"Estate" Planning: 75 yr old father & his mortgage

Any chance of selling the house for a wash now and move him into either an assisted living or an apartment/condo or other arrangement for what he is spending on the house note. That way he is living in something that is not in disrepair?

It depends entirely upon your goals. Are you and your siblings willing and able to chip in to keep him in the house? If not, what will it cost to refurbish the house for sale?

This is what I would do - just being creative. Form a limited liability partnership (or LLC) with all the siblings and dad. Make everyone an equal owner, with dad having a lifetime use (however to do that in your jurisdiction) that is revocable by him and at death (of course).

He contributes the house itself - you and your siblings finance the needed improvements - he can't sell without his partners - y'all can't sell until he wants to or dies.

This is as close to a win-win as I can get for you.

Nobody asked the biggest question: preexisting health conditions? Could he be eligible for a new policy? Hif health precludes him getting a new policy, you might be able to sell the one he currently owns is his health is poor, tor a viatical settlement company

Is he paying the mortgage? House is just in his name?

Really depends on whether or not you want to keep the house. The other issue you may or might not deal with will be nursing home costs. Guess which asset they're going after first for repayment. If you really want to keep the house for your dad's lifetime and he is paying the mortgage, you should really look at some sort of vehicle for granting him a life estate and for taking it out of his reach for nursing home protection.

In Florida we have a lady bird deed that we recommend to a lot of clients. It grants a life estate with full ability to sell/mortgage the house, but it prevents the nursing homes from going after the asset as long as it is beyond the five year look back period.

He could possibly sell the policy. Is it convertible?

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Oil & gas royalties. Enough to keep his mortgage & other bills paid but not enough to save much.

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So his income is somewhere in the $2000-3000/ month range probably with sociall security and his Royalties?

Honestly, and I don't blame you, I think you are just over thinking it. If you don't want the house and just want to sell it for a profit, I wouldn't worry at this point. I'd just let your dad be happy and live his life. At this point I don't think it's worth worrying about an inheritance. I don't think there's enough equity to worry about your dad screwing something up by taking out another loan, I mean you are talking about somewhere around $20-50k each in inheritance right? I would just let him live, but again make sure there's enough savings to pay for his funeral, burial, and lawyers for closing out his estate.

I'd definitely make sure he has a will squared away to make all of that as easy time wise and financially as possible.

You said the house is his only debt, his income is royalties and social security, and he is able to make his payments when due but not a lot of money left over. I also assume he is on medicare.

Make sure, real sure, there is enough money to bury him and pay for final expenses, which include dealing with succession and all those royalties.

If you need some extra cash to make that happen, is lowering the face amount of the policy an option to reduce costs? Is the policy whole or term?

The house... I wouldn't put a cent into it now. If you want to fix it up when he passes to try to sell it for more... great. If not, sell it for what it can go for. If it's at a loss, negotiate it with the bank. Doesn't sound like there are a whole lot other assets the bank could go after the estate for.

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I don't know how this works, but could you not put the royalties into some kind of trust now while he is alive? So that no one had to deal with that later? He is the sole beneficiary of the trust until his death? Seems like if that's going to be a major issues, it would be much MUCH easier dealt with now.

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Yes, he could contribute them to an intervivos trust and make him the sole beneficiary. If done properly there would not even need to be a trust tax return done each year.

But... when he dies, then what? The trust would have beneficiaries, and now you have to deal with trust returns and trust accounting. If you want to eventually distribute out trust property to the kids, you have to terminate the trust, AND still deal with all the operators to transfer and split the royalties.

What could be done is he contributes the royalties to an LLC in exchange for 100 percent of the LLC interests, and update his will to leave his LLC interests to the kids. Now, when the kids step in after death, the LLC starts getting taxed as a partnership. Are the kids going to want to be in partnership with each other? Are the interests even worth enough to justify the additional compliance?

A third option is dad goes ahead and gifts the interests now to the kids, and the kids agree to send him all the money from the checks until he dies. But then the kids are taxed on the income, not dad.

A fourth option would be to gift the assets but keep the income stream, but that's pretty convuluted and complex and might not be worth it given the costs of setting it up.