Couple With 2 Houses Ask What to Do

​2. Go house shopping.

The couple toured the few homes for sale in their town but found them wanting. So, I asked how they’d renovate Tom’s house to make it work for them. On their wish list: office space for each of them, and a music room. “We don’t want to downsize,” Tom said. “We want something that we both feel really good about.”​

​3. Run the numbers.

Pamela and Tom estimated those renovations would cost more than $300,000. The experts say the money could come from the equity in their homes, but how? Pamela would owe substantial taxes if she sold her house, which she bought nearly 30 years ago. (That’s the case even though $250,000 of her profit would be excluded from taxes.) Instead of selling the home, the experts suggest she raise the money by either refinancing the mortgage or taking out a home equity line of credit, then renting out the property.​

​4. Make it legit.

Pamela and Tom had suspected they’d need a prenuptial agreement, and they do. For that, they each should hire a matrimonial lawyer. They also have to consult a trust and estates attorney to ensure that Pamela won’t be forced to move if Tom dies first and that she (or her estate) is reimbursed for the money she’ll be putting into Tom’s house. Both Pamela and Tom already have living trusts — legal holding pens, of sorts, for assets — which allow for easy distribution after death. Tom’s trust, which holds his house, can be instructed to pass it to his heirs only after Pamela dies or moves. Pamela’s renovation money can be treated as a loan from her trust to his — a loan that will have to be repaid. “Estate planning and a prenup: That’s what it comes down to,” Harshman says.​

The Outcome

Pamela and Tom are mulling over the plan. They’re meeting with real estate agents to figure out the rent she could charge for her house. And they’ve started talking to contractors about doing the work on his. They’re looking forward to being together, in the same home, not too far in the future. Merging money and real estate later in life can be complicated — but worth it. ​

Jean Chatzky is an award-winning personal finance journalist and best-selling author of  books including Women with Money: The Judgment-Free Guide to Creating the Joyful, Less Stressed, Purposeful (and Yes, Rich) Life You Deserve.