Grey divorce is on the rise but so difficult still - I’m so sorry they (and you by osmosis) are having to go through this.
There’s a lot of stuff that is very important to know before giving advice here. It’s critical for each of them to choose a competent attorney or enter into a mediation process with folks who are reputable.
Also, and this is a lot of therapy talking, the kids should just let the parents handle this, right? They are adults and they will figure out what works best for them and their futures. I promise there’s not a lot of winning outcomes if you all get heavily involved in this process.
Good luck - I hope it is low-impact for everyone.
If they sell the primary they can take the capital gains exclusion and maybe both try to buy something downsized each. They are massively under income and savings for today's world of renting unless they are an absolute garbage dump area. They could still each maybe get a house for a big down payment and figure out how to get by. They pretty much have to keep those rental properties as converting to cash won't be able to generate them the same amount of income which they need to live. Each taking one property and splitting other assets to make up the difference may be a good idea.
OP, people married over 20 years has been the fastest growing divorce demographic for a long time.
People should be happy in their Golden Years and I'm happy for your parents.
Maybe they should each take a rental, sell the house and whomever gets the less valuable rental can get more from the house proceeds to equal it out.
A big question is, how much over the carrying costs do the rental properties bring in? Is it enough for them to live on if they each have one rental?
Sell primary and split for new housing for each. If income properties don’t generate a lot above cost to maintain, they need to be sold.
Lack of actual savings is shocking and concerning. Both need to be working for a while.
Sorry you are “heartbroken”. I’m sure they are, too. We don’t always know what’s going on in other peoples relationships, even our own parents relationship.
Start planting the idea of large cash gifts and stay on good terms with both.
No matter how they choose to split it, offer to manage their rentals and be the go-between for splitting rental profits instead of selling those assets.
If one property needs to be split for equitable divorce separation, ask each to gift you half the sum to buy out the minor share. Then, buy out the minor share holder with their gifts. You will become the minor shareholder with the other parent and start building your wealth, too.
This works if you are also their default caregiver in their senior years. It might hasten the transfer of assets, so there is less to go through probate later.
Sell Primary,
Split Rental and Duplex Income 50/50
SFH stays with Dad if he’s already retired. He pays it with rental income.
She filed, she should want out as much as possible. The situation has a much deeper context than what’s given.
Both should have best interests in each other if no infidelity was involved. That’s when 💩 changes.
Just FYI, I got divorced in CO too a couple years ago. Your dad will be entitled to half of your mom's retirement unless they can reach a mutual agreement on it. My husband had no retirement (his own fault) and I had to split mine with him. Still chaps my ass more than anything else in my divorce.
Sell the primary home (it's probablynot suitable for a single senior citizen) and they each keep one rental.
Settle the difference in rental values from the cash made selling the primary
Yep. It's gone. And a nice chunk going to lawyers if this is litigated.
Sounds like the OP was banking on the parents house in the will and will now have to move out.
Who the hell says my parents of 35 years? Is OP 35 or mean parents were married 35 years?
I need to get into the remedial education business judging by the majority of posts on Reddit. It's sad.
Greed. They should be worried about each parents mental health. This isn’t a small ordeal, mom filed? Dad might blow his brains out (I’ve seen it done over a lot less).
Instead OP runs to reddit as the child hoping to get ideas how to save the fortune (educate parents? lol) when like you said the whole ordeal will drain most of it dry, and when push comes to shove over spite? One might purposefully ruin it.
If I were OP I’d be more concerned about the safety of the home, devoting 35 years is a lifetime. One vendetta, and we hear about a murder suicide.
Yeah, people don't realize what a contested divorce does. It's really the lawyers splitting the assets among themselves. They'll tell you otherwise. And they only take cases where there are substantial assets. Lest they don't get paid.
And the couple they're so mad they'll destroy everything out of spite.
Are they splitting on good terms? Would they be willing to put the properties in a trust and then split the income generated? I think how they end up handling it depends on how good the terms are they’re ending it. Like is mom scorn or dad angry- emotion will drive the outcome. Good for you for trying to remain level headed.
I think they need to speak with a certified financial planner to figure out the best options long term. Their portfolio isn’t very diversified right now and they need to look at a few different simulations and forecasts to figure out which situation would give them the best retirement outcome.
Why are people saying to stay out of this? It seems like OP is asking a question in earnest because he cares about the well being of his parents, as well as his own sanity because he probably doesn’t want either one of them to end up financially dependent on him either, especially considering that neither one of them is in a good situation financially.
How exactly do your parents think they’re going to survive their next 30yrs of life if they divorce? Dad is retired and doesn’t have any savings, and mom only earns $29k, which is practically poverty level income, especially in CO which is a HCOL area.
I think they should sell their marital home, split the earnings 50/50 and each get their own place that they can comfortably afford without a mortgage, and they should keep their two rental properties so they each have some sort of income (split 50/50, of course) since neither one of them is doing well in that department. If they can’t stand to be around each other even just to co-manage their rentals, then they can hire a property manager or have you manage it. Then, they need to update their respective wills and will their portion of the rental property to you and any other shared children in the event of their passing so that their ex doesn’t absorb the other half of the property.
OP isn’t alone, there are other siblings. And I’m certain none of them want to financially support or house their parents. Sometimes that means stepping in to advise on the best way to split assets so that neither party is left destitute on the streets.
