Home Purchase For Two Families

[I.Smoak]

Jurisdiction

Colorado

Hello, I'm not sure where to begin so I will briefly describe our idea and then provide a list of questions that are concerning us: My wife and I and two children (one baby and one 6y/o with shared custody from previous relationship) are hoping to purchase my parents home. Here's the catch... We are first-time buyers with up-and-coming credit and very little in assets. My parents are in their 60's though my mother is disabled with MS and will soon be leaving her current employment. While my father has Type I diabetes, he is still able to work - though he makes very little and they are barely squeaking by. As my wife and I are looking at the mutual benefits of: taking care of my parents, their assistance with care of the children, providing our children with a proper yard and neighborhood, and reducing the monthly overhead for my parents.

Some notes: My wife is not currently working, nor do we plan on this in the near future. We are currently covered (though not necessarily by choice) by Medicaid due to my income (~$55k/yr) and family size. My mother is working up to the point that she can receive the maximum SSD benefit. They are covered through my father's insurance at work - were it not for that insurance, they would be paying nearly $10,000/mo on medications alone! They are currently paying off some remaining IRS debt from years of back-taxes on their own business (which technically is still open, though it is not a significant source of income). Their small home is rapidly unable to accommodate my mother's deteriorating mobility and currently has JUST enough room to house my family as well. The property value is around $340k in the current market and they owe approximately $72k in principal. I will be discussing the selling price with them based on anticipated improvements, leaving them a large sum for them to live on and enough equity to install additional rooms and renovate the main level for easy access in a wheelchair. I will be having a contractor look at the home to estimate the cost of these improvements.

I am ABSOLUTELY keeping our finances separate from my parent's. I will be covering the mortgage and our usual bills and they will mind their's as well (phones, insurance, etc.) I am considering splitting the cost of utilities - probably with them paying through me.

Looming concerns:
-Will we be able to remain on medicaid? I am unlikely to be able to afford private insurance in addition to our regular bills and consumables - we are extremely careful and quite thrifty; not spending much (<10% on expendable items)
-Is it possible that my parent's debt could come to haunt me in regards to the property or other assets?
-Assuming that total household income will be around $75k/yr and a total occupancy of 6, what will happen with my taxes? Will I incur more? Are there exemptions or other credits for assisting care of my disabled mother, or down the road father as well?

I know I have more questions... I just need someone to talk to who, hopefully, can even offer more advise than I am looking for!

 

[army judge]

-Will we be able to remain on medicaid?

That decision will be made my Medicaid. Usually people in your position don't qualify for Medicaid assistance, but you do, so who knows?

Here is the Medicaid site in your state. I'm sure you'll find many answers embedded on the site:
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Health First Colorado (Colorado's Medicaid Program) | Colorado Department of Health Care Policy and Financing
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I am unlikely to be able to afford private insurance in addition to our regular bills and consumables - we are extremely careful and quite thrifty; not spending much (<10% on expendable items)
-Is it possible that my parent's debt could come to haunt me in regards to the property or other assets?

Adults, even adult children are NOT legally responsible for the debts of other adult, including their parents.

You might wish to suggest to your parents they investigate chapter 7 bankruptcy with one of the BK attorneys in your county.

-Assuming that total household income will be around $75k/yr and a total occupancy of 6, what will happen with my taxes? Will I incur more? Are there exemptions or other credits for assisting care of my disabled mother, or down the road father as well?

Tax advice and guidance should be sought by consulting a CPA or a tax attorney.

You can also educate yourself about federal and state income taxes, local property taxes, various tax breaks, and other tax matters by scouring the internet.

Each person's tax situation is unique.

You might wish to hold off from investigating home ownership until your income and financial picture improve.

Owning a home encompasses and requires much more than paying a monthly mortgage obligation.

Given the financial picture you paint, owning a home for you anytime over the next five (maybe ten) years isn't a financially sound decision, even if you get approved for the loan.

You might be better served by discussing a family TRUST with yoru parents, and contributing to the monthly home expenses.

That IRS debt that hounds your parents can POSSIBLY be cured by them declaring bankruptcy, which is why they should discuss it with a couple local bankruptcy attorneys.

I wish you and your loved ones all the best as you investigate your options.

I commend you for THINKING before jumping.