It is not easy to decide what to do with your assets as you get older. Here is a problem..feel free to write in your suggestions..
Let us say a person is 80 years of age and is dependant on his ‘interest’ income which is dwindling. He has a house worth Rs. 2 crores and fixed deposits of about Rs. 20L. For his day to day living he gets a small pension of Rs. 28000 per month, interest of Rs. 13000 per month and his son pays him a rent of Rs. 20,000 per month.
This gives him a total income of Rs. 61,000 a month. His expenses (in an old age home) is about Rs. 55000 per month.
So far, so good.
However, he is now in a dilemma. His wife has some new complications and he needs to get a full time maid/ nurse – at least for a part of the day and it is costing him Rs. 15000 a month, and expected to go up. He needs MORE CASH.
I told him he has 2 choices:
- eat into your fixed deposits – consuming the principal or
- Sell off the house and eat into that prinicipal.
He has 3 children – 2 sons and a daughter. All the children are settled – but none of them have a huge cash surplus. In fact the son who is staying in his house cannot afford a higher rent. The rent prevailing in that place is Rs. 45,000 a month, but his son is paying him ONLY Rs. 20k. It is in a good location and he can easily, easily get about 2 crores for that house.
So a simple solution was to monetize the asset, put it in a bank, and live far more comfortably. His son is offering his parents one room..and offering to pay for the food and other expenses. Thus the senior citizen would save the money paid to the home, and will be able to live with his pension, and interest income.
The Father does not want to shift from the senior citizen home – which is about 180 km away from his hometown Mumbai.
I stuck to my solution – said ‘sell the house, invest in REC bonds, pay some tax and live happily.
I said “by partially subsidizing ONE CHILD you are actually cheating your other children.
I said make him pay Rs. 80L to each of his siblings as a settlement. He again said “it is too much – he cannot afford even that”.
I said then ask him to buy HALF the house – paying his father Rs. 1 crore.
I said the other option is to ask him to pay you Rs. 10L on account, so that you can keep it in the bank and increasing your interest income.
I do think the best solution is to sell off that house and use the cash.
What do you think?
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