My sister has been going through a divorce. Her husband made very good money, but they were both financially irresponsible and racked up hundreds of thousands of dollars of debt, including owing at least $150,000 to the Internal Revenue Service in back taxes for a business. They also bought a vacation home, but had to sell it recently because of the divorce.
My sister told my parents that she and her kids were crying about having to sell the vacation home. Our parents took out a home equity loan for $100,000 to give her a down payment on a new vacation home. This was all done without my being told about it. (My parents bought the new home in their name so it won’t be contested in the divorce.)
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This is all before the divorce is final; she has no idea how much child support she’ll get. In addition, she has one child in college and two more due to start in the next two to five years. She recently started working full-time, but even with a good salary and eventual child-support, she’ll still have to pay a sizable mortgage for her primary residence, plus the mortgage on the new vacation home.
My parents gave me $40,000 as a down payment on a small apartment nearly 20 years ago. I didn’t ask for it and it certainly didn’t require taking out a six-figure home equity loan in their old age.
She’s never been financially responsible, always living far beyond her means. My parents have also been extremely generous to her children, paying for whatever my sister requests for them, including computers and international trips.
In fairness, my parents gave me $40,000 as a down payment on a small apartment nearly 20 years ago. I didn’t ask for it, but they insisted that they had the funds, and it certainly didn’t require taking out a six-figure home equity loan in their old age. Funds were extremely tight growing up, but in retirement they’ve managed to live comfortably until now. However, the large home equity loan in their old age will tighten their finances considerably, which I also resent.
I was very upset that my sister would put such a financial burden on my aging parents, as well as the fact that there’s now a $100,000 home equity loan on the house, which is probably most of our inheritance. I realize that my parents can do whatever they want with their money, but I’m upset that this was done behind my back and at the inequality of the situation. I’ve expressed my extreme displeasure at the burden this puts on them, as well as the fact that they’ve always given my sister and her family more, when they were completely irresponsible financially, even with a very large salary. My parents have said they wanted to do this and that I’m being petty.
Am I justified in being angry about this?
Feeling Slighted in New Jersey
Your parents gave both you and your sister financial gifts. She got $100,000, which is far more than you got when you were starting out. That’s true. She has two children, a husband on the way out the door and, sure, she caught your parents at a generous —perhaps even vulnerable — moment. They didn’t want to see their daughter hurting. So they gave her a down payment for a vacation home, and put the deed in their own name. Your sister feels better and more secure. It sounds to me like you have pretty smart parents.
There is also a question of who got more money. Your parents gave you the $40,000 in 1990. You didn’t say no and, if your sister was upset with that gift at the time, she likely didn’t tell you about it. If she did, you didn’t mention it. If she didn’t, she might have figured that you needed it at that time in your life. She could have asked herself, “Is life fair? You know what? Life isn’t fair.” And then she would have gone back to her studies or on a date with the man she would marry, or whatever she was doing at the time.
There’s a lot your parents could have done with the $40,000 they gave you in 1990, which would be worth around $75,000 in 2016 dollars. Your parents could have even bought a second home for their retirement.
There’s a lot your parents could have done with that $40,000 in 1990, which would be worth around $75,000 in 2016 dollars. Your parents could have bought a second home for their retirement. The median house price was $118,400 in 1990, so $40,000 would have been a great start. Today, the median price is $306,700. That $40,000 would arguably not be enough for a down payment today. The S&P 500 hovers at 2,164 today, up over 600% from 306 in 1990. They could have invested that $40,000 in stocks.
Sibling rivalry and petty jealousy can masquerade as genuine concern for, say, our parents’ ability to retire or lead to thoughts like, ‘Haven’t they had to put up with enough?’ Both of those concerns may have basis in reality, but I’m cautious about taking one sister’s side over the other when both have received their fair share of their parents’ money. I’ve seen it before with a sister who felt that her unmarried sister was given preferential treatment by their mother. Sure, $100,000 is a sizable sum of money. But your parents may decide to keep the house in their name and leave it to both of you after they’re gone.
If you think your sister should decline her gift, and if you are that concerned about your parents’ financial welfare, maybe you should consider giving back that $40,000 too.