“Should I pay off the reverse mortgage and risk losing the money if she ends up spending years in a home?”
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My husband and I married 10 years ago. It was a second marriage for both of us. I recently found out that after five years of marriage, he put all of our assets into trusts controlled by him alone. At that time, at his request, I also gave up a job that I loved passionately so we could establish a stable home for his youngest daughter. He also has three other children who had already launched.
Instead of having a high-level job with bonuses and accolades, I ran one of his companies with no pay. I also drove his daughter’s carpool, allowed his adult son and his son’s children to move in with us, and ran our home in a smooth and efficient manner. I acted as a good steward of his assets so he could maximize his retirement and investments. I also added substantial assets to our portfolio with my “hobby” of real-estate investing.
I’m a team player and thought that upon retirement we would live the life we dreamed about during the early days of our marriage — I expected he would retire at 65 and we would travel the world. Our portfolio is worth 10 times what it was when we married. His retirement account and several IRAs were opened after we were married.
Irrevocable trust for his children
He put everything, even our home and my investment properties, into a trust, with his friend as trustee. I had been the beneficiary of his retirement account, but now the trust is. I believe this change of beneficiary was forged. He invested in a company that stands to make a lot of money, and that investment was put into an irrevocable trust for his children only. His children have quit their jobs to create startups with funding from their dad. At 69, he feels he can’t retire because he’s helping his kids.
I told him that if I outlived him, I would give everything I inherited from him to his children, and my assets would go to my family. When confronted about the trusts, he said he assumed I’d be OK with that because of my promise to give his assets to his kids. I’m not even a 50% beneficiary. I’m terrified his kids will boot me out of my home or declare me incompetent when I’m a little old lady just trying to sit on the beach. I don’t even have kids of my own to look out for me.
He can’t understand why I’m upset. Now I’m nearing retirement age with no extra investments in my retirement account, no credit for the work I’ve done and no say in my assets. I don’t even have a work history for the past 10 years and can’t get a job. Is this even legal? If I bring an attorney in, it will ruin the marriage. I can’t even contest the will because it states if anyone contests the will, they will have nothing.
With most things, I’m smart. But gosh, I’ve been so stupid. What are my options?
Second-Class Wife
“Transparency is key to marital estate planning.”
MarketWatch illustration
Dear Ex-Wife,
Secret trusts and a possible forgery do not constitute a healthy marriage.
There’s nothing stopping a spouse from setting up a trust during a marriage, but they should do so with separate assets. To set up a trust with separate assets without telling your spouse is bad manners, but to create a trust with both separate and marital assets, in secret, is a recipe for a legal battle and divorce court. Marital assets are those that are accumulated during the marriage.
Sometimes in life, you have to make a choice: You can stand back and allow your husband to squirrel away marital property and thereby “save” your marriage on paper — even though he has broken your faith in him and in the marriage. Or you can call a lawyer and perhaps a forensic accountant to examine the contents of the trust and trace their origins, and thereby risk your marriage.
“While there are legitimate reasons for a spouse to set up a trust during marriage, sometimes it is done in order to improperly shield assets from equitable distribution,” according to Jewell Law PLLC in New York. “Often, the non-beneficiary spouse is not aware of the trust or thinks the money came from another source such as a family member.”
Transparency is key to marital estate planning. “A trust set up in one spouse’s name can be considered separate property regardless of whether it is set up before or after marriage,” the law firm adds. “However, when it is created during a marriage, the non-beneficiary spouse must raise the question of whether any marital assets have been put into the trust.”
“This is a situation in which a prenuptial agreement could have been helpful to confirm — and protect — the rights of each spouse in the event of divorce or death,” says Neil V. Carbone, a partner at Farrell Fritz, P.C. ”State law governs a spouse’s inheritance rights. Most states provide a surviving spouse with a minimum ‘elective’ share, that is, the right to take a share of a deceased spouse’s property regardless of what a will or revocable lifetime trust agreement provides.”
“The idea of the elective share is to avoid the complete disinheritance of a surviving spouse, so ‘no contest’ clauses are ineffective to defeat the demand for an elective share,” he adds. “What goes into the elective share ‘pot’ will vary from state to state. For example, in New York, life insurance is not included in determining the elective share. Some people may seek to defeat a spouse’s elective share rights by transferring property to an irrevocable trust, but they generally must survive a look-back period in order for the transferred property to be excluded.”
Potential forgery
Some retirement plans require a spouse to be the primary beneficiary. If your husband changed the beneficiary on a qualified retirement plan without your consent this should be challenged. Other retirement plans, such as IRAs, do not carry the same spousal-consent requirements. You can read more about what plans are covered under the Retirement Equity Act here.
