‘It’s a sensitive topic’: My husband’s parents live in our basement. They paid us 20% in advance. Should we charge them to renovate?
Last year, my husband and I went to see my in-laws to see if they wanted to live with us. We were told that my father-in-law had terminal cancer but could still live 5 to 7 years in remission, and we felt that when the time came and my father-in-law passed away, my mother would easier to adjust. in-law, as she is quite dependent on him.
They agreed to the deal, and we each sold our homes for a profit; My husband’s parents owned their house outright. We agreed that my in-laws would pay 20% of the money we needed to buy the new house and we would make monthly mortgage payments. This 20% deposit is my husband’s inheritance.
“‘Who will be responsible for major upgrades or renovations to the house? For example, the central air conditioner will soon need to be replaced.’“
We bought a three-story house and turned the basement into a suite in the house, which took up more than 20% of the total living space in the house. But we’re not sure who is responsible for the ongoing costs of running this home, and that’s causing friction. My parents-in-law pay property taxes, and we pay monthly utility bills and home insurance. They don’t pay rent. Is this fair?
Who will be responsible for major upgrades or renovations to the home? For example, the central air conditioner will soon need to be replaced. Who should pay for this? Should my husband and I, as hosts? Should we ask his parents to pay 20% of the total cost? What about improvements like railings that need to be installed to help keep them safe?
It is a sensitive topic. My husband and I approach money very differently from that of my parents-in-law. What do you suggest?
financial disappointment
Dear Financially Disappointed,
If you start from a position of shared responsibility and accountability, it will be easier for you to find a solution that works for everyone.
Let’s start with what you all have in common. There is no one to blame, and everyone to blame. No one is at fault, and everyone is at fault. You get into a cohabitation situation without a clear understanding of what you’re getting into or how you’re going to split the costs.
Let’s say property taxes go up to $25,000 a year. That’s a fair amount for your in-laws to pay in lieu of rent. Asking them to pay for central air conditioning or other renovations, provided you own the home, seems like a sharp practice. No one likes surprise bills. This should have been agreed upon before they moved in.
There is also the issue of goodwill. You and your husband were able to buy a bigger house thanks to the 20% down payment your in-laws offered. Your home, even in a property market that appears to be cooling after prices skyrocketed during the first two years of the pandemic, will continue to increase in value.
Extra help from your in-laws with property taxes, which is negligible in many parts of the United States, has also helped you to upgrade. Now is not the time to bribe your in-laws by asking them for 20% of this and 20% of that. It’s time to stick to the agreement, so that all of you can co-exist peacefully and happily.
“There is also the issue of goodwill. You and your husband were able to buy a bigger house thanks to the 20% down payment your in-laws offered. “
Some tax related news: Your parents-in-law, and any other individuals with the means to do so, can each donate up to $12.93 million (after tax exemptions increase in 2012. 2023) to their family members through gifts made during their lifetime or through claims without incurring any federal estate or gift tax penalties.
As a couple, they can give away $25.84 million without tax. Next year, the annual gift tax exclusion will also increase to $17,000 from $16,000. These exemptions significant increase with the Trump Tax Cuts and Jobs Act. Good news for wealth transfers between wealthy family members.
To your original question: Asking your in-laws to contribute 20% of the cost of air conditioning sounds mathematically reasonable, given that their living space takes up 20% of the space. of the house — but their 20% deposit would consider such a request.
Uncertainty leads to anxiety, and that leads to resentment. Set clear expectations so they — you and your husband — don’t have to live in uncertainty about who paid what, or doubt about who should pay what. Your parents-in-law are paying for guests in your house, but they’re guests anyway.
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