Dear Moneyist,
My only daughter was asked by her father to co-sign a mortgage of $300,000 for 30 years on his home so he has enough to live on. The house is worth over $2 million, but it’s in a state of disrepair. It still carries a $66,000 mortgage. Her father remarried a few years back and has other debts of unknown amounts.
He is 68 years old and has received Social Security and has health issues. He told my daughter that he has a living trust set up to leave the house to her. This is too big a loan amount for anyone to co-sign even though my daughter is making a six-figure income. She’s not married yet and would like to buy her own home soon.
How much responsibility does a child have to a parent who has spending problem? Regardless of when the living trust was created, how can my daughter be sure that the living trust won’t get modified during his second marriage? My daughter’s stepmom is relying on him.
A reverse mortgage is one option that came to mind, but my daughter probably won’t get the house in the end as California is a community property state. I have a feeling her father may come back to his daughter with other urgent medical or debt requirements later on. What advice can you provide to situation like this?
A Concerned Mother
Dear Moneyist,
My only daughter was asked by her father to co-sign a mortgage of $300,000 for 30 years on his home so he has enough to live on. The house is worth over $2 million, but it’s in a state of disrepair. It still carries a $66,000 mortgage. Her father remarried a few years back and has other debts of unknown amounts.
He is 68 years old and has received Social Security and has health issues. He told my daughter that he has a living trust set up to leave the house to her. This is too big a loan amount for anyone to co-sign even though my daughter is making a six-figure income. She’s not married yet and would like to buy her own home soon.
How much responsibility does a child have to a parent who has spending problem? Regardless of when the living trust was created, how can my daughter be sure that the living trust won’t get modified during his second marriage? My daughter’s stepmom is relying on him.
A reverse mortgage is one option that came to mind, but my daughter probably won’t get the house in the end as California is a community property state. I have a feeling her father may come back to his daughter with other urgent medical or debt requirements later on. What advice can you provide to situation like this?
A Concerned Mother
Dear Concerned,
Let’s start with the obvious: $300,000 is a big mortgage to co-sign on, even on a six-figure salary, and especially at the request of a 68-year-old man. Throw in a new wife and the emotional ties of this father-daughter relationship, the tricky family history that can force good people to do bad things and smart people to do dumb things, some good old-fashioned guilt about never being able to do enough and, perhaps, other debts incurred by your daughter’s father, you’ve got a recipe for disaster.
It’s a big ask. There’s no question about that. But family will always make those big asks. Sometimes it’s too much. And sometimes, it’s not. But there’s also a big potential asset here too. Your daughter should not enter into such an arrangement lightly, but nor — I would gently suggest — should she dismiss it out of hand. If she considers it, she should (of course) do her due diligence and make sure every aspect of this agreement is in writing, including her name on the title deed with her father or solo and/or put the house in an irrevocable trust in her name.
I understand that the initial reaction to a request like this would be to say, “No.” Or, “No, thank you.” Or as I like to say to soften the blow, “Alas, no.” But it really all depends on the closeness of the relationship of this father-daughter, your daughter’s financial health and the terms of the deal or, to put it more politely, written agreement. So let me answer your question with several more questions: Would your daughter be expected to pay the entire monthly mortgage repayment? Plus, a portion of the property taxes and other maintenance costs?
Would she, and she alone, be placed on the deeds of the house? Would his second wife be given the right to live there for the rest of her life, should her father predecease is wife? Would your daughter agree to that? What if, heaven forbid, your daughter pre-deceased her father? Would your daughter’s share of this house — whether it was 50% or 100% — go to you? If the house is worth $2 million, and it’s valued at such a price, this could be both an opportunity for your daughter to do a good deed and strike a good deal.
What do we owe our parents? Do we owe them anything? There is no one answer that fits all. It varies from family to family. Some lawmakers disagree. Some two dozen U.S. states have filial responsibility or “piety” laws, which can be traced back to colonial times. They were designed to prevent aging parents from drawing on public resources and, instead, impose a duty on adult children to support their impoverished parents.
California is among them, although they are rarely enforced. They have been used to some effect by nursing homes. Some legal experts say they’ve rightly taken some children to task, while others say nursing homes have aggressively pursued adult children. Pennsylvania did use filial responsibility to force an adult child to pay his mother’s bill. In 2012, a Pennsylvania court ruled that John Pittas must pay his mother’s $93,000 nursing home bill after she moved to Greece.
There has been renewed interest in these laws and some lawyers have argued they should be expanded, arguing that adult children should not be allowed to turn their backs on their parents. “Texas should join the other 28 states that already have a filial responsibility statute,” according to this opinion piece by Katherine Pearson, a professor of law at Penn State. “With the number of indigent elderly quickly rising, long-term care costs are likely affecting many families.”
Writing in the Estate Planning & Community Property Law Journal, she said, “Placing the duty of support on able family members first is a centuries-old obligation that has managed to survive into the present day despite opposition,” the article says. “While filial responsibility may seem harsh, it is simply making families care for each other.” That said, it seems like your daughter’s father has plenty of other options, given that he’s living in a $2 million home.
A child’s financial responsibility does not extend to taking out a $300,000 loan on a parent’s behalf. If the terms are not to her liking, or if helping her father maintain this property is too onerous, or if she simply doesn’t want to, then she can say no. But he is her father, so let’s not demonize him for asking. She could advise him on downsizing to a smaller home. A reverse mortgage, like marriage, should not be entered into lightly, but they can make sense in some scenarios.
There are many ways to give help. Co-signing on a $300,00 mortgage is just one of them.
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