How should I handle my parents' house after they pass? Considering trusts

Seeking Advice
1

I’m in Texas, discussing future plans for my elderly parents’ house valued at $240k with a remaining mortgage of $103k at 3.75% interest, financed through a VA loan until 2045. My parents propose that I buy the house for the remaining loan balance and continue the payments while they live there. We’re exploring placing the house in a trust, but I’m overwhelmed by the options like living trusts and revocable trusts. I want flexibility to sell anytime, access equity for emergencies, and avoid probate and transfer taxes. Any advice on trust options or other arrangements that might suit these needs?

2

You might be able to assume the VA loan. Any compensation to your parents can be arranged as you all wish. It’s crucial to discuss estate and trust issues with an attorney who specializes in these areas to find the best solution for your situation.

3

@Blakeley
Thanks for the info on VA loans, that’s really helpful.

4

You should definitely consult with an estate or trust attorney to fully understand your options and ensure everything is set up correctly.

5

Most VA loans are assumable. Contact their mortgage company to discuss the process.

6

Finn said:
Most VA loans are assumable. Contact their mortgage company to discuss the process.

That’s great to know, thank you!

7

Ollie said:

Finn said:
Most VA loans are assumable. Contact their mortgage company to discuss the process.

That’s great to know, thank you!

Just be aware, the entitlement remains tied up, which could affect them if they plan to purchase another house.

8

Consider the tax implications, like the lack of a stepped-up basis if they sell you the house for below market value now versus transferring it upon their death.

9

Chen said:
Consider the tax implications, like the lack of a stepped-up basis if they sell you the house for below market value now versus transferring it upon their death.

I need to understand these tax terms better, thanks for pointing that out.

10

@Ollie
Definitely look up ‘stepped up basis’ to see how it could impact your tax situation.

11

Putting the house in a trust can be beneficial. It allows for a step-up basis and avoids probate. I recommend consulting a trust lawyer to explore this and get all your questions answered.