Purchasing in-laws' home & renting back versus providing loan to pay off mortgage

[Thomas Neuberth]

Simply put, my future in-laws did not plan for their future.

They periodically ask my fiancee for assistance with emergency expenses. I see her future burden, financially, but more importantly emotionally, as my burden.

My fiancee's parents are both in their mid-to-late 60's, with no education or technical skills for the modern workplace. Both have worked on-and-off over years under the table, so Social Security benefits are next to nothing. My father-in-law has a criminal record that cannot be wiped, is physically disabled and has paranoid schizophrenia. My mother-in-law will be starting a new job next after an almost 2 year long stint back working under the table, but her own physical ailments are becoming worse.

Their combined income is only $21/hr.

They owe $70K on a home worth ~$170K that was free and clear, but stupidly signed onto one of their parent's cash-out refis before death.

There are additional credit card debts that are nearly paid off (around $5K I believe).

With abysmal credit, selling the home and renting would likely be a wash, if not a worse situation.

I would like to see them grow a saving account of some type. I wouldn't call it retirement, as they will never be able to retire, but something is better than nothing at this late stage. My in-laws are extremely kind, but very lost. I would like to help them, responsibly, as these are not MY parents. My intent is to maintain their current living situation while reducing their expenses.

I am well off, so I've considered pay off their debts, but I fear that making a problem of this size disappear would not be holding them accountable. I've also thought about purchasing the home at the price that would wipe their cumulative debts and renting back to them at cost, so they can invest the savings.

My fiancee preferred this idea, but I do not want to acquire the only this she would have received as an inheritance. She does not have the same ability to purchase the house outright that I do, so I am considering purchasing equal shares of the home with her, and her sister, so that they has equity in the deal.

Long story short, would purchasing the house at this low value flag me for an audit? Are there any better alternatives, such a transferring the title, or would that have major tax ramifications?