‘I shouldn’t be punished’: My sister can’t afford to buy me out of our mother’s $450,000 house. She has no home. What should I do?

Dear Quentin,

My father passed away several years ago. My parent’s home has long been paid for and my mother probably has roughly $120,000 in liquid assets (bank accounts, CDs and a retirement account). My sister and I are the only children, and our names are on the deed as second life tenants. Ownership would pass to my sister and I upon my mother’s death. 

I’m 54 and my sister is 51. My concern is that my sister and her husband are both financially unsavvy and even irresponsible in all aspects. They have no savings, no retirement, and are living on borrowed time in their current situation. They live for the moment with no planning for the future. My wife and I are not well off, but in a much better financial position.  

My income is twice what theirs is combined. My mother’s home is worth roughly $450,000. My concern is what to do when my mother passes, which I hope will be decades from now. There is no way my sister and her husband would be able to afford to get a loan to buy me out of my half of the property. 

Greed versus success

One option would be to force the sale of the home, which would leave them with cash but no house, and make me look like a heel. My wife and I have a very nice home and are viewed by much of our family as being well off. Even if they were to get all of our mother’s liquid assets and they only had a $100,000 mortgage, I don’t know if they could swing it. 

I don’t want to be greedy, and I’m not saying it even has to be a 50/50 split, but I shouldn’t be punished for getting a fair or reasonable share of my inheritance because I have had a more successful career, made better decisions, and am in a better financial spot. It would be an uncomfortable topic to bring up, and again, I hope it’s not necessary for a very long time.

Keeping my name on the house forever might be more of a liability than an asset. My brother-in-law has been known to avoid homeowner’s insurance on their mobile home, which he almost lost to foreclosure, and calls insurance a “rip off.” If something were to happen and they were sued, or the house burned down, I would be at risk of loss as well.

What are my options?

The Responsible Brother

Related: If I say the sky is blue, she’ll tell me it’s green’: My daughter, 19, will inherit $800,000. How can she invest in her future?

“You can’t live your sister’s life for her, or go back and make different decisions on her behalf.”

MarketWatch illustration

Dear Responsible,

Splitting your inheritance 50/50 is the right thing to do. Anything else is icing on the cake.  However, if you and your sister are listed as life tenants, you both have the right to live at your mother’s house for the rest of your lives. Neither of you will be allowed to sell the property, so please check the exact status of your inheritance.

“The remainderman has a future interest in the property, meaning they have a guaranteed right to the property upon the death of the life tenant or the measuring life’s conclusion,” according to RK Law. “When the life tenant passes away or the measuring life ends, the property automatically transfers to the remainderman without the need for probate proceedings.”

You can’t live your sister’s life for her, or go back and make different decisions on her behalf — which include her choice of life partner — so you should take any additional pressure off yourself to fix her life. You can only do so much for people, and half of this inheritance could help change her life if she uses it wisely.

You’re not being punished. You are, in fact, likely going to inherit a significant amount of money, so you should put time aside to figure out how you should spend, save and invest it. You have a variety of options available to you: upgrading your home, downsizing your home, buying CDs assuming the rates are favorable, and topping up your retirement savings.

Financial advisers generally advise seeking out higher-quality dividend-growth stocks, playing it safe with a portion of your inheritance, and holding your money in cash for a rainy day. Consider diversifying into high-quality short-term bonds, and looking into gold and other commodities. A side note: Inheritance is deemed separate, not marital, property.

Life-changing sum of money

I’m mindful of this woman from Texas who was living on the poverty line and inherited $157,998.14. Yes, she counted down to the last cent. Good for her! She built her own off-grid tiny house for about $31,000, which includes the cost of a tiny-house DIY camp. She also spent $7,000 on a dentist she found in Mexico, which was both smart and savvy.

“I have a solar roof and two small wind turbines that generate all the power, and a rainwater harvesting/purification system with a water heater and a recirculating shower that ensures I never run out of clean or hot water,” she told me. “Much of the tiny house is made from repurposed materials I got off of Craigslist. Pretty much everything.”

When your mother dies — assuming she does NOT leave you a life tenancy and, instead, allows you to sell the house — you could offer to provide a financial adviser as a gift for your sister and her husband, to help them make smart decisions with this money rather than using it to buy stuff that will eventually depreciate over time.

But your instincts will guide you in relation to your sister and her husband. It’s generally not a good idea to go into business with a family member and, if you are both co-owners of a house, you will effectively be doing that. Maintenance, property taxes and other costs would, from what you say, fall to you. A clean break will be wise for everybody’s sanity.

You don’t say what age your mother is now, but hopefully she will have a healthy life, and her house will continue to appreciate in value. 

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Previous columns by Quentin Fottrell:

‘I grew up pretty poor’: I got an annual bonus. After I pay off my credit cards, I’ll have $10,000. What should I do with it?

‘I received an insurance-claim check for $22,000’: Why on earth does it take five days for my check to clear?

‘I want to protect my family’: My wealthy father, 49, is marrying his third wife. How do I broach the subject of my inheritance?

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