Many people are surprised to learn that 401(k)s and IRAs are treated differently,” Carbone says. The former are governed by the Employee Retirement Income Security Act of 1974 and, typically, a spouse must consent in writing to have someone else named as beneficiary, he adds. “IRAs are not governed by ERISA and the spouse’s consent is not required to designate a non-spouse as a beneficiary.” If your husband did forge your consent on a 401(k) beneficiary designation form, you should act ASAP.
While you process that information, I have other questions for you to mull over: What are you hanging onto? The illusion of a happy marriage? The promise of financial security, even though that seems increasingly unlikely? The damage to your marriage has already been done by your husband. By hiring a lawyer after so many years of acquiescing to his requests, you would be merely cleaning up the fallout from his actions.
One final piece of advice: If you are considering divorce, you would be better off waiting until your 10th wedding anniversary. After that date, you will be able to receive spousal Social Security benefits. If he earned more than you during your marriage, you are entitled to a maximum of 50% of your husband’s full retirement benefit.
You’ve given up a lot for your husband. Yes, you did it willingly, but you contributed your time and financial expertise to your husband’s businesses, and any right-thinking divorce court would not be likely to look kindly on your husband’s actions. Not all stepmothers abide by their promise to distribute assets to their late spouse’s children, but this is not an excuse for his actions.
In addition to forgery and financial skullduggery, you can add gaslighting to the list of his misdeeds.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
The Moneyist regrets he cannot reply to questions individually.
Previous columns by Quentin Fottrell:
I have $1.5 million in stocks and bonds. I asked my broker to convert my bonds to cash. He didn’t and my portfolio fell by $100,000. Can I sue?
‘She was very special to me’: My late 98-year-old cousin was targeted by grifters. They stole $800,000. Do I have any recourse?
‘It was a mistake’: My father set up a revocable trust, leaving everything to my stepmother. She’s cutting me out completely. What can I do?
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.
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I am a 56-year-old man living in my family home with my father, 93, who has Type 2 diabetes and a pacemaker and is legally blind. My mom passed away five years ago. He is in good health otherwise, and well taken care of. Because of his blindness, he needs round-the-clock care. My girlfriend of 10 years lives with me, and she helps. We are his caregivers.
I also have a sister, whom I just set up with an apartment for which people wait years to even get on the waitlist. I was able to get her in based on my connections with the management. She is a spendthrift and has not worked for years, and while living with my father prior to my taking over, she spent thousands of dollars of his money.
Last April, my sister racked up $20,000 on our father’s credit cards, and tried to take upwards of $13,000 from his bank account. She wrote two checks — one for $8,000 and one for $5,000. Luckily, the bank did not cash the check for $8,000. What we want is for him to quitclaim his home to me to help my sister and me. My father will live here until he passes.
Upon his quitclaiming the house to me, I would own it outright and get an immediate home-equity loan. I plan to purchase a lump-sum annuity for $200,000 with a 20-year time period, which would give my sister approximately $1,400 a month in addition to her Social Security Disability Insurance. We would then split the balance of my father’s estate — $100,000 each.
Here are my questions regarding my father’s house: What is the best way to go about this? I own my own business, and I can’t get a home-equity loan until I take over my father’s house. I’m looking for some expert advice on how to get this done. Thank you in advance for any help and/or advice you can provide.
The Son
Related: I want my son to inherit my $1.2 million house. Should I leave it to my second husband in my will? He promised to pass it on.
“Choosing to do your own version of a reverse mortgage by leveraging the equity in your father’s house to provide income for you and your sister today seems opportunistic and foolhardy at best.”
MarketWatch illustration
Dear Son,
This is a terrible idea. It’s a terrible idea for you, for your sister and for your father.
Say your father quitclaims this home to you now, while he is still alive, and you sell the home. You will have to pay long-term capital-gains tax on the property, if or when you sell it, on the price he paid for the home rather than on the value of the home when you inherit it. This is called a “step-up in basis,” and you will lose that tax advantage by quitclaiming now.
If your father quitclaimed his house to you and it was worth $1 million upon his death, an appreciation of 100% on the purchase price, you would be required to pay capital-gains tax on the original purchase price ($500,000) to the Internal Revenue Service, if you sold the property. With a step-up in basis, you’d pay capital-gains tax only on appreciation above $1 million.
Furthermore, you are proposing taking out a home-equity loan on a property in order to purchase a $200,000 lump-sum annuity over 20 years. With interest rates hovering at over 6%, you are facing at least $1,200 a month in repayments. You’re putting yourself into debt to buy this annuity, effectively robbing Peter to pay Paul.
Research has shown that people don’t always act prudently when they take out a lump-sum annuity. Some analysts refer to this as the “lottery effect.” According to this survey by MetLife, one in five retirement-plan participants who selected a lump sum from either a defined-benefit or defined-contribution plan say they depleted it, and ran through their money in 5.5 years on average.
