I bought property from my father in law. I have paid him right on schedule, in fact way ahead of schedule. I owe him 11G still. I was going to take out a home equity loan to pay for my son’s college tuition, but I can’t because in the terms of the land contract it says I cannot otherwise encumber the property. So no prob, the credit unioin says I am good for thirty thousand, but have to pay off the land contract. There are mechanisms to take care of that or so I am told by the loan officer at the credit union. I only want 20 G, enought to pay off the house and make AJ’s tuition payments. Father in law refused, he says he doesn’t want the money lump sum now, and will refuse to cash any check, and refuses any sort of escrow arraingement.
I been around the block a few times, I have had my share of debt collectors hounding me for payment. I have never, ever, ever had anyone I owed a legitimate debt to refuse payment. My head is spinning.
The contract has no provision against early payment, and in fact the reason I owe so little is because I have been paying 150 a month above the required amount for ten years.
Can you force someone to accept money to pay off a debt?
I guess I am going to find out, as the father-in-law made an appointment to see an attorney, and invited me to sit in. I think I am going to decline and get my own hired gun. (attorney, not hit man).
IANAL, so my advice is not worth much (perhaps AL will soon be along to set things straight).
If the contract allows it and FIL has been willing to accept payments above what is specified, he will have a hard time resisting your attempts to pay off the loan early. Provided you are able to avoid signing anything or committing yourself, you have little to lose by attending the session with your FIL’s attorney - it might just happen that the attorney tells your FIL to accept the payment.
Let me see if I understand. You want to take a home equity loan to cover the remainder of what you owe your FIL and pay the tuition, right? So you get a $20,000 loan and $11,000 of it goes to your FIL and $9,000 goes to the school?
I’m not seeing the (legal) problem here. If you pay your FIL what you owe and he refuses to cash the check, isn’t that his problem? Take the loan, have the credit union cut him a check for the $11,000 and the rest to you. What this may do to your personal relationship I have no idea.
It seems strange. Is your FIL doing this out of a desire for you take out further loans and encumber yourself with further debt? Have you asked him why?
Otto, the problem is that the OP needs clear title to borrow money against the property. If it is a land contract (a.k.a contract for deed), the FIL would have to deliver a deed. If the OP is misusing that term, and this is actually a (more typical) mortgage situation, the FIL would still need to issue a release of mortgage.
This misconception is pretty common to the point of being almost an urban legend and I don’t blame you for believing it but it is false. No one except the extremely poor are in one tax bracket. Tax brackets are stratified so that you pay the same amount on a given amount of income that anyone else does. For example, if there is a tax bracket that goes up to $15,000 then both someone making $14,000 a year and Bill Gates will pay the same rate on their first $15,000 a year income. Those tax brackets rise the same way so that income categorized into each bracket is taxed the same way no matter how much the person makes total. No one ever gets “bumped up” in the sense that making $100 more could actually cost them money. It is just that additional income over certain amounts may be taxed at higher rates than the earlier amounts of income.
I think this is a mistake. I’d accept the invitation, w/ the caution to be very careful what you say and don’t agree to anything, in writing or verbally.
You can gain valuable information, pehaps find a solution, and you can always contact your own lawyer if needed.
It’s almost always better to negotiate, than to litigate.
Perhaps your father-in-law could take a portion of the large sum of money he is about to receive and use it to help pay for his grandson’s tuition. This could even take the form of a loan to said grandson, since he obviously has no problem storing his money in the hands of family members. Two birds, one stone.
I think everyone who pays taxes must understand that, right?
But imagine that he plans on making less money next tax year. If that 11,000 gets taxed at the higher rate, it would cost him more than the 11,000 the next year at the lower rate. That would be the case if his income were lower the next year. I can see this being a problem if he had expected it to work that way. Would you rather get a lump sum payment of 1,000,000 dollars or would you rather get 100,000 a year for ten years?