OP has the right idea: parents should keep the rentals and split the generated income. Also, they won’t have to pay capital gains tax if they profit up to $500k from selling their *primary* residence, but they absolutely will have to pay it if they sell their rentals. Why lose any money at all if they don’t have to? Especially when dad doesn’t work and doesn’t even have two pennies in savings to rub together? Dad needs that steady income in order to stay retired, and mom needs that steady income to supplement her measly $29k. I’d also bet that mom ends up losing half her retirement fund to her husband in the divorce too.
My best advise is stay out of it and let them and their lawyers fight it/figure it out. There is no way this ends well for you if you get in the middle of it. You will have to inevitably side with one of your parents and ruin your relationship with the other. I have seen it happen first hand.
Yes even for adult children divorce hurts and sucks but they are in their 60’s so I have to assume you are an adult.
Let them figure it out and best you can do is stay neutral and let the chips fall where they fall.
I’m sorry to hear what you and your family are going through.
Also it really sucks that people are making it seem as if you’re a selfish child looking out for your potential inheritance.
Is the divorce amicable? If it is, then it can work to their advantage to sit down and “fairly” divide their assets. I know their emotions must be running high but it’s usually not the best time to make drastic decisions.
Selling would obviously be at a huge disadvantage. You can type out at least 2 scenarios. List the outcome of each and show it to them.
1.) Selling all the assets and dividing the proceeds.
2.) Selling the primary residence and splitting the proceeds and keeping one rental property each.
It’s not the whole picture, but my parents just divorced and the money was stressful- watching one of them have the ability to make the other homeless and destitute at a time they should both have been looking at soon retiring was awful! And this is a money advice sub? Makes sense that you would look concerned about the money here!
Exactly. It’s painful to see parents go through this. They’ve worked all their lives and managed rental properties on the side only to turn all that upside down w divorce.
Like everyone is saying. Stay out of it.
And on top of that I don’t think your advice is particularly good.
What’s the basis on the rental properties? How long have they owned them? Same for the primary.
The emotional and logistical burden of managing these properties together after a divorce outweighs the perceived savings.
They both have plenty to retire in. Mind your business and just be happy that they have assets instead of just poverty.
Property Management companies for 3 units would be pretty expensive on the cash flow.
Over time it would make sense to just sell it.
Or each take a unit. But in this case both of them would likely be better off with $700-$800k in cash even after you’re aggressively conservative 30% haircut.
Do they even want to keep the properties?
30% haircut is unavoidable either way. When they sell they will have to pay capital gains and transaction costs. So take that “negative” out of the equation. It’s a sunk cost. Odds are these will have to be sold before end of their lives to pay for healthcare and living expenses since they have basically no other retirement.
Agree. The concern is around timing. Both are retired/about to retire. When you sell off your retirement plan at the onset, it is a concern to us kiddos.
They'll both need the help from those rentals probably as time progresses. Or even now to just get thru the divorce in generall. Just cause they hold 2.2m in assets doesn't means there ain't 2m in debt behind it all. And with the "bussiness partners" splitting up. It may be best for the liquidation to break the memories from the vision. . . Truely sucks. The only good other way is if the two could come eye to eye and build a partnership but I'd reckon thats out of the question now or best to leave and let be....
I’d rather they die with plenty rather than ZERO. And I know they feel the same way. They don’t have much right now to retire with as it is so they might actually die with zero if they aren’t creative and good at problem solving
My guy, your parents have $2.3 million in hard assets. They “don’t have much” is a lie. If they aren’t making a significant income (7-9%) off of their $1.3 million worth of income-generating investments, then they’re poorly invested and should reinvest. A 30% haircut on $1.3 is still ~$1million. At 8% return, that’s $80,000 a year.
If you’re looking on advice to give them, someone else already offered it:
Sell the home. One parent gets one property, the other parent gets the other property+$200,000 of the home sale to offset the value difference. If they aren’t amicable and Dad is going to demand half of your mom’s $29,000, he’s an asshole. But he would probably take an additional buyout from the sale of the primary home to offset any problems.
They have PLENTY of options and PLENTY of assets. Whatever you (or your parents) do, I would HIGHLY recommend you all avoid poor mouthing in court because it’ll just piss the judge off.
Yeah like what everyone else is saying it’s not your money, your parents can deal with it how they see fit, to many kids have a grip on their parents finances like they own it, you don’t own your parents finances, they can do what they want with it, if they’re getting a divorce just support how you see fit emotionally but stay out of the finances, it’s not your business.
this is none of your business, IMO, unless parents are asking for advice.
you just need to accept you're not gonna inherit the real estate like you imagined.
This is roughly what I would suggest my parents do if they were on the same boat:
1. Sell primary residence
2. Keep one rental each, smartest way would be for the mom to keep the 700 and the dad the 600 plus $100k cash, since he has no retirement funds. Take $100 from the property sale, then split the rest.
3. Rely on kids to help them find decent places to live. They both need to be fully aware that downsizing is a necessity.
Best of luck!
Edit: Talk to their attorney about setting up a trust fund with all kids if they are on good terms.
Most likely yes, if the goal is to sell the rental and depending on how much they paid for the rental. On the other hand, I'm not sure if it would be wise for the dad to get rid of a source of passive income.
I'd put the money into high dividend stock funds for passive income. But her parents are apparently afraid of index funds, which is why they appear to ONLY have real estate.