The price of your father’s care
Another problem: Your sister has proven herself to be untrustworthy, by your telling — someone who will fritter away money given to her and ask for more. Or, assuming what you say is true, she might just take what she wants, regardless of the consequences. Why are you going through these financial gymnastics? Is it for her? Or for yourself?
The other issue casting a shadow over your desire to plunder your father’s house for money even while he still lives there: your business. Carefully examine your motivations for making such an extraordinary move while your father is still alive. What if you fall on hard times and the bank forecloses on the house? Where will your father live then?
Children usually inherit their parents’ property after their last parent has passed away; choosing to do your own version of a reverse mortgage by leveraging the equity in your father’s house to provide income for you and your sister today seems opportunistic and foolhardy at best. Let your father live the remaining years of his life in peace.
Your father has been fortunate to have you and your girlfriend taking care of him these past few years, given his multiple health issues, but what is the price of this care? What if you can no longer take care of him and he needs to be admitted to a long-term-care facility, or he requires professional medical assistance?
His house is his one source of income and stability. Please don’t take that away from him.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.
The Moneyist regrets he cannot reply to questions individually.
Previous columns by Quentin Fottrell:
My parents want to pay off my $200,000 mortgage, and move into my rental. They say I’ll owe my sister $100,000. Is this fair?
‘I hate the 9-to-5 grind’: I want more time with my newborn son. Should I give up my job and dip into my six-figure trust fund?
Dear Quentin,
Per our parents’ will, my brother and I will split their inheritance 50/50. This includes the family house. I would like to keep the house in the family for my children, as I bought my current home nearby to be able to care for my parents as they aged.
I understand the best time to sell a home is soon after inheriting it, to avoid capital-gains tax. The issue is that my brother is single and currently living in the house, and he may not want to sell his portion right away. I would be happy to let him live in the house that we jointly own.
I worry that he may decide to sell his half and I’ll have to take a financial hit, or that he’ll get married and live in the home with his family, which may complicate matters. How do I ensure my interests in the home are protected while making sure I do right by my brother?
Thank you so much.
Complicated Matters
“If due to financial or familial reasons you did flip a coin, agree that the end result is the right result, whether either of you likes it or not: Heads you win. Tails you win.”
MarketWatch illustration
Dear Complicated,
Your last question is both a good one and rhetorical. Your interests are already protected: You are entitled to 50% of this home, not 100%, as you rightly suggest. Inheriting a property with a single sibling who does not have children does not automatically entitle the sibling with children to full ownership, and/or obligate that sibling to sell their share to you. Real-estate inheritances can cause discord among siblings. Not everyone understands this, as you apparently do.
You can do right by your brother by asking him what he wants, too. This appears to be the only home he has known, and one could argue that he has an equal — or even 50.1% — right to buy you out, given that you live elsewhere with your family. If he wishes to continue living there, it would be generous and compassionate of you to allow him to do so. Many siblings would insist on cashing out and filing a quitclaim to turf their sibling out of the family home.
You’re correct in that the house will be passed down to you through a “step-up in basis” valued at the current value, not the purchase price, which reduces your capital gains tax if/when you sell. If the house was sold for $1 million, even though it was originally purchased for $500,000, you and your brother would have to pay capital gains tax on $500,000, if you decided to sell, you would pay long-term capital gains on the appreciation post-inheritance.
Rite-of-passage scenario
There is, however, no definitive right or wrong path on your familial dilemma, except that you both navigate the process with transparency and respect. If he has lived in the house his entire life, and gets married and has kids, it seems reasonable to maintain the status quo — that is, he continues to live there — but with one proviso: He buys you out. You could ask him to do that anyway, but if he can’t afford to, he is relying on your generosity.
In the grand scheme of things, this is a normal rite-of-passage sibling scenario. I have received letters from people whose siblings “borrow” hundreds of thousands of dollars from their parents with no intention of ever repaying them; siblings who hid their father’s will; and parents who were possibly coerced into putting their son’s name on the family home, much to the surprise and consternation of the other family members. The list goes on.
What now? Scenario No. 1: He lives there as a single man, and you don’t ask him to buy you out. That’s pretty decent of you, all things considered — though you are entitled to change your mind, buy him out or ask him to downsize. Scenario No. 2: He starts a family and lives there, and you ask him to buy you out. If he does not have the money, you either sell or you buy him out. That’s fair. Scenario No. 3: You both have families, and the money to buy each other out. You flip a coin.
