The Moneyist: My stepmother got nothing when my father died, per their prenup. She asked me to buy her a home. What should I do?

‘What would be some ways I could help her financially or otherwise without giving her a house?’ Read More...

Dear Quentin,

My dad recently passed away. My stepmother and he signed a prenup where she gets nothing. Because she has nothing, she has asked me, the only child, for some financial assistance. She asked for me to purchase a house for her to live comfortably.

I would like to help her because I know my dad would want me to, and I wouldn’t want her to have nothing. What would be some ways I could help her financially or otherwise without giving her a house? Thanks for your time and consideration.

Stepson

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Dear Stepson,

As prenups go, this one seemed unnecessarily unforgiving.

For that reason, I’m glad your stepmother feels like she can come to you, and that you are in a position to help her and willing to do so. Your father could have given her a life estate in the home they shared together for the remainder of her days after, say, 5 or 10 years of marriage. That way, she would get to live there and pay for the upkeep and property tax, and you would inherit it after she dies, assuming she predeceased you. You could do that now, or buy a home and have her rent it from you at below the market rate, assuming she could not afford the full rent.

I asked Dave Totah, CFP, senior wealth adviser at Exencial Wealth Advisors, for some other suggestions. He says it’s worth looking into tax advantages to buying a home for her. On the life-estate option, he says, “The property may also be subject to your stepmother’s current or future creditors. There could be tax implications if the property is sold prior to your mother’s passing, and possible issues if your stepmother is applying for Medicaid. You would still have to determine who pays the expenses on the property, such as taxes, insurance, maintenance, repairs, etc.”

But you can also help your stepmother help herself. “If your stepmother has very little or no assets she may qualify for subsidized or Section 8 housing assistance from the Federal or State government,” Totah adds. “The U.S. Department of Housing and Urban Development runs this program on a national level and many states have programs as well. There are income limitations to qualify, and not all properties or locations are eligible for these programs.” He also suggests giving your stepmother an allowance, which may or may not be palatable to you both.

“ ‘Prenups can be a way to set future goals and establish a financial plan that includes both spouses.’ ”

Younger couples are using prenups to deal with new financial and social challenges — including rising student debt, social-media use, embryo ownership and who takes care of the pets. But Cynthia Loh, vice president of digital advice and innovation at Charles Schwab, says they can be a way to set future goals and establish a financial plan that includes both spouses: “Instead of seeing it as a way to simply protect your assets in the unfortunate event of a divorce, consider treating it as a tool to build a long-term financial plan with your partner before entering into marriage.”

Please do circle back with us about what you decide. Of course, your response will depend on how much your stepmother will need to live on every month, her age and health, and how much savings and other assets she has. Your father’s prenuptial agreement is also a cautionary tale on how such contracts can, perhaps, go too far and be too punitive. Marriage is a commitment, after all, but it is also a contract between two people to share their lives and their finances. There is a risk, sure, but there is also a reward in making such a commitment. And that shared journey can make it worth it.

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