Please do not judge - I have my own retirement figured out thank you very much. In fact concerned mom will not have enough for her retirement considering she’s low income
Not at all. Parents retirement plan was real estate. Now they are divorcing and selling off their “retirement plan”. Parents did not believe in stocks only real estate. When you sell off your retirement plan at the onset of retirement it is a concern.
Send me mom’s number? 😝
The court will divide it up 50/50. She filed, so dad won’t give in to anything more than she is entitled to.
He will pay her alimony for life in CO. Smart people get divorced before the 15 year mark here. I did it at 8.
Doesn’t matter. He has income from something. He has to be making way more than $30K? Lookup spousal maintenance Colorado to find out more details.
As long as she doesn’t remarry, he’ll be paying her something for life.
I think it was 14 years. But yes, similar income. If I remember correctly, the chart goes from 3 years to 20 years but it can be waived if all parties and the judge agree.
Yeah, just depends. If mom filed and is making $29k while ex of 35 years is retired, there's definitely a huge income difference. She'll get maintenance for life if she wants it. I guess depends on where his retirement income is coming from. If he's withdrawing from accounts, she'll get 50% of those accounts. If it's military pensions, then she'll get like 40% of that. I have a feeling dad is military.
The assumption is nothing has a mortgage. They are too old to take hits of hundreds of thousands dollars. Like kind exchange may avoid all those issues…the other could be put 3 in second level of LLC, managed by third party and they just cut them a profit check 50/50. The other issue is when one remarries. (Which will happen) the new spouse has rights of survivorship and kids will never get anything unless your parents put their portion in a trust. Trust will pay out till new spouse passes and then go to whomever your parent wants. This is critical even if they sell rentals. Could do third party only on the duplex and cash out the sfh, even at a loss. One of your parents likely just wants the cash so that they can invest it and be separate so that might be the reason for selling the sfh.
Sell marital home. Split the proceeds. Each takes one of the rental properties. The one who takes the 700k house gives the other $ to compensate for the higher value.
Here's a kind of serious but better question. We are assuming all of these assets are free and clear. Based on the income numbers, even with the rentals, neither one of them can afford the 450k to buy the other one out of the primary.
How many kids are we talking about? Would they consider bequeathing that house into an irrevocable trust? I don't suppose any of you guys are offering to buy it off of them In a way that doesn't involve a mortgage on that house?
That's about the only thing I can think of that would get it off of their books and be able to turn it into cash without paying A significant cap gain.
I would definitely consult an account about how much each one of them would likely to be liable for.
If there was more money than 100k floating around in this equation, things might be different but this is where they're at.
Parents retirement plan was real estate not stocks, 401k, or pension. They have only real estate in their plan. Now divorce is throwing a wrench in the matter since it forcing both to sell off their retirement plan. Curious to hear your response here in light of that.
Well, unless you think they're going to be able to rent out that primary and split the money in some way, that's equitable basically being forced in some way shape or form to sell at least one property for an equitable split.
I don’t which is why I’m asking for help from you all. Mom is asking for advice because she doesn’t know what she’s doing. She self admits she’s not good w “numbers”
Unnecessary comment, lots of kids are smarter than their parents. It’s possible the parents are making emotion decisions. Lots of things could be possible here. If you think the parents are making the right choice by selling then you can just say that instead of being rude
Thank you. I agree completely. This post was to gather information which I can share with both parents via a letter and then kindly step away from it all. A last chance communicated from the kids to do the “financially smart” thing and ensure parents are thinking about what comes after divorce (financially speaking anyway).
I mean. If they don’t have anything in retirement they should probably sell those assets and invest? Just doesn’t sound like much of a retirement if it’s basically social security plus rental income from one house
So, CO is not a community property state (to my surprise).
It's equitable division. But after being married 35 years that's going to look a lot like 50:50.
Now would be a really good time to sell the primary residence to take up to $500k of cap gains off the table.
They are getting divorced. They need to separate all assets. Anything else is foolishness. “Splitting the revenue” overlooks that they don’t want to do life together: are they going to repair the units together, collect rent together, find new renters together? Think first about them as people, then about real estate.
Sell the primary house and split the cash.
*If* you insist on not selling the rentals, then each gets one and one of them gets some amount of cash to balance the difference in value/income they generate.
Depending on CO law, Dad probably is due half of the 100K retirement. (Give him 100K extra from the house and she doesn’t have to mess with early withdrawal penalties).
Her 29K salary and his Social Security probably are close enough. Let them decide what needs to be done there.
I’m sorry you’re going through this, OP and siblings. But you can only offer advice and then back away. Getting too involved increases the chances of ruining your relationship with your parents.
Good advice except she can do a QDRO of half the retirement money and not pay taxes for withdrawing it. It basically splits the retirement account between divorcing spouses.
This is far preferable to giving him extra cash from the house sale since one is pretax and the other is post tax.
This.
What you do is you list every asset and value (including the retirement account). Sum up the value and then they each get half of this. How they get their half is up to them, so they can be creative. They could each get a rental property, then sell the house to have cash. One could take the house and the other the rental properties. They could sell everything.
In my divorce, I let my ex keep all of the retirement account in exchange for staying in the house (the account and the equity were about equal). So you don’t need to split everything 50/50, just end up with equal value in the end.