Oftentimes, leaving our egos and fears and wants aside is the better option. Trying to make a case why we deserve something more than the next person — a bad case of the old “do-re-mi-me-me-me-me” — can lead to more resentment and one-upmanship. It’s not likely to end well. If due to financial or familial reasons you did flip a coin, agree that the end result is the right result, whether either of you likes it or not: Heads you win. Tails you win.
This house should never be more important than your relationship.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.
The Moneyist regrets he cannot reply to questions individually.
Previous columns by Quentin Fottrell:
My parents want to pay off my $200,000 mortgage, and move into my rental. They say I’ll owe my sister $100,000. Is this fair?
‘I hate the 9-to-5 grind’: I want more time with my newborn son. Should I give up my job and dip into my six-figure trust fund?
Somewhere in the local landfill is a section for my belongings. I would like to keep it modest and don’t want it marked with a plaque stating, “Here lies a lifetime of accumulated stuff that once belonged to Linda Nanos.” I admit having accumulated too much, and as I work on getting out from under it, I want to do it in the way that is most friendly to the environment.
My dresser drawers and closet were jammed with unused clothing. I have a favorite donation bin tended by a reputable charitable organization. I called to ask if they accept undergarments and was told that they accept those that are wearable, otherwise, I should find a drop off for textile recycling. The term was new to me, so I began to educate myself about it.
Textiles are trouble
My husband and I conscientiously sort our recyclable plastics, glass and paper and leave it out for weekly pick up, but my town doesn’t recycle textiles. The buildup of fabrics in the landfills is rising at a shocking rate, and the worst part is that many materials do not break down.
As I suspected, my bestie, Spandex, is a culprit that breaks down into beads of microplastic, but I was surprised to learn that one of the worst offenders is plain old cotton (unless grown organically). The toxins that mass agribusiness uses to grow cotton linger in the environment.
I sorted the clothes I chose to give away into two piles: wearable garments to donate and worn-out apparel to recycle. I found a list of textile donation sites on a website run by my state government. In my area, it seems I was supposed to toss everything into a single bin and let charity workers sort it into usable and disposable.
Related: How to net top dollar selling your stuff online while you declutter
What would Mother say?
When I prepared the donation, I had to confront my mother’s indoctrination about wearing decent underwear in case I ever was in an accident. Apparently, I was as mortified for the bin sorters to see old underwear with stretched out, brittle elastic as I would an EMT at the scene of an accident. I labeled it for recycling to be clear that I wasn’t offering it for someone to wear. I wasn’t pleased with the number of bags lying unattended outside the drop-off bin.
I found a better option at a Farmers’ Market in Manhattan, where my son lives. The city is further along in dealing with mountains of textile waste. I brought a bag of textile recycling when I visited my son, and he salvaged a vintage T-shirt before disposing of the rest.
Separately, I found a home for worn and torn towels at a pet shelter. I was told dogs and cats particularly welcome fleece blankets. An old quilt with matching dust ruffle went to a thrift shop, because I no longer wanted something that proclaims its purpose is to hold dust, but it might suit someone else.
Moving on from textiles, my next clutter-busting task was excavating piles of paper from my home office. Once again, the stacks of unfiled papers were out of control.
Recycling dos and don’ts
I don’t consider myself a hoarder and blame my inordinate amount of clutter on a busy lifestyle. I went from caring for children to tending to aging parents always while managing a career. Household management was low on my list.
Once I made clutter-busting a priority, my initial round of paper shredding produced seven grocery bags of paper. They went out on my curb with the weekly recycling.
After the sanitation pick up, my bags of shredded paper were still there. I called the town sanitation department and learned it had switched to a single stream system that sorts recyclables, and shredded paper jams the equipment. I was forced to put most of it in the garbage cans as trash, but some went into a compost bin we maintain for gardening because the paper is biodegradable.
I developed a new method of disposing of any paper that contains identifying information. Depending on how much sensitive information is involved, I either use a marker to obscure the information or cut off and shred only the name, address, and account number. The remaining sheets can go into the regular recycling.
Plus: 4 ways clutter costs you — like renting self-storage units for thousands of dollars a year
Controlling catalog clutter
Stopping the glut at its source is another tactic. I switch to paperless reports when they are offered. Every day I receive address labels, greeting cards, and calendars from nonprofits to which I’ve donated and catalogs from companies I’ve patronized.
The most ironic gifts, meant to encourage a donation, come from conservation groups, which should not be glutting landfills with junk mail solicitations. I’ve contacted organizations and companies that send catalogs or solicitations and asked them to remove me from their mailing lists.
Also see: How to declutter your finances
What to do with e-waste
A pile of electronics in my home office required my attention. My old laptop presented the problem of safeguarding sensitive information. I called my tech support person to remove the hard drive, and then made a trip to the dump, which has set aside an area for disposing of computers, televisions, and other electronics.
If there is no dedicated electronic drop off in your area, many companies that sell electronics now offer recycling, and even encourage it because they can salvage the valuable precious metals they contain. Best Buy
BBY,
for example, says it has recycled 2.7 billion pounds of electronics and appliances since 2009 and is committed to protecting the environment from its own electronic products. They will accept three products per day from a customer.
For all the belongings we already possess, donating clothing and household goods to thrift stores and other charitable organizations keeps our stuff from landing in landfills — or at least postpones their arrival.
Next challenge: buy less stuff
It’s easiest to put unwanted possessions in the trash when you no longer need them, but finding a more responsible disposal solution is worth the time you dedicate to it.
We can address the vast world of yet-to-be purchased items by eliminating impulse buying. I pledge to shop online or in a store with intention to replace, update or meet a new need, and not to buy an item tantalizingly placed near the checkout or on my computer screen based on my most recent search.
Read: Want companies to lower their prices? Stop buying stuff from them.
I’ll leave the shiny objects for the crows, and hope my legacy won ‘t be having the largest pile in the landfill.
Linda Goor Nanos is a practicing attorney, author, wife, mother and grandmother. Her writing credits include a memoir “Forty Years of PMS,” professional articles and published essays on life lessons.
This article is reprinted by permission from NextAvenue.org, ©2023 Twin Cities Public Television, Inc. All rights reserved.
More from Next Avenue:
My mother’s will states that her home is to be sold and the money divided — with half going to her two children and the other half to her late husband’s nieces. Mom now feels the nieces don’t deserve the money because they never helped or even visited her husband, their uncle.
But she has yet to change her will to reflect those feelings. After a stroke, she moved in with me and sold her house, with the money from the sale going into her savings to pay for her care. My brother and I are on both her bank accounts.
Upon her death, can the nieces demand half of the proceeds from the house sale? What if she’s used the money for her own care? Would we be responsible for covering that amount? Your answer will help me convince mom that it’s time to get the will to reflect her wishes.
Daughter
“Generally, legitimate ‘interested parties’ have the right to challenge a will. They could be relatives and, yes, people who are mentioned in the will.”
MarketWatch illustration
Dear Daughter,
Your mother effectively made her decision when she sold the house and used the proceeds for her care. Her late husband’s nieces are not direct heirs and, if she died without leaving a will, her entire estate would go to her next of kin — her two children, you and your sibling.
However, legitimate “interested parties” have the right to challenge a will. They could be relatives and, yes, people who are mentioned in the will. In an ideal world, executors should keep beneficiaries informed of changes to the will in question. In this case, of course, your mother is very much alive.
Neil V. Carbone, a partner at Farrell Fritz, P.C., quotes a simple adage to sum up your predicament: “As the saying goes, ‘You can’t give what you don’t have,’” he says. Your mother said she would leave her home to four people, but she sold that home during her lifetime.
“The question here is whether the legal doctrine of ‘ademption’ applies,” he says. “In general, when a decedent includes a specific bequest of property under his or her will but no longer owns that property at the time of death, the bequest ‘adeems’ or lapses.”
“In effect, the decedent revoked the gift by disposing of the property during his or her lifetime. Here, because mom sold the house herself, according to the facts presented, the direction in her will to sell it and divide the sale proceeds is rendered ineffective and the bequest adeems.”
But there are exceptions to the doctrine of ademption in New York, he says. “One exception applies when property is sold by the guardian or conservator of an incapacitated person. In that case, the beneficiary would be entitled to receive the traceable proceeds of sale.”
As more people use a durable power of attorney to avoid the expenses related to guardianship, Carbone adds, more cases of wills being challenged in court have arisen seeking to extend this exemption to agents acting under such a power of attorney.
In other words, her husband’s nieces could claim that your mother was not competent at the time of the house sale and that they should therefore receive what they believe is their fair share of the proceeds. That could be a time-consuming and expensive process.
It’s smart to update a will as circumstances and feelings change. While your mother can’t leave what she no longer owns, there could be a loose end or two that might motivate these nieces to take action. Where there’s a will, there’s a relative. You mother should change the will, and keep things simple.
More from Quentin Fottrell:
My mother’s late husband came with baggage — ‘his deadbeat son.’ Is she on the hook for his debts? Can she evict him from her home?
On the day my stepfather died of brain cancer, he changed his trust and left everything to my sister. Do I have any recourse?
My husband and I are in our 70s. We married 3 years ago. He’s leaving his $1.8 million home to a 10-year-old relative. Is that normal?
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter. The Moneyist regrets he cannot reply to questions individually.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write to me with all sorts of dilemmas. Post your questions, or weigh in on the latest Moneyist columns.
By emailing your questions to the Moneyist or posting your dilemmas on the Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.
