Pay Dirt is Slate’s money advice column. Have a question? Send it to Athena and Elizabeth here. (It’s anonymous!)
Dear Pay Dirt,
My husband and I have been struggling to find a house to buy. Despite having a down payment saved, we still pay rent, and the market is insane where we live. My in-laws have several homes and decided to turn their vacation home into their retirement one. After their last renter moved, they offered their old suburban house to my husband and myself for free. It is very generous—unpromptedly so!—but I hate the idea. It was built in the mid-1990s and never updated. It is huge, designed in echo-y open concept style, with half the space barely useable for everyday life. Other than the downstairs master’s, the utility room, and the upstairs bedrooms and baths, there are no doors. You can overhear a normal conversation in any part of the house. The back and front yard are huge (did I mention my husband and I have black thumbs?) The commute would be horrible enough, with the house over an hour away from where we work, but given traffic and the never-ending road construction, that time can almost triple. And the local culture here is barren—no theater, no art, no nightlife unless you want to go to a chain restaurant.
There is no question that my in-laws will be insulted and offended if we reject moving into the house and chose to sell it and use the funds to buy something better for our lifestyle. They will call us ungrateful. My husband thinks we need to take the offer and wait a year or two before selling it. I don’t know—the market can’t stay like this forever, and I do not want to get dragged into a house flip. The commute will kill my mental health. Right now I can walk to work. My husband bikes when he isn’t working from home. There is some sentimentality at play, since my husband spent his last year of high school in this house, and his sister grew up in it. And my in-laws are thin-skinned and very proud. Is this the golden goose or a white elephant?
Dear House Hunters,
I wouldn’t say it’s a golden goose or a white elephant, I’d say it’s more of a “hold your horses” situation. Here’s why. You want to offload the house while the real estate market is hot, and for good reason. It sounds like you’ll be miserable there. No one wants to be miserable, nor should they be made to feel so. Life’s too short! But I am hearing a lot of reasons why you shouldn’t be living there, not why your husband shouldn’t be living there. It actually sounds like he’d be okay staying there, and stacking some cash. Depending on how much you’re currently paying in rent, you could easily save over five figures. This cash can be put towards the down payment that you currently have saved, but that isn’t enough to get you a competitive offer in your desired area. It could also go towards repairs, to make the house more comfortable, so you could use it as a rental and secure cash flow for your future mortgage payment in the house you actually want.
Also, if you sell the house before living in it for two years, you’re at risk of paying up to 20% of your profit to the IRS. A capital gains tax is a levy on a profit of an investment after it’s sold. One of the items on the list of investments subject to a capital gains tax is real estate. Not to mention, you’d probably make your husband’s life a living hell with his parents if you take the money and run. Who wants that?
You can handle a shitty commute and no museums for a year or two. Offer your husband a compromise, and put a time limit on living in your new digs. Stack the money for over two years. Make enough upgrades to the home that you can charge market value if you sell it—or get a renter, and a cash flow to subsidize your life in your dream house.
Dear Pay Dirt,
Before my father died, he advised me that I and my brother “Dan” would be named co-executors of his will, and co-trustees of a trust established for another sibling who has debilitating medical conditions. At the time of my father’s death, I had my own medical problems that made it impossible for me to deal with the confusion and stress of acting as co-executor, and I informed Dan that I was declining to act as such. He went ahead and administered the estate, and my siblings and I received equal shares. That was several years ago. And, due to my continuing medical issues, I frankly never gave the trust another thought.
Recently, curious about the terms of the trust, I called the attorney who handled my father’s will to request a copy. I know the terms of the trust are in the will. I was stunned when he told me that the will had never been probated! I suspect that Dan simply divided the estate into equal shares for all siblings because that was his (good faith) understanding of my father’s wishes, and was “fair.” Dan’s an honest guy. I don’t for a moment suspect anything malicious. But I wouldn’t be surprised if the will made some provisions for grandchildren, or who knows what else? It appears no one has looked at it.
I haven’t breathed a word of this to anyone, including Dan. My question is: Should I? If I told Dan he’d gone about this in entirely the wrong way, it would cause him a lot of angst, including fear about personal liability. And what’s to be done now? After all this time, I suspect the funds are entirely spent by all siblings. I believe that when it comes time to distribute the trust, Dan will approach it the same “fair” way—equal shares to remaining siblings.
