A friend of mine told me a sad story yesterday. Her parents are going to have to move in with her sister who lives in a different state. I assumed that the reason was because the parents had become frail or because they wanted to be nearer to their grandkids. But, no. The reason the parents have to move is much more complex and serves as a warning to the rest of us to make sure our affairs are handled according to the law and that we save something for the future.
My friend’s parents live on land that has been in the family for generations. However, they do not own the piece on which they live. The grandfather owns the land and pays all of the taxes. He has allowed his children and now grandchildren to live on the land rent free. They only have to provide their own home and he pays the taxes. It’s a great deal for the relatives except for one big problem. None of them own the land on which they live. Since the land has never been legally divided and deeded, it’s a precarious position. If the grandfather ever quits paying the taxes, they are all out on the street. Since he is getting older and has made no provision (and doesn’t seem inclined to at this point) to deal with the land, if he dies without a proper estate plan, the relatives will either have to come up with the tax money (which I understand they cannot) or be forced off the land. It’s a mess.
This problem has come home to roost for my friend’s parents. Their home was damaged in a recent flood and, despite repairs, they’ve been unable to eradicate the mold to make it livable again. So they need a new house. But this is where the problem compounds. First, they would be foolish to build a new home on land they don’t own. With the grandfather aging and in poor health, they could build a new home only to be forced off the land next month.
Second, they cannot afford a new home on other land. They have nothing put away for the future and they did not have flood insurance. Without flood insurance, none of their damage is covered. Their only money is their Social Security check which is enough for basic expenses but not for something like this. The only option left is to move in with family, which is less than ideal. The parents are still independent and aren’t going to like living under someone else’s roof. The sister doesn’t really have the space for two more people and the state my friend’s parents have to move to isn’t one in which they want to live.
This mess is a product of some bad luck (the flood), but mostly bad decision making. The failure to save anything for the future means there is no money to draw upon to help them get a new place. The failure to have flood insurance when they lived in a coastal area was another big mistake. Yes, the premiums cost money, but are nothing compared to the damage they’re now dealing with. The fact that they don’t own the land on which they live is the biggest problem. If they owned that land, they could probably scrape together enough money to get a trailer to live in. But since they don’t own the land and know they shouldn’t risk living there any longer they have to buy a house and land elsewhere, which they cannot afford. The only other options are to move in with family or to get a cheap, government subsidized apartment.
This sad situation serves as a reminder to all of us to make sure your dealings are all legal and that you have the proper insurance and safety net to protect your lifestyle. My friend’s parents had a great ride for many years. They lived rent and tax free. Now that the ride has come to an end, they have no plan and no options. They bet that several things could never happen and, as is likely to occur in life, it all happened at once.
When you consider your financial plan, make certain that you’re in control. Don’t live on land you don’t own, even if it’s a great deal for you, unless you are willing to live with the risks. If you do this, make certain you have a plan if the sweet deal ends. Don’t neglect the insurance you should have. It seems silly at times to pay those premiums but when you need it you’ll be darn glad you did. Finally, make sure you save for the future. Hopefully your life will never come to this point, but you never know what’s coming. You need money so you can deal with the unexpected messes in life. Otherwise you may find yourself moving in with family when you’d rather not.