Nowadays I don’t know if the tax system is abusive to the higher incomed-people, but imagine if it were something like 60 percent starting at 300k? That way you’d only see 280,000 of that, not including the taxes at the lower brackets. Now imagine that the taxes at 100,000 and below were 10 percent. You’d get away with 900,000 over 10 years.
I don’t know how the govt works with such things, but if you could manage to delay that 1m payment over 10 years then you’d be set. However I do realize that lotteries and such will actually tax you all at once, but in private affairs you could work around these things.
FIL is retired. He is 87 years old. I do not think tax brackets are even in his vocabulary. It seems the big concern is keeping the money out of the bank or leaving a paper trail. We are talking about people who bury money in the back yard. There is no use in telling him that for years we have been declaring the interest on our tax returns, so the government already knows. It is just so frustrating.
Even better reason to accompany him to his lawyers office. If you explain your position, that you need a clear title to borrow your child’s tuition, there’s no logical reason why his lawyer wouldn’t try to explain that your FiL should go along, or maybe just modify the original contract to allow you to take a second mortgage. There’s more than one solution here and you might gain his lawyers help in finding that solution. He’s 87, he’s your spouse’s father, humor him a bit, it’s probably in your best interest.
I’ve never been a fan of contracts for deed, they tend to lead to problems somewhere down the road. I don’t think anyone should buy real estate w/o gaining title up front.
Thanks all, especially A.R. Cane. My wife and I discussed this at length and have decided I should go to the lawyer with FIL. I should explain to the lawyer that our desire is to finance my son’s college, and we are not real particular how we get there, (Pay off the land contract, modify the contract so I can borrow against the equity, escrow, whatever.) and then keep my mouth shut (that will be the hard part). It seems the big issue here is that FIL somehow has a fear that recieving the money will put him on the IRS “Radar” and cost him in the long run. He does not comprehend that the IRS already knows about our land contract. He seems to think it is some big secret. I have been declaring the interest for years, and have had to divulge the amount I owe him in financial aid statements to get AJ through his first two years of college. There is no secret to be kept here. I would be perfectly willing to place the money in escrow, and he can take it whenever he wants at whatever rate we wants. I will even pay the fees for a bank to administer said escrow. But the conversation has never gotten that far, it sort of ends at “No”.
Sounds like a plan, just remember the lawyer represents your FiL and you don’t know what accounting skills he may have. It could be that the lawyer will tend to agree w/ the FiL. That would be especially true if you critisize the FiL. I’d suggest that you bite your tongue, wait until FiL has presented his position to the atty. and wait until you’re asked for your side of the story. Then keep it as simple as possible, don’t try to characterize your FiL’s position, just state the facts of your position. This meeting may not solve anything, but I think you must let the lawyer come to his own conclusions. If you try to argue, or show your frustration, you’re likely going to make things worse.
Remember the KISS principle.
Sounds like he might be getting a little “infirm.” He’s really not getting it for whatever reason. He needs to let his lawyer guide him. I can’t imagine you being forced to maintain the loan if this goes further than this meeting (but I can see his lawyer trying to get you to honor his wishes…that’ll suck).
Why not offer to buy him (with the proceeds of the bank loan) an annuity that will make the payments he’s expecting over the period of your loan from him? The good thing about this plan is that it would cost you less than paying off the balance now in a lump sum, because the annuity will cost you (roughly) the net present value of the total due. Of course, there’s still the interest on the bank loan, but you were going to have to pay that anyway, and you’ll be able to borrow less.
Lotteries do not tax you all at once, unless you take the lump sum. Otherwise you pay income on the winnings as you receive it. If what you said were true then there’d be no way most lottery winners could ever afford to take cash payments, they’d owe ~35% of the prize and only get about 3-4% in the first year.
Repaying of principal is not income. Money you have sitting in the bank is not taxed. You are taxed on whatever income is derived from that money sitting in the bank. Just like money you’re taxed on whatever income is derived from a loan you make: ie interest.
There is a big difference between making a loan to someone and winning the lottery. With the lottery, all income is going to be taxed at some point. With loans, only the interest is income and therefor taxed, principal is not.