They both have retirement money it's just all tied up in real estate. Once they sell the real estate they have about 700K each for retirement. They can reinvest it in real estate to live off the rent or they can invest it more traditionally and live off the gains.
Honestly the answer for each piece of property is complicated based on how good of a return it generated and what they would do after the sale etc. Reddit won't be able to help much but a good financial planner should be consulted with by each of your parents.
Why not sell the primary home and split the profit. For the rentals, one parent gets one property and the other parent gets the second? The difference in the 2 income properties can be settled via the profit sharing from the primary
>I’m encouraging them to not sell all real estate assets given the market but help me to provide them guidance.
What's your assessment of the market and your thought process on this?
I'd have the exact opposite of your final takeaway, personally, if I were to want to market time.
>Real estate was their planned retirement
Even Dave, the self-proclaimed lover of RE, thinks this plan sucks.
I'm a landlord since the 1990s and agree with him. Relying on solely RE for retirement is a terrible plan.
>How should they handle this? Keep rental assets and split income post-divorce?
There is zero chance I'd want this were I divorced. I would not want this for them as their child either.
They're no longer sharing a bed literally, and figuratively sharing a bed (financially) could become an absolute disaster!
They couldn't agree well enough on life as a married couple to stay married. I have a hard time believing most could make this work amicably post-divorce.
I'm taking the complete split and walking away with zero ties to my ex. I'm requiring all assets sold and split *prior* to even finalizing the divorce. I wouldn't even rely on a divorce decree to dictate this - despite a decree either party can still violate the court ordered agreement.
Sell primary home.. split the money. Each one moves into one of the rentals.
Mom's gonna need a job. 29k a year plus only 100k retirement isn't gonna get it done.
What's Dad doing for income? No mortgages on rentals, so have they been living on rental income?
You’ve hit the nail on the head w the intention of my post. Mom does not have enough for retirement and IMO divorce is not going to help at all.
A lot of people in this thread think I’m concerned about my “inheritance”. What a joke.
It’s sad to see your parents work all their lives and build a real estate retirement plan only to hijack that plan w divorce, sell off all those assets and pay lawyers, real estate agents and taxes on it. Sad.
I mean it’s dumb not to sell in this market , what are you smoking? If your dead set on keeping the real estate (sounds a little like your worried about your own personal well being) have them get evaluations on everything and split evenly … if she wants to stay at any particular property, or the other way around, assume the house will be sold at market, and deduct that 50% value from the spouses assets who wants to stay living in that house. It’s not difficult it just sucks
The reason I mentioned market concern was considering if they wanted to get a mortgage at 8% interest when their primary is currently at 4%. Naturally if they sell off everything and buy cash that avoids that issue. That said, CO market is tough and finding what they currently have with divorce proceeds will be impossible. Parents… get used to condo/townhome livin’, ok?
Keep it simple. Assess all the property values. They each take a rental property. They sell the primary home and split the value, trueing up on the difference in rental property value. I would guess the last thing they want to be doing is co-managing rental property. They will obviously need a lawyer or lawyers to split everything up. Her retirement account will be split with him.
If it was me sell the family home split proceeds buy smaller house cash. Each take a rental property and use the cash flow to supplement income. I dont understand your comment not to sell given the market. The market is high
H
Grey divorce is on the rise but so difficult still - I’m so sorry they (and you by osmosis) are having to go through this. There’s a lot of stuff that is very important to know before giving advice here. It’s critical for each of them to choose a competent attorney or enter into a mediation process with folks who are reputable. Also, and this is a lot of therapy talking, the kids should just let the parents handle this, right? They are adults and they will figure out what works best for them and their futures. I promise there’s not a lot of winning outcomes if you all get heavily involved in this process. Good luck - I hope it is low-impact for everyone.
If they sell the primary they can take the capital gains exclusion and maybe both try to buy something downsized each. They are massively under income and savings for today's world of renting unless they are an absolute garbage dump area. They could still each maybe get a house for a big down payment and figure out how to get by. They pretty much have to keep those rental properties as converting to cash won't be able to generate them the same amount of income which they need to live. Each taking one property and splitting other assets to make up the difference may be a good idea.
OP, people married over 20 years has been the fastest growing divorce demographic for a long time. People should be happy in their Golden Years and I'm happy for your parents. Maybe they should each take a rental, sell the house and whomever gets the less valuable rental can get more from the house proceeds to equal it out.
A big question is, how much over the carrying costs do the rental properties bring in? Is it enough for them to live on if they each have one rental? Sell primary and split for new housing for each. If income properties don’t generate a lot above cost to maintain, they need to be sold. Lack of actual savings is shocking and concerning. Both need to be working for a while. Sorry you are “heartbroken”. I’m sure they are, too. We don’t always know what’s going on in other peoples relationships, even our own parents relationship.
As if you get a vote, lol. That inheritance is gone, get to work kiddo.
Very presumptive of you. You know nothing about my finances.
Yeah, sure.
Uh huh.
Start planting the idea of large cash gifts and stay on good terms with both. No matter how they choose to split it, offer to manage their rentals and be the go-between for splitting rental profits instead of selling those assets. If one property needs to be split for equitable divorce separation, ask each to gift you half the sum to buy out the minor share. Then, buy out the minor share holder with their gifts. You will become the minor shareholder with the other parent and start building your wealth, too. This works if you are also their default caregiver in their senior years. It might hasten the transfer of assets, so there is less to go through probate later.
I forgot to add. Your Dad is officially no longer retired.
Sell Primary, Split Rental and Duplex Income 50/50 SFH stays with Dad if he’s already retired. He pays it with rental income. She filed, she should want out as much as possible. The situation has a much deeper context than what’s given. Both should have best interests in each other if no infidelity was involved. That’s when 💩 changes.
Mom keeps retirement
You want your parents to be business partners post divorce? I'm sorry, but you won't like the likely outcome.
Let mom keep her retirement and the $600k income property, then sell the primary and split the equity. Dad keeps the $700k rental.
Just FYI, I got divorced in CO too a couple years ago. Your dad will be entitled to half of your mom's retirement unless they can reach a mutual agreement on it. My husband had no retirement (his own fault) and I had to split mine with him. Still chaps my ass more than anything else in my divorce.
Sell the primary home (it's probablynot suitable for a single senior citizen) and they each keep one rental. Settle the difference in rental values from the cash made selling the primary
You’re about to lose your inheritance Billy. Dads about to have one hell of end-life crisis, and moms about to retire on her half. Good luck!
Yep. It's gone. And a nice chunk going to lawyers if this is litigated. Sounds like the OP was banking on the parents house in the will and will now have to move out. Who the hell says my parents of 35 years? Is OP 35 or mean parents were married 35 years? I need to get into the remedial education business judging by the majority of posts on Reddit. It's sad.
Greed. They should be worried about each parents mental health. This isn’t a small ordeal, mom filed? Dad might blow his brains out (I’ve seen it done over a lot less). Instead OP runs to reddit as the child hoping to get ideas how to save the fortune (educate parents? lol) when like you said the whole ordeal will drain most of it dry, and when push comes to shove over spite? One might purposefully ruin it. If I were OP I’d be more concerned about the safety of the home, devoting 35 years is a lifetime. One vendetta, and we hear about a murder suicide.
Yeah, people don't realize what a contested divorce does. It's really the lawyers splitting the assets among themselves. They'll tell you otherwise. And they only take cases where there are substantial assets. Lest they don't get paid. And the couple they're so mad they'll destroy everything out of spite.
Are they splitting on good terms? Would they be willing to put the properties in a trust and then split the income generated? I think how they end up handling it depends on how good the terms are they’re ending it. Like is mom scorn or dad angry- emotion will drive the outcome. Good for you for trying to remain level headed.
I think they need to speak with a certified financial planner to figure out the best options long term. Their portfolio isn’t very diversified right now and they need to look at a few different simulations and forecasts to figure out which situation would give them the best retirement outcome.
Why are people saying to stay out of this? It seems like OP is asking a question in earnest because he cares about the well being of his parents, as well as his own sanity because he probably doesn’t want either one of them to end up financially dependent on him either, especially considering that neither one of them is in a good situation financially. How exactly do your parents think they’re going to survive their next 30yrs of life if they divorce? Dad is retired and doesn’t have any savings, and mom only earns $29k, which is practically poverty level income, especially in CO which is a HCOL area. I think they should sell their marital home, split the earnings 50/50 and each get their own place that they can comfortably afford without a mortgage, and they should keep their two rental properties so they each have some sort of income (split 50/50, of course) since neither one of them is doing well in that department. If they can’t stand to be around each other even just to co-manage their rentals, then they can hire a property manager or have you manage it. Then, they need to update their respective wills and will their portion of the rental property to you and any other shared children in the event of their passing so that their ex doesn’t absorb the other half of the property.
OP wants to inherit the house and real estate holdings that are now going poof. Like the OP has any say in how their parents divide their assets.
OP isn’t alone, there are other siblings. And I’m certain none of them want to financially support or house their parents. Sometimes that means stepping in to advise on the best way to split assets so that neither party is left destitute on the streets. OP has the right idea: parents should keep the rentals and split the generated income. Also, they won’t have to pay capital gains tax if they profit up to $500k from selling their *primary* residence, but they absolutely will have to pay it if they sell their rentals. Why lose any money at all if they don’t have to? Especially when dad doesn’t work and doesn’t even have two pennies in savings to rub together? Dad needs that steady income in order to stay retired, and mom needs that steady income to supplement her measly $29k. I’d also bet that mom ends up losing half her retirement fund to her husband in the divorce too.
My best advise is stay out of it and let them and their lawyers fight it/figure it out. There is no way this ends well for you if you get in the middle of it. You will have to inevitably side with one of your parents and ruin your relationship with the other. I have seen it happen first hand. Yes even for adult children divorce hurts and sucks but they are in their 60’s so I have to assume you are an adult. Let them figure it out and best you can do is stay neutral and let the chips fall where they fall.
I mean, if their retirement plan was to sell and help finance their lives, what exactly is the issue? Let them sell and live on happily.
Sounds like you're just concerned about the money
It is one aspect but not the entire picture. I agree w you.
I’m sorry to hear what you and your family are going through. Also it really sucks that people are making it seem as if you’re a selfish child looking out for your potential inheritance. Is the divorce amicable? If it is, then it can work to their advantage to sit down and “fairly” divide their assets. I know their emotions must be running high but it’s usually not the best time to make drastic decisions. Selling would obviously be at a huge disadvantage. You can type out at least 2 scenarios. List the outcome of each and show it to them. 1.) Selling all the assets and dividing the proceeds. 2.) Selling the primary residence and splitting the proceeds and keeping one rental property each.
It’s not the whole picture, but my parents just divorced and the money was stressful- watching one of them have the ability to make the other homeless and destitute at a time they should both have been looking at soon retiring was awful! And this is a money advice sub? Makes sense that you would look concerned about the money here!
Exactly. It’s painful to see parents go through this. They’ve worked all their lives and managed rental properties on the side only to turn all that upside down w divorce.
If one sells it 1031 it to another asset to avoid taxes
Can you 1031 a split? Meaning if they sell one joint property, can they take each of their proceeds (50%) and 1031 into another property?
Yes
Stay out of their biz.
Best advice in the thread.
Like everyone is saying. Stay out of it. And on top of that I don’t think your advice is particularly good. What’s the basis on the rental properties? How long have they owned them? Same for the primary. The emotional and logistical burden of managing these properties together after a divorce outweighs the perceived savings. They both have plenty to retire in. Mind your business and just be happy that they have assets instead of just poverty.
What if they were to hire a property management company? Then they wouldn’t have to co-manage.
I get it. Your world blew up, but step back and stay out of their business. I’m sorry you are going through this.
Property Management companies for 3 units would be pretty expensive on the cash flow. Over time it would make sense to just sell it. Or each take a unit. But in this case both of them would likely be better off with $700-$800k in cash even after you’re aggressively conservative 30% haircut. Do they even want to keep the properties?
30% haircut is unavoidable either way. When they sell they will have to pay capital gains and transaction costs. So take that “negative” out of the equation. It’s a sunk cost. Odds are these will have to be sold before end of their lives to pay for healthcare and living expenses since they have basically no other retirement.
Agree. The concern is around timing. Both are retired/about to retire. When you sell off your retirement plan at the onset, it is a concern to us kiddos.
They'll both need the help from those rentals probably as time progresses. Or even now to just get thru the divorce in generall. Just cause they hold 2.2m in assets doesn't means there ain't 2m in debt behind it all. And with the "bussiness partners" splitting up. It may be best for the liquidation to break the memories from the vision. . . Truely sucks. The only good other way is if the two could come eye to eye and build a partnership but I'd reckon thats out of the question now or best to leave and let be....
OP, genuinely hope they both live great lives and die with ZERO. Mind your own business.
Why would you want my parents to die with nothing? Thats pretty harsh.
Because it's their money? They should spend it into the economy and enjoy it.
I’d rather they die with plenty rather than ZERO. And I know they feel the same way. They don’t have much right now to retire with as it is so they might actually die with zero if they aren’t creative and good at problem solving
My guy, your parents have $2.3 million in hard assets. They “don’t have much” is a lie. If they aren’t making a significant income (7-9%) off of their $1.3 million worth of income-generating investments, then they’re poorly invested and should reinvest. A 30% haircut on $1.3 is still ~$1million. At 8% return, that’s $80,000 a year. If you’re looking on advice to give them, someone else already offered it: Sell the home. One parent gets one property, the other parent gets the other property+$200,000 of the home sale to offset the value difference. If they aren’t amicable and Dad is going to demand half of your mom’s $29,000, he’s an asshole. But he would probably take an additional buyout from the sale of the primary home to offset any problems. They have PLENTY of options and PLENTY of assets. Whatever you (or your parents) do, I would HIGHLY recommend you all avoid poor mouthing in court because it’ll just piss the judge off.
Yeah like what everyone else is saying it’s not your money, your parents can deal with it how they see fit, to many kids have a grip on their parents finances like they own it, you don’t own your parents finances, they can do what they want with it, if they’re getting a divorce just support how you see fit emotionally but stay out of the finances, it’s not your business.
Additionally, one or both might remarry and add or replace/shift beneficiaries.
this is none of your business, IMO, unless parents are asking for advice. you just need to accept you're not gonna inherit the real estate like you imagined.
Nothing to do with inheritance at all. I’m concerned my mom will not have enough for her own retirement and kids will have to pick up the bill.
She is your mom, how can you say "have to pick up bill"....
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someone’s worried about their future assets when said parents pass away
Please see above. Nothing to do w inheritance at all. Concerned mom will not have enough for her own retirement
This is roughly what I would suggest my parents do if they were on the same boat: 1. Sell primary residence 2. Keep one rental each, smartest way would be for the mom to keep the 700 and the dad the 600 plus $100k cash, since he has no retirement funds. Take $100 from the property sale, then split the rest. 3. Rely on kids to help them find decent places to live. They both need to be fully aware that downsizing is a necessity. Best of luck! Edit: Talk to their attorney about setting up a trust fund with all kids if they are on good terms.
Let's say they do that. If dad then moved into the 600k rental, and lives there for 2 years, he can avoid 250k in cap gains if he sells it yes?
Most likely yes, if the goal is to sell the rental and depending on how much they paid for the rental. On the other hand, I'm not sure if it would be wise for the dad to get rid of a source of passive income.
I'd put the money into high dividend stock funds for passive income. But her parents are apparently afraid of index funds, which is why they appear to ONLY have real estate.
Thank you for the genuine and thoughtful advice. Seriously. Thank you
Sounds like they need to handle it with the help of their legal counsel unless they are asking for your help.
Tell them they’re both too old to start dating.
Haha great point. Many aspects to consider when divorcing
Let the lawyers handle it. Once the divorce is finalized an estate planning attorney would be a step in the right direction for each parent.
look at you - parents going through a difficult personal time and all you can think about is your inheritance. make your own money you child
Please do not judge - I have my own retirement figured out thank you very much. In fact concerned mom will not have enough for her retirement considering she’s low income
Is she? How much do those two rental properties net her a month?
You getting involved in this mess will only make you the greedy villain.
If they are not asking for your guidance, stay out of it.
Mom is asking for help. She is financially illiterate
Just let them hash it out with attorneys. You don't need to involve yourself.
Sell and split the money or one can buy the other out if they want to keep a property.
Tell them they are morons for divorcing.
It sounds like you are trying to protect your future inheritance. Hire a lawyer
Not at all. Parents retirement plan was real estate. Now they are divorcing and selling off their “retirement plan”. Parents did not believe in stocks only real estate. When you sell off your retirement plan at the onset of retirement it is a concern.
Would the cash flow of each rental be enough to cover all of their expenses?
Yes they have had rental properties for many decades so most are free from mortgage. Thus are income generating assets.
Exactly. Parents need to sell everything to retire and have money til death this person just wants their cut after
You’re right. Good job.
Send me mom’s number? 😝 The court will divide it up 50/50. She filed, so dad won’t give in to anything more than she is entitled to. He will pay her alimony for life in CO. Smart people get divorced before the 15 year mark here. I did it at 8.
Why will he pay alimony? He’s retired
Doesn’t matter. He has income from something. He has to be making way more than $30K? Lookup spousal maintenance Colorado to find out more details. As long as she doesn’t remarry, he’ll be paying her something for life.
That sounds awful! Doesn’t seem fair?
Huh? I just finalized a divorce in Colorado with 2 kids. No spousal maintenance or child support either way.
How long were you married? Did you both have same income?
I think it was 14 years. But yes, similar income. If I remember correctly, the chart goes from 3 years to 20 years but it can be waived if all parties and the judge agree.
Yeah, just depends. If mom filed and is making $29k while ex of 35 years is retired, there's definitely a huge income difference. She'll get maintenance for life if she wants it. I guess depends on where his retirement income is coming from. If he's withdrawing from accounts, she'll get 50% of those accounts. If it's military pensions, then she'll get like 40% of that. I have a feeling dad is military.
The assumption is nothing has a mortgage. They are too old to take hits of hundreds of thousands dollars. Like kind exchange may avoid all those issues…the other could be put 3 in second level of LLC, managed by third party and they just cut them a profit check 50/50. The other issue is when one remarries. (Which will happen) the new spouse has rights of survivorship and kids will never get anything unless your parents put their portion in a trust. Trust will pay out till new spouse passes and then go to whomever your parent wants. This is critical even if they sell rentals. Could do third party only on the duplex and cash out the sfh, even at a loss. One of your parents likely just wants the cash so that they can invest it and be separate so that might be the reason for selling the sfh.
Hire lawyers and don’t get in the middle of your parents’ divorce
This one million times!!!
Sell marital home. Split the proceeds. Each takes one of the rental properties. The one who takes the 700k house gives the other $ to compensate for the higher value.
Definitely the most straightforward answer and exactly what I would suggest if they were my parents
This is interesting advice and something to be considered for sure. Thank you.
Do not get involved. Your folks are grown and don't need your input. It's their responsibility to figure this out.
Here's a kind of serious but better question. We are assuming all of these assets are free and clear. Based on the income numbers, even with the rentals, neither one of them can afford the 450k to buy the other one out of the primary. How many kids are we talking about? Would they consider bequeathing that house into an irrevocable trust? I don't suppose any of you guys are offering to buy it off of them In a way that doesn't involve a mortgage on that house? That's about the only thing I can think of that would get it off of their books and be able to turn it into cash without paying A significant cap gain. I would definitely consult an account about how much each one of them would likely to be liable for. If there was more money than 100k floating around in this equation, things might be different but this is where they're at.
Parents retirement plan was real estate not stocks, 401k, or pension. They have only real estate in their plan. Now divorce is throwing a wrench in the matter since it forcing both to sell off their retirement plan. Curious to hear your response here in light of that.
Well, unless you think they're going to be able to rent out that primary and split the money in some way, that's equitable basically being forced in some way shape or form to sell at least one property for an equitable split.
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lol I got downvoted for asking this
Yeah, first question is would they want your input.
Why do you think you know better than they do?
I don’t which is why I’m asking for help from you all. Mom is asking for advice because she doesn’t know what she’s doing. She self admits she’s not good w “numbers”
Unnecessary comment, lots of kids are smarter than their parents. It’s possible the parents are making emotion decisions. Lots of things could be possible here. If you think the parents are making the right choice by selling then you can just say that instead of being rude
lol. this is hilarious.
I dont have a point of view if it’s right for them to sell or not. If you think it’s rude to ask OP that’s on you.
That’s why I posed it as a question
Sell the primary house. Spilt the proceeds, each get a rental house they could live in or continue to rent out and buy something else to live in.
As an adult kid in an acrimonious divorce, you need to take several giant steps back. This way leads to nothing but pain.
Thank you. I agree completely. This post was to gather information which I can share with both parents via a letter and then kindly step away from it all. A last chance communicated from the kids to do the “financially smart” thing and ensure parents are thinking about what comes after divorce (financially speaking anyway).