By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
I’m in escrow on a house I am buying, but I just had inspections done, and they found a dead German cockroach, as well as droppings and egg casings.
The pest control inspector seems to think it’s no issue, and says there is no obvious evidence of active infestation. But he did not check everywhere, and was there primarily for termites. He also said that we will be fine after tenting the house and doing a quarterly spray.
The owner moved out in October, and the house has been empty, but there were some food scraps behind the fridge.
Then the pest guy found one rat dropping in a closet, but says it likely came from the attic where other inspectors were checking yesterday.
I’m so freaked out and I’m about to cancel this deal. This feels like I’m signing myself up for a horrific situation, but maybe I’m wrong and he’s right to say it’s no big deal? What do you think? I have no idea how common this is.
Grossed Out
‘The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.
Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Aarthi Swaminathan at TheBigMove@marketwatch.com.
Dear Grossed Out,
I share your sentiments — cockroaches are gross, and it surely must feel like a bad omen when you are this close to buying your home.
Roaches are not only unsightly, they’re also dangerous. Since they can carry bacteria, they can spread diseases such as E. coli, salmonella, and so on, according to Pestworld.org. If you have kids, they’re also at greater risk of asthmatic illnesses from a cockroach allergy.
Depending on the severity, the bugs and rats could be a solvable problem — or not. It’s not unusual to see pests now and then, but it’s definitely an issue if they had multiplied over the course of time the home was lying empty.
Raise the bug issue with the home seller
So before you bail on the house, inform the seller’s attorney of the problem, and identify the source and the scale of the infestation and seek help from pest control.
The seller may provide important information. Does the house have a history of pests? How did the previous owner address the problem?
Consider hiring a second pest inspector and go through every nook and cranny of the house with them once again, this time with a notebook and pen, and write down every location where you believe these rodents and roaches enter. Make sure they do a thorough job and keep a log of pest sightings.
If the expert says that the problem is widespread and/or you see evidence of a severe infestation, raise it with the seller and your agent, and negotiate to see if there is anything that can be done in terms of compensation to address the problem. Could they lower the asking price to reflect how much it would cost you to fix the bug issue? Or could the seller fix the problem before you move ahead?
Now, for some bad news. Thai Hung Nguyen, a real-estate agent with Better Homes and Gardens Real Estate Premier, told MarketWatch that based on what he’s seen with home inspectors and pest exterminators, rodent infestation can sometimes be untreatable.
“They are animals that live outside of your home and get attracted to your home by two main elements: source of food and source of heat,” Thai said. “In the spring and the fall, this is when they are very active looking for food and heat. Make sure to eliminate these two sources that attract them and exterminate those that already got inside your home.”
Getting your money back if you back out
If you want to back out of the deal, whether you get your escrow money back will depend on if you had waived your inspection contingency. That means if your home has significant problems, you can back out of the deal without penalty within a certain period of time.
If you did not waive the home inspection, see if you have crossed the deadline for your inspection to be complete, and if you are within that date, talk to the seller about backing out.
If, on the other hand, you had opted to forgo the inspection contingency, you likely won’t be able to back out of the purchase contract and get your money back, according to legal-information publisher Nolo.
Weighing your options in a competitive market
At the same time, backing out of the deal and going through the entire house-hunting process to find a bug-free or a rodent-free home will be time consuming, and expensive.
With mortgage rates falling, you’re likely going to face more competition if you’re back on the market looking for homes. Recall the pandemic buying frenzy when people were waiving home inspections to win offers? You might be facing some competition if you go back to the drawing board.
Ultimately, if it’s a good deal, Thai said, “I would spend some time, effort, and money to treat this issue prior to moving in. Remember to take care of this issue prior to moving in so you will enjoy it. The longer you delay the treatment, the worse it will get.”
And “for those who didn’t have this issue yet,” he added, “when you move into a house, newly built or not, make sure you check around your house to ensure your house is well sealed and blocked off so you won’t have any issues in the future.”
If you do wish to do it yourself, find the best chemical that will get rid of the infestation. Some recommend sprinkling boric acid in corners and floors, but this may not be an option if you have kids or pets who may accidentally come into contact with the chemical. Seal any cracks and crevices that they may be climbing through. Fix any leaks as well. And set traps, bait, and so on, to catch any rodents or roaches.
Ultimately, the wisest course of action is hire a pest control expert, and take your cue from them.
This week’s dilemma came from Reddit. By emailing your questions, you agree to having them published anonymously on MarketWatch. By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
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Falling mortgage rates can lead to a surge in homebuyer demand, which pushes prices up.
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But an uptick in housing inventory could blunt the impact of a demand spike, economists said.
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In addition, mortgage rates have limited downside this time around.
