit (HELOC), but they do have a good credit score and could take a personal loan, albeit at a higher interest rate than a HELOC or 2nd mortgage, and without the benefit of tax-deductible interest.
- Mom wants to ensure that any inheritance is divided equally between Mandi and her two siblings.
Finally, we helped implement.
- They found the contractor and designed a facility that gave mom some privacy, adding about 600 square feet and another bedroom and a bathroom to their home, increasing the kids’ property value.
- Since mom is over 62 and she had a lot of equity in her house, she qualified for a Home Equity Conversion Mortgage (HECM), which she used to fund the addition. It got paid off when they sold the house, making the interest paid during the life of the loan tax deductible from mom’s income tax return.
- The balance of the proceeds from mom’s house were invested to produce additional income to help improve mom’s lifestyle and provide for additional expenses.
- Working with a qualified estate planning attorney, mom’s assets were placed in a trust which defined how her remaining assets would be allocated between her three kids. It accounted for the money she’d invested in Mandi’s home.
Tracking # 1–074477