Life long lease

[siddobson]

What is the name of your state (only U.S. law)? Mississippi
My wife and I want to build a cottage on a lot adjoining my son’s home site. He owns both lots but they are used as collateral for his mortgage. He is married. We would pay for a well and septic system for the second lot in addition to the cost of the cottage. The lot has been approved for the build by the code office. We want lifetime use of the cottage and lot without any constraints. Upon death of both my wife and myself everything will become property of my son and his wife. What will be necessary to protect our investment should something go awry such as divorce of son and his wife or failure to satisfy his mortgage etc.?

 

[tranquility]

The property already secures a debt. Any other security on the property will be junior to the one with the mortgage. So, you cannot guarantee the property.

If you lease the property, with the cost of the improvements as the rent, they must report the value in the year received. They would only be able to depreciate the improvements over time.

The only way I see is to loan them the money and take a promissory note signed by each of them. They would need to pay you back over time and the interest would be income to you. If you didn't get interest, it would be imputed. However, you could balance the terms of the lease with the interest amount and no money would need to change hands. You would get some income but you could work it so it wouldn't be much. You can then set up the note so that it cancels on your death so the principal never really will get to be fully paid.

See an attorney or CPA who will review your goals and the numbers and will help you formulate a plan to do this.

 

[Zigner]

He (by the terms of his mortgage) cannot allow his property to become encumbered without the permission of the lender.

 

[tranquility]

He (by the terms of his mortgage) cannot allow his property to become encumbered without the permission of the lender.

Of course he can. But, the encumberence is junior to the mortgage.

I don't need the permission of my mortgage holder if I want to get an equity loan. But, if the equity line goes bad, the mortgage holder will be paid first from any foreclosure.