—Let Sleeping Dogs Lie?
Dear Sleeping Dogs,
I’m sorry to hear you had medical problems, but I’m glad you are now feeling better. In regards to stepping down as a co-executor, you did the right thing. Everything feels worse when you are sick, including grief.
As for the distribution of the estate, I’d let it go. Your brother did the best he could, while he was grieving too. You say that everyone got their “fair” share and was taken care of while he divided the assets, including you. So yes, he may have missed the will being probated, but it wasn’t intentional and nothing bad happened as a result.
You worry that the grandkids may have been left out, which is valid, but at the same time, their parents got some cash so they could have passed on their grandpa’s legacy if they had wanted to. You also share that there probably isn’t any cash left anyway, so what would you do? Drag all of your siblings to court? Let it go, and silently thank your brother for handling your father’s affairs in a fair way, while giving you the space to heal. Namaste.
Dear Pay Dirt,
My brother has historically been a bit of a spendthrift with his money, while I’ve prioritized stability. Our childhood wasn’t great, and though I tried my best not to enable him when he was single, his girlfriend (who is disabled and unable to work) had a baby a few years ago, and I helped pay for diapers and care when times were tight.
In January, my husband got the coronavirus, with serious complications, and now has long-haul COVID. As a family with three kids, we’re suddenly a single-income household, with substantial medical bills, and underwent some serious belt-tightening to try to stabilize things for the foreseeable future.
I put down my foot with my brother and his family, indicating that I can’t afford to help them anymore, even though I know they need it. My brother seemed to take this in stride: He wasn’t happy, but he was gracious, and we’ve maintained our relationship. His girlfriend, who I suspect does the bulk of making the household function, won’t stop calling and texting me with pleas for new school shoes, or milk, or help with the electric bill. I could probably manage $20 here and there, so I feel enormously guilty every time I turn down a request, but I (selfishly) want to prioritize my own family.
How do I untangle this problem, especially because I know the true culprit is my brother’s financial habits, not his girlfriend’s behavior?
—Can’t Share in Kansas
Dear Can’t Share,
Well… it may be his financial habits that keep them broke, but his girlfriend is the one begging you for money, not him. You’ve already told him you can’t help financially anymore because you have your own household to provide for, and he accepted it, so she needs to as well.
When she reaches out to ask for assistance, start pointing her to community resources. 211 is a community resource hotline that is currently available in all 50 states and can be accessed by dialing that number on any phone. 211 is state-specific to where you are calling from and covers a variety of resources to help with a variety of needs. She can be pointed to food banks, as well as non-profits that provide utility assistance and help with basic needs such as clothing.
Next, every time she reaches out to you, feel free to reach out to your brother. All you need to say is “Hey, your GF called me to ask for help with X. I reminded her about 211, hope everything is okay.” The calls will eventually stop, and you can rest knowing you did the best you could.
Dear Pay Dirt,
What’s the correct amount of money to have in my savings? I know the general rule of thumb is three to six months’ worth of income, but I’m currently working part-time and temporary jobs that typically come with an end date and no immediate job placement. Additionally, these jobs come with varying hourly rates of pay. I want to contribute to my IRA, but how much is enough in savings before I make larger contributions to the retirement account?
—Want to Retire Someday
Dear Want to Retire,
The correct amount of money to have in your savings is whatever amount you feel comfortable with. Just because something is a general rule of thumb doesn’t mean it can be universally applied to everyone’s situation. It sounds like your current work situation leaves a lot to be desired, including a consistent paycheck and predictability. If you end up losing a job, then getting another, it might be harder for you to replenish your savings account before you take the next hit.
You seem happy with your current employment setup, so I won’t tell you to focus on getting a full-time gig. So yes, do save at least six months of living expenses. For every $100 you save, as you go along, put $80 into that emergency fund, and then $20 to an IRA. You could also look into a roboadvisor app like Acorns. With those, you don’t need a ton of cash to get started, and you’re making investments when you can. This way you are putting something towards retirement while saving to offset your lack of job security. Good luck.
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