The housing market is beginning to ease up, with mortgage rates slipping and prices softening. That’s good news for homebuyers who had been waiting on the sidelines.
But they may be tempted to see how much further conditions improve as mortgage rates are already falling at the fastest pace since the 2008 crash.
There’s a big catch to that idea though: as rates drop, more buyers may jump in, potentially sending home prices up. Due to that risk, real estate expert Barbara Corcoran has warned against waiting for a better deal.
We don’t have to look too far back to see what happened the last time interest rates fell. In 2020, when the Fed began easing to keep the economy chugging along during the pandemic, mortgage rates plummeted below 3%, and home prices rocketed higher.
That situation, however, is fundamentally from what’s coming up in 2024, said Lawrence Yun, chief economist at the National Association of Realtors.
“I don’t anticipate that type of situation this time,” he told Business Insider. “First, we’re not going to get to 3% mortgage rates. And the second is that I think we’re going to certainly see more inventory come out to the market.”
Indeed, many housing experts think mortgage rates won’t drop that much further, slipping to 6% next year from just below 7% now after hitting 8% in October.
And if more homes come on the market, a demand spike won’t force prices higher. Next year may see housing supply thaw after this year’s crunch kept the market largely frozen.
There are some signs that more homes are coming on the market — November’s housing starts data signaled fresh supply on its way.
Meanwhile, demand may not actually spike right away. Hannah Jones, senior economics research analyst at Realtor.com, said fewer people are in the market right now because buyers are waiting out the fall in mortgage rates.
While she expects rates to go a little bit lower next year, “a buyer may be facing less competition because less buyers have decided to re-enter the market.”
However, Redfin chief economist Chen Zhao cautioned that it’s hard to anticipate where mortgage rates or home prices will go.
In previous instances when mortgage rates have been coming down, it’s because the Fed was cutting rates into a recession, she pointed out.
“And that’s a really important distinction because right now going into 2024, the Fed anticipates cutting, markets anticipate the Fed cutting, but no one is anticipating the Fed cutting into a recession,” she said in an interview.
Read the original article on Business Insider
Dear Quentin,
My wife and I have been married for over 30 years. Throughout the years, we relied mainly on my income. My wife worked occasionally, but mainly raised the children. We started to struggle financially when I was laid off. We went through all of my 401(k) investments.
I lost my home through a short sale because of the difficulty of keeping up with the expenses. I asked my wife to help by getting a job, but that did not happen. Now we are finally at a comfortable place, renting a home, and my wife is finally working.
My question: Do I have the legal right to an equal share of her $200,000 inheritance when she gets it, given I used all of my retirement funds to get us through those hard years?
Divorcing in Ohio
Related: My husband added my mother-in-law to the deed of our house 20 years ago. Now we’re getting divorced, and she wants one-third. Can I fight this?
“It’s a tough break that after 30 years of marriage and several years of homeownership, you are bidding adieu to the former and had to let go of the latter.”
MarketWatch illustration
Dear Divorcing,
You have experienced a lot of financial loss, and you are about to go through what I hope is the last of it. It’s a tough break that after 30 years of marriage and several years of homeownership, you are bidding adieu to the former and had to let go of the latter. Given how difficult it is to get on the property ladder, you would have been better off living in a studio rental with your wife and renting out your house rather than letting it go. But we all do the best we can with the resources we have at the time, and you have finally reached a place of stability.
The short and long answer to your question: Ohio is an equitable-distribution state, meaning that marital assets are divided fairly, if not equally. Inheritance is regarded as separate property in Ohio, unless it is in some way used to benefit the marital assets — that is, commingled. For instance, if it were used to renovate your home or it was deposited in a joint bank account, it would cease to be separate property in a process called transmutation. This can easily happen: One letter writer used $142,000 from a $246,000 inheritance to pay off her mortgage.
For anyone else out there with an inheritance and a divorce pending: “Do not use inheritance money for regular spending, then replenish the account balance,” according to Manning & Clair Attorneys At Law, a law firm in Willoughby, Ohio. “This can be problematic for a separate-property claim. That is because inheritance money must be ‘traceable’ [or identifiable] to prove to a court that it is separate property. … You must be able to prove the inheritance, or asset purchased with the inheritance, maintained its separate nature from the rest of the marital assets.”
The final and, perhaps, bitter irony of your own situation is that you would, in all likelihood, have had to give up 50% of your property if you still owned it at the time of your divorce, assuming it was purchased during your marriage. Unless you had a prenuptial agreement before you got married, you may have to factor in alimony payments given that you have typically been the breadwinner in the relationship, in addition to other legal costs. The sooner you get divorced, the sooner you can start rebuilding your wealth, and saving once more for retirement.
