Ok, I am Durable Power of Attorney for my grandmother and maintain her health care options, financial affairs - almost anything to do with her life I guess you can say. Due to her son (my father) being irresponsible to say the least, she is left with minimal funds, although she receives an annuity of around $2k per month, but I have developed a budget for her and arranged some in home care for her benefit. I am a first-time homebuyer and have recently closed on a house. I was talking with her about how I'd like to take out enough to pay off student loans, house, and enough for upgrades and a few other minor purchases, and make 1, 15 yr loan payment. Here is a general idea. Any and all input is greatly appreciated! Student Loans: Mine: $60k @ 6.5% for 25 years Monthly: $405 House Loan: On closing day: approx: $9k for down payment & my part of closing costs Loan: 170k loan @ 4.875% for 30 years: Monthly: $900 Total Amount over 30 years: 405(12) = 4,860 (25) = 121,500 900(12) = 10,800 (30) = 324,000 Grand Total: $445,500 New Plan: 1.Grandmother (or I) takes out $270k line of credit or home equity loan against her farm which is worth close to $1 million and debt-free. I prefer a fixed rate and am willing to pay a slightly higher rate to lock this in. She has agreed and I am POA so I can do this in her name. 2. I take out $170k loan and make a few monthly payments (make sure loan doesn't have pay early penalty) 3. Grandma gifts 270k to my name (tax free). The first 13,000 goes unreported. The remaining $257k is reported to the IRS and deducted from her lifetime allowance of $3.5 Million (still tax free, but must be claimed if over $13k in 1 yr.) 4. Pay off the entire remaining home balance: (For easy example, use $165k). ** The house would be completely paid off and in my name. This would likely improve my credit, purchasing power, and still qualify for $8k tax credit. 5. Pay off $60k in student loans - virtually replacing with lower interest rate. 6. Remaining Funds: $270k-230k= $40k - The remaining 40k will be used in combination to furnish the home, do minimal upgrades, establish an emergency fund, and do a small amount of investing. Updated Plan: 270k @ 4.25 for 15 years: $2030/month Grand Total: $2030 (12) = 24,360 (15) = $365,400 By shortening loan duration and lowering interest, I am paying (445,500-365,400) $80,100 LESS while borrowing $40k MORE. In dollars alone, this is a swing of over $120,000! Also, without ever making additional payments, I'm COMPLETELY debt-free in 15 years. Once I start earning more, I can pay off debt much faster. This one loan payment is much easier for me to manage. Anyone have advice on this plan? Will it work, is it legal as I have researched and assume it is? Also, what type of loan would you recommend for this. Any input encouraged! Thanks!
R.M. And as a lawyer, I assume you'd consider more details. I was in a hurry earlier and didn't want to go here but I will out of respect for the first couple responses. I am 24 years old, recently graduated college with a Finance Degree and an accelerate MBA. My father is a degenerate alcoholic. Whille we thought for years he was taking care of her financial affairs, he was in fact draining her estate. By the time I was aware, she had the farm (been in my family since late 1800s), about 20k in cash, 80k in stock, and a monthly annuity of $2k. She realizes my dad's problems and knows her money is depleting and if she goes into a home she will lose the farm. Since then she has elected me as a power of attorney - I have closed all accounts in my father's name, reopened seperate accounts and developed a budget that is allowing her to break even at work, and at times, accumulate some wealth monthly. She has had heart failure, kidney failure (dialysis), a stroke, the list
goes on...I stay with her every night during the week and walk her to the bathroom several times each night. In addition her and I have setup a trust where I have control over my father's ability to steal her money. I would never take advantage of her in anyway. When I mentioned looking for houses, her exact words were that she'd rather me somehow use equity on the farm to help than to have my father drink it away. Sorry for the lack of details - I just didnt want to get into that area b/c I could go on forever...Anyways...back to the subject..
Ask me: the apple doesn't fall far from the tree? I am in no way using any of her funds. I dont see how this poses any threat to her whatsoever. I will [and have] done everything in my power to make sure she receives the best healthcare available and to preserve the farm in my family which would have been sold shortly after her passing under my dad's plan. I trade commodities and make good income. I take sole responsibility of her well being and will do anything to help her. I feel as if everyone assumes I haven't talked for countless hours about the plans and havent spent every waking moment making sure she is taken care of....bad assumption and straying from the topic...
Help myself instead of my grandmother? She has 24 hours care from the best nurses in the area. I have done EVERYTHING for her. I pay all of her bills, do her taxes, clean her house, GIVE HER BATHS, drive her to dialysis, you name it - I do it... If you do the figures it's a no brainer. In the long run this could benefit her regardless because I'll be paying any bills she can't in order to keep the farm in the trust as she has wished....If her finances were depleted I could understand, but they aren't.
A free home? Where are you getting this? I am paying back HER loan!!! She is gifting me the money but still owes on the home equity loan. I would be making the payments for her What do I need with a 170k home? That's an ignorant question at best - u have no idea where I live, the housing market, or the investment opportunities. I am only taking out the equity loan so I can have enough to pay off high interest loans, some house add-ons, furnishings, and leaving an emergency account incase either of us needed it. You have no idea what I've been through in order to preserve her assets. The farm would be long gone by now and she's be in a worthless retirement home if it weren't for my planning. Not to mention, I have not and will not take a dime from her........How is this hard to comprehend?
Lauren, honestly you're an idiot....it's not a free home. I have paid for 100% of my expenses, school, cars, college, grad school all by myself....Don't tell me to "pay like the rest of you." It's a financial edge that poses no real risk to her. Bottom line, she offered it - You act like a 170k house is a lot? Regardless, I'm successful to this point in my life and have always remained loyal - I don't see how gifting the amount of the loan and repaying to her is not taking good care of her finances - she is financially solid at the moment...insurance pays $60k/month for dialysism etc....She has a monthly annuity/ss....she has stocks for some reserves....And she has me to step in at any time. Oh and as for poa being revoked, my father and his brother do not even call her - thanks for the criticism but why dont you still to the topic instead of running these schemes through your head. You know nothing that either me or her have been through and I'd do anything for her ....
April 30th 2009 Posted to
QanA 
