The Carr Report: What should we do with our deceased mom’s house?

by Damon Carr, For New Pittsburgh Courier

Both parents are deceased. Mom was the last to die. The Will leaves everything to me and my two sisters equally. The biggest asset left is the house. The middle sister has her own home. The younger sister lives out of town. The oldest sister wants to move into the house rent free. The sisters are ok with her moving into the house. They want the sister to pay them their respective share of the house. She doesn’t want to buy the sisters out. She says she can’t afford to pay rent or buy them out. Middle sister wants to know: How should she and their younger sister proceed?

~Facebook Question

Damon says:

Estate Planning is something most people neglect to plan for. Less than 46 percent of Americans have a Will. No one wants to talk about themselves in past tense. The reality is we’re all going to die—hopefully in the distant future. It’s best to speak from the grave by way of Will, Trust and Beneficiary Designation then to allow the state/courts to decide to whom and how to divide your assets.

This mother had a Will. She was very explicit in her wishes. She wanted the girls to inherit the property equally. She also communicated to all three that she would like for one of them to stay in the house. She wanted to keep the house in the family.

One of the sisters is willing to move into the house. Her doing so honors the mother’s wishes. But she’s reluctant to pay rent or buy the other sisters out. The two sisters are not wrong for wanting their piece of the pie. Sure they have a place to live. However, I’m sure they have financial goals that proceeds from the house will enable them to fulfill sooner.

We make the error in life and in death to assume the child in most need is the one deserving of the most help whereas the child doing good receives very little to no help at all. Should children who are selfsufficient be penalized because the one sister experienced tough luck or maybe dumb luck?

If this sister has proven herself to be unstable, who’s to say she can properly upkeep the house. If she doesn’t maintain the house, the property value can go down—thus reducing their projected inheritance.

You can’t call it rent when she’s part owner. The payment enforced would be her making payments to the sisters to buy them out. That’s not the cleanest way to transfer the property to the sister.

There’s a good chance the sister who wants to live in the house can refinance the property or even purchase using what is called a gift of equity. This will reduce and may even eliminate her bringing money to the table to transfer title at closing. Proceeds from the mortgage will be used to pay off the other sisters. A new deed is drafted making the sister who lives in the home the sole owner. If she truly can’t afford to rent or buy you and your sister out, you may need to sell the property. Sounds like she too can use the cash.

Prior to that happening, the property will have to go through probate first to legitimize the transfer from mother to three daughters.

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Can student loans be forgiven if you refinanced your student loans into a mortgage?

~ Facebook Question

Damon says:

The answer is a RESOUNDING NO!!!!

To qualify for the Public Loan Forgiveness and or Income Driven Repayment Plan, you must have a qualifying federal student loan. Other types of debt—including private student loans, personal loans, credit cards and mortgages—don’t qualify. That’s because the federal government only has the power to forgive federal student loans.

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My 401(k) balance isn’t growing as fast as I’d like it to. Can you explain why?

~ Facebook Question

Damon says:

I don’t know the details of your 401(k) but I’ll give you four possible reasons why it’s not growing as fast as you thought it would.

Not saving enough: Saving something beats not saving anything. However your saving rate—the percentage of your income that you’re saving has a bigger impact on your overall saving and investment balance than the rate of return that your earning on your savings and investments. How much are you saving per month? Are you able to increase it. Start with what you can realistically afford, then work your way up to saving enough to get your company’s matching contribution. Then work towards saving and investing more.

Asset Allocation: Asset Allocation defines how your investments are distributed amongst Stocks, Bonds, Real Estate, Cash, Cryptocurrency etc. The way your money is allocated amongst the various asset classes accounts for 90 percent of your rate of return. It’s also the main driver that determines the risk level of your investment portfolio.

Time in the market: We hear so much about Professional and Common Investors attempting to “time” the market. Buy when things are low. Sell when things are high. Both Professional and Common investors get “timing” the market WRONG most of the time. That being said, “time in” not “timing” the market is your biggest ally when it comes to investing. You need time to allow your money to grow.

Fees: This might surprise you. Investment Companies and Investment Professionals charge fees to assist you in choosing the right investments. Some charge more than others. Fees cut into your return on investment. If your investment earns 10 percent in a given year and your expense ratio was 3 percent, you made out with a 7 percent return on your investment. Problem is the 3 percent fee you paid was TOO HIGH. If your expense ratio is north of 1 percent, you’re paying too much. An expense ratio lower than 1 percent means more of your money working for you.

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I have approximately 20-years until I retire. Do you think Social Security will be around then?

~ Janeen

Damon says:

I’m also approximately 20-years away from retirement. Yes, I think Social Security will be around when we’re ready to retire. Here’s why: For Social Security to go away completely, the entire economy will have to collapse – meaning not one person on earth has a job and all stocks, bonds and other asset classes are worth zero because no company exists. That’s not likely to happen EVER!

What’s going to happen is 1 of 4 things: