The Moneyist: ‘It’s a touchy subject’: My in-laws live in our basement. They gave us our 20% down payment. Should we charge them for renovations?

Dear Quentin,

Last year, my husband and I approached my in-laws to see if they wanted to live with us. We had learned that my father-in-law had terminal cancer but could still live five to seven years in remission, and we felt that when the time came and my father-in-law passed, the adjustment would be easier on my mother-in-law, as she is quite dependent on him.

They agreed to this arrangement, and we each sold our homes for a profit; my in-laws already owned their home outright. We agreed that my in-laws would give us the 20% down payment we needed to buy the new home, and we would make the monthly mortgage payments. This 20% down payment is my husband’s inheritance.

“There is also the issue of goodwill. You and your husband were able to afford a larger home because of the 20% down payment given by your in-laws. ”

Some related news on the tax front: Your in-laws, and any other individuals with the means to do so, could each give away up to $12.93 million (after tax exemptions increase in 2023) to their family members through gifts made during their lifetime or through bequests without incurring any federal gift- or estate-tax penalty.

As a married couple, they could give away $25.84 million without incurring a tax hit. Next year, the annual gift-tax exclusion will also increase, to $17,000 from $16,000. These exemptions rose significantly with the Trump-era Tax Cuts and Jobs Act. Good news for the transfer of wealth among, well, wealthy family members.

As for your original question: Asking your in-laws to contribute 20% of the cost of air conditioning sounds mathematically logical, given that their living space accounts for 20% of the home’s square footage — but their 20% down payment should weigh against such a request.

Uncertainty leads to anxiety, and anxiety leads to resentment. Set clear expectations so they — and you and your husband — are not living under a cloud of insecurity about who paid what, or of doubt about who should pay what. Your in-laws are paying guests in your home, but they are guests nonetheless.

Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

The Moneyist regrets he cannot reply to questions individually.

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Also read:

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