Mental illness can tax a family’s finances
Mental illness in the family can be mentally and financially draining. This week we look at single mother of a bipolar son.
The situation
Andrea is 67. She was divorced 23 years ago and never remarried. She has one 40-year-old son who is bipolar. He can periodically hold a job for months at a time and moves out of her home and into an apartment. After months or sometimes years, the stress of being on his own builds up, and he needs to move back into the support of her home to get back on his feet.
Andrea’s career has been outstandingly successful. Many years she made six figures as a manufacturer’s rep for women’s jewelry. In recent years, the grind of traveling became too much, and she took a job managing a jewelry boutique making $45,000 per year. To make ends meet when she was unemployed five years ago, she claimed her Social Security, which pays $1,640 per month.
Her condo in the Capitol Hill area of Denver, is almost paid off. It’s worth $230,000 and only has a first-mortgage balance left of $30,000 and a home-equity loan
with a balance of $20,000.
Andrea gives credit to a real estate developer girlfriendwho talked her into buying two identical condominiums in downtown Seattlewhen she lived there and worked in information technology for a short time in 1999. They’re eachworth $280,000, one is paid off and she owes $205,000 on the other one. They’re listed with a rental management company, so she has littlework to maintain them, and their rent just covers their mortgage payments and expenses.
She also has $260,000 in an IRA.
Until her town-home mortgage is paid off, she estimates that she needs $4,600 per month to live. Her income needs will drop by $600 when it’s paid off. Her income from her current job and Social Security isn’t quite enough, and her credit card bal- ances have crept up to $12,000.
Andrea wrote intoWhat’s The Plan? with one big question: Should she sell one of the condos so she could use the proceeds to pay down the other one?
The recommendations
The answer about the condos first prompted a few questions back from Pam: “Do you believe the condos will continue to appreciate in value? Do you think the Seattle market is stable and increasing?”
Andrea’s answer was a resounding “yes” and, based on the demographics of that market, we’re inclined to agree. So right now is not the time to sell one of the condos to pay down the other. Like the gameMonopoly, you want to control as much property as possible while you’re still trying to accumulate assets for retirement. If the properties go up 10 percent in the next few years, each one will go up $28,000. If you only own one, you’ll make $28,000. If you own two, you’ll make double, $56,000.
The rentals’ mortgage interest rate is 5.62 percent on the first mortgage and 6.67 percent on the second mortgage. Research the possibility of refinancing both or even all three of your properties to reduce the totalmonthly payments. If it’s possible to reduce the payments, put the newly freed up cash flowtoward paying down the credit cards.
Andrea needs to work as long as possible, living on her earnings, allowing her properties and IRA to grow. When she arrives at the day she just can’t work any longer, that is the day to sell one or both of the condos to reduce her risk and give her investment income to live on.
Andrea’s son has special needs. He may always struggle to keep his head above water, so it’s very important that she talk to a qualified attorney about her money going into a special needs trust to protect him from spending it frivolously or the money preventing him from having access to government aid programs.
Andrea’s had many scary episodes with her son being hospitalized over the years, and the doctors were not allowed to inform her of his condition or work with her toward solutions.
He’s given medical and financial power of attorney to his father, who lives out of state, but not to Andrea. When her son is in a good mental state, it will be important that he name her, his local parent, as his power of attorney, and distant dad as back up, so she can take care of her son’s affairs should he become incapacitated again.
For information on legal issues and more, The National Alliance onMental Illness is a resource to support families in the many facets related toMental Illness.
Andrea has made a great living for herself selling jewelry to adorn many women’s “little black dresses” over the years. She was brave to buy rental real estate and hold onto it through thick and thin, and has supported her son on a single mother’s income. She can be very proud of her accomplishments and look forward to a comfortable retirement comparable to the “basic little black dress,” even if she can’t afford an extravagant tiara to go with it.