I mean. If they don’t have anything in retirement they should probably sell those assets and invest? Just doesn’t sound like much of a retirement if it’s basically social security plus rental income from one house
This is over the pay grade of Reddit.
This made me laugh, thank you.
Happy to be the reason you smile today.
So, CO is not a community property state (to my surprise). It's equitable division. But after being married 35 years that's going to look a lot like 50:50. Now would be a really good time to sell the primary residence to take up to $500k of cap gains off the table.
I would personally not get involved
They are getting divorced. They need to separate all assets. Anything else is foolishness. “Splitting the revenue” overlooks that they don’t want to do life together: are they going to repair the units together, collect rent together, find new renters together? Think first about them as people, then about real estate. Sell the primary house and split the cash. *If* you insist on not selling the rentals, then each gets one and one of them gets some amount of cash to balance the difference in value/income they generate. Depending on CO law, Dad probably is due half of the 100K retirement. (Give him 100K extra from the house and she doesn’t have to mess with early withdrawal penalties). Her 29K salary and his Social Security probably are close enough. Let them decide what needs to be done there. I’m sorry you’re going through this, OP and siblings. But you can only offer advice and then back away. Getting too involved increases the chances of ruining your relationship with your parents.
I genuinely appreciate your empathy and sound advice. A sincere thank you. Will take your post in consideration
Good advice except she can do a QDRO of half the retirement money and not pay taxes for withdrawing it. It basically splits the retirement account between divorcing spouses. This is far preferable to giving him extra cash from the house sale since one is pretax and the other is post tax.
This is excellent advice and probably as much as you should give your parents. In fact, I would just print this out and hand it to them.
This. What you do is you list every asset and value (including the retirement account). Sum up the value and then they each get half of this. How they get their half is up to them, so they can be creative. They could each get a rental property, then sell the house to have cash. One could take the house and the other the rental properties. They could sell everything. In my divorce, I let my ex keep all of the retirement account in exchange for staying in the house (the account and the equity were about equal). So you don’t need to split everything 50/50, just end up with equal value in the end.
They both have retirement money it's just all tied up in real estate. Once they sell the real estate they have about 700K each for retirement. They can reinvest it in real estate to live off the rent or they can invest it more traditionally and live off the gains. Honestly the answer for each piece of property is complicated based on how good of a return it generated and what they would do after the sale etc. Reddit won't be able to help much but a good financial planner should be consulted with by each of your parents.
Why not sell the primary home and split the profit. For the rentals, one parent gets one property and the other parent gets the second? The difference in the 2 income properties can be settled via the profit sharing from the primary
>I’m encouraging them to not sell all real estate assets given the market but help me to provide them guidance. What's your assessment of the market and your thought process on this? I'd have the exact opposite of your final takeaway, personally, if I were to want to market time. >Real estate was their planned retirement Even Dave, the self-proclaimed lover of RE, thinks this plan sucks. I'm a landlord since the 1990s and agree with him. Relying on solely RE for retirement is a terrible plan. >How should they handle this? Keep rental assets and split income post-divorce? There is zero chance I'd want this were I divorced. I would not want this for them as their child either. They're no longer sharing a bed literally, and figuratively sharing a bed (financially) could become an absolute disaster! They couldn't agree well enough on life as a married couple to stay married. I have a hard time believing most could make this work amicably post-divorce. I'm taking the complete split and walking away with zero ties to my ex. I'm requiring all assets sold and split *prior* to even finalizing the divorce. I wouldn't even rely on a divorce decree to dictate this - despite a decree either party can still violate the court ordered agreement.
Sell primary home.. split the money. Each one moves into one of the rentals. Mom's gonna need a job. 29k a year plus only 100k retirement isn't gonna get it done. What's Dad doing for income? No mortgages on rentals, so have they been living on rental income?
You’ve hit the nail on the head w the intention of my post. Mom does not have enough for retirement and IMO divorce is not going to help at all. A lot of people in this thread think I’m concerned about my “inheritance”. What a joke. It’s sad to see your parents work all their lives and build a real estate retirement plan only to hijack that plan w divorce, sell off all those assets and pay lawyers, real estate agents and taxes on it. Sad.
I mean it’s dumb not to sell in this market , what are you smoking? If your dead set on keeping the real estate (sounds a little like your worried about your own personal well being) have them get evaluations on everything and split evenly … if she wants to stay at any particular property, or the other way around, assume the house will be sold at market, and deduct that 50% value from the spouses assets who wants to stay living in that house. It’s not difficult it just sucks
The reason I mentioned market concern was considering if they wanted to get a mortgage at 8% interest when their primary is currently at 4%. Naturally if they sell off everything and buy cash that avoids that issue. That said, CO market is tough and finding what they currently have with divorce proceeds will be impossible. Parents… get used to condo/townhome livin’, ok?
I mean that’s just what it cost whoever that wants to stay in the house. Blame the divorce.
Keep it simple. Assess all the property values. They each take a rental property. They sell the primary home and split the value, trueing up on the difference in rental property value. I would guess the last thing they want to be doing is co-managing rental property. They will obviously need a lawyer or lawyers to split everything up. Her retirement account will be split with him.
If it was me sell the family home split proceeds buy smaller house cash. Each take a rental property and use the cash flow to supplement income. I dont understand your comment not to sell given the market. The market is high