Creative Solution?
A friend of mine brought to my attention a man with a problem. This man is in the advanced stages of cancer. He is very deeply in debt but he owns his house free and clear(worth about $100k). He has no family and no friends so he doesnt care what happens to his stuff when he dies, he just doesnt want his creditors to be able to take his house and put him out on the street for his last days. Is there a way I can buy his house for next to nothing but allow him to live there for the rest of his life for free and not have it be a fraudulent transfer of assets? I would have to pay property taxes, insurance, electrical, and gas bills. Any ideas? Also, he is thinking of declaring bankruptcy. Would his house be protected or is there a way that our deal wouldnt be screwed up?
Ryan
The simple answer is yes. Of course nothing in life is simple. In this case, you're talking about a very complex deal in which you are taking a very big risk. What's stopping this person from living the remainder of his life in an irresponsible manner as regards the house? He may not fix things or inform you of problems that need fixing. People with terminal diseases who have no family support can often become very bitter. This bitterness can lead them to lash out in unexpected ways. Of course not everyone is like that, and I'm certainly not trying to talk you out of this deal. But I think you need to get together with a very competent lawyer to discuss every possible scenario you can think of, and try to prepare documents that protect your interests as much as possible. The upside in this deal can be fantastic both emotionally and financially, not you need to make sure that you're also protected from the downside. Good luck.
You could do a life estate where basically you own it but he live there until he dies. Or a reverse mortgage where he gets the cash now and you get the house when he dies.
Neither scenario will work well with paying him next to nothing. Also, him selling you the house for next to nothing can come back and bite one of you if his medical bills are high and those parties get edgy. It could be seen as asset hiding or something.
Maybe a land trust to both your benefits so neither one of you can sell it out from under the other and he gets to live there until he dies.
However, bear in mind cancer is curable and the old guy could outlive you - lol
If your seller files chap 7; all unsecured debts will be extinguished - if he files BK within 6 months of the sale, the judge can unwind the sale.
You need to tread very carefully wiht this deal - a gentleman's agreement that he won't BK right after sellling to you; would be a minimum.
But personally, i'd have a hard time letting someone live for free in one of my houses if they were intentionally not paying someone else,
Maybe you should buy it and L/O it back to him...
Just an idea,
Scott
What if he has to go into a nursing home before he dies? Wouldn't Medicare consider the sale of his home a fraudulent transaction? They'd want the proceeds of the sale of the house to pay for his care wouldn't they? Can anyone shed some light on the risk of this transaction to the buyer? :-o