‘My brother refuses to work and he owes me $50,000’ — I want him to pay me back, so should I help him purchase a home?
My brother refuses to work and will now inherit his late girlfriend’s estate with whom he resided for many years and for whom he is the only designated heir. He has not held down a job in years. He will receive a home and car, amounting to perhaps $500,000 in total value.
I have agreed to fund his short-term needs with a periodic transfers to his accounts, which he depends on for daily survival — rent, food, and so on. In addition, there is a balance owing for previous such arrangements, to the tune of $50,000.
Is there a legal mechanism whereby I can purchase a home for him and his new — much younger — wife, where they can live in peace and harmony, which provides legal tax benefits to me and my family? Should I purchase him a home? If so, how?
For various reasons that are sufficient to me, I do not wish to simply gift this money to him with no material benefit to myself and/or my family. I am willing to seek legal advice, but I thought it best to put some guidelines in place first.
You have a lot invested in him: $50,000 and, it seems, not a small amount of love.
He must have a good deal of charm to inherit $500,000 and lean on his brother for financial support. You don’t say why he doesn’t work. It may be not in his nature to hold down a nine-to-five job — perhaps he was destined to be a man of leisure — or perhaps he has had other personal issues.
Lady Luck has shone upon him thrice: a generous benefactor, a new wife and a trusting brother. Most siblings would see this half-a-million bucks as an opportunity for him to stand on his own two feet. He is in no position to get a mortgage and you can afford to help him, but I still urge caution.
No one — least of all his new wife — wants him to burn through his small fortune to the point where he ends up back where he started. And one could argue that it’s an opportunity for you to make an investment, assuming you believe this is a good time to buy. (Others might disagree with that.)
You may feel like you’re in for a $50,000 so you’re in for a pound, but be careful about indulging your brother and enabling him. You sound like a caring man, but this also has many of the hallmarks of a co-dependent relationship. He is responsible for paying his debt. You are not responsible for him.
This has many of the hallmarks of a co-dependent relationship. Your brother is responsible for paying his debt. You are not responsible for him.
I would not offer him a home without some conditions attached. If ever a gift were destined to come with strings, this is the time. Could he go to college and/or learn a trade? What investments could he make with, say, $100,000 of his inheritance? I’m not talking about betting it on the horses.
It’s a good time to find work. A 10-year-long bull market, rising corporate profits and economic growth, despite predictions of a recession, have led to a stronger labor market: The Dow Jones Industrial Average
is up 22.7% this year; the S&P 500
is up 29.2%.
You could put a house in a qualified personal residence trust that would go to your children, but where your brother can live with his new bride — as long as he sticks to whatever agreement you hash out (paying his $50,000 debt to you should be No. 1 on that list).
Alternatively, you could buy the home outright and allow him to live there and pay a nominal amount in rent on the condition that he manage the home, pay the property taxes and take care of the property. You could make him a tenant for life and leave the home to your children.
In 2020, his New Year’s resolution should be to become self-sufficient and to get acquainted with the Real World. If you give him too much, too soon, and with too few strings, you will come face to face with the Ghost of Christmas Past. You may regret helping him.
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