Obviously, withdrawing money from your 401(k) comes with penalties and should always be seen as a last resort. But you’re not the only one who has had their hand forced in such a way: 37% of workers have taken a loan, early withdrawal or hardship withdrawal from their 401(k) or similar retirement plan, according to a report released earlier this year by the nonprofit Transamerica Center for Retirement Studies in collaboration with Transamerica Institute. Among those workers, 21% took an early and/or hardship withdrawal.
Good luck with the next chapter.
More from Quentin Fottrell:
My father has dementia and ‘forgave’ my brother’s $200,000 house loan. The nursing-home notary said he was of sound mind. What can we do?
My husband bought our house with an inheritance. I signed a quitclaim. He said I could live there after he dies, but changed his mind. What now?
Low-paying jobs are the economy’s way of saying you should get a better job’: I’ve decided to stop tipping, except at restaurants. Am I wrong?
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter. The Moneyist regrets he cannot reply to questions individually.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write to me with all sorts of dilemmas. Post your questions, or weigh in on the latest Moneyist columns.
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A large construction site next to a home for sale can sometimes hurt property values.
But that’s not the case for a waterfront property owned by former “Real Housewives of Miami” star Lea Black in Miami Beach, Fla. The place is listed for $37.5 million.
“Basically next door, you have a home that’s being built that is going to be about $100 million,” says listing agent Saddy Abaunza Delgado, with ONE Sotheby’s International Realty. “I love the fact there is going to be a $100 million home next to us, which is just going to add a lot of value.”
Aerial view of the Star Island property, with construction next door.
LuxHunters for ONE Sotheby’s International Realty
Star Island
LuxHunters for ONE Sotheby’s International Realty
Black’s home sits on a 1.07-acre lot on desirable Star Island.
“The profile of a buyer on Star is somebody special,” Delgado says. “Whoever wants Star—wants to be on Star, and there’s no option other than Star.”
It’s the only home currently for sale on the exclusive island, and it’s bounced on and off for the market over the past few years. The price has fluctuated from $26.9 million in 2021 to $28.9 million in 2022 to the current ask.
Delgado says a comparable lot with less water frontage recently sold for $33 million, and another sale in the area was $67 million—data that was used to help price this property.
“What is happening on Star Island is crazy,” Delgado says. “It’s probably the most unique location in all of Miami.”
Aerial view
LuxHunters for ONE Sotheby’s International Realty
Lea and her husband, Roy Black, bought the house in 2011 and have used it as an investment rental property.
“Not only do we have comparables to justify the price, but there is no inventory,” Delgado says. Black is “very motivated to sell now. She’s very firm on her price, and she knows the market. We are right on the ball, with the price with the recent sales and all of the craziness that is happening on Star Island.”
The interior
LuxHunters for ONE Sotheby’s International Realty
The interior
LuxHunters for ONE Sotheby’s International Realty.
The exterior
LuxHunters for ONE Sotheby’s International Realty
The question is, will someone come in and buy the property just for the land value, or will they want the house on top of it?
“Most people are looking at it for the property, so that’s why we have it as land value and as a residential property for sale,” Delgado explains, estimating that roughly half of potential buyers likely would keep the structure. “It’s got really high ceilings, but it needs a gut job. We priced it as a land value deal. The house would be gravy at this point.”
The 8,500-square-foot, Mediterranean-style home was built in 1981 and has seven bedrooms and eight bathrooms. A guesthouse offers two bedrooms and a bathroom.
“If somebody didn’t want to start from scratch, and from an architectural point of view, this house has great bones,” Delgado says. “But if you’re paying that kind of money, most people would want to probably either completely gut it or tear it down.”
Outdoor space
LuxHunters for ONE Sotheby’s International Realty
The pool is newer, and the lot offers 180-feet of water frontage.
“The lot is a pie shape; and it opens up where it needs to, which is the waterfront, which is where the value is,” Delgado says. “That’s very special to this property.”
A 60-foot, deep-water dock can hold most any type of boat. And because there are no bridges, ocean access is a breeze for watercraft.
Residents of the island are a who’s who of wealth. Hedge fund manager Kenneth Griffin, rapper Rick Ross, singer Gloria Estefan, and many others have homes on the island. Lisa Hochstein, another “Real Housewives of Miami” cast member, was living on the island, but Page Six and other media reports indicate she moved out a few months ago.
Also see: Kendrick Lamar scoops up $8.6 million Brooklyn penthouse
“It’s a very billionaire-style home area,” Delgado says. “This is the address to have in Miami. A lot of people are coming to Miami. We just need one buyer.”
A version of this story was published on Realtor.com, a real estate and rentals site. In addition to homes for sale, you can find rentals like Scottsdale apartments, Austin apartments, Tampa apartments and more.