It's not just recent college grads moving back in with their parents. So are older children. And more parents are moving in with their kids. This is happening for financial reasons -- two or more can live more cheaply than one -- and in many cases for the children to provide care and companionship to the parents in their later years.
In most cases, this works great for all concerned, but not always. Problems often arise when financial obligations are not talked through or when care of a senior becomes a greater burden than anticipated. It's important that the arrangement be discussed before the move in and the agreements be reduced the writing. It is often helpful to include other family members who won't be living together in the conversation so that everyone knows what is happening. Then, review the arrangement in a formal meeting each year to make sure it's working for everyone and it can be tweaked as necessary.
Writing down the arrangement may seem too formal for many families, but the act of doing so serves at least three purposes. First, the act of putting the agreement in writing will make sure that everyone is on the same page. Otherwise, some members of the family may have understood A, while others heard B. Second, the process will raise more issues that weren't considered at first. And, third, everyone's memory is fallible and selective. A written record of the arrangement will be available to refresh everyone's memory years later.
The written agreement isn't a contract and doesn't necessarily have to be signed. It also doesn't have to be prepared by an attorney, though that may be useful if there are real estate transactions involved.
Here are 10 issues to consider before moving in:
- Living Expenses. Who is paying for food and utilities and how much? If there are rental or mortgage payments, who is responsible for how much? If one of the parties owns the house or condominium, will the other be paying rent?
- Nonpayment. What happens if one of the parties doesn't pay his or her share of the expenses? If there's shared ownership of real estate, will this come out of the sale proceeds. If it's a child not paying up, will this become a deduction from her share of the parent's estate? Will it depend on whether she can't find work or she's spending her money on shopping?
- Meals. Who is cooking meals and who is expected to be present for meals? What's the schedule? Will parents moving in be living in an "in-law" apartment and expected to take care of their own meals, or will everyone always be eating together.
- Care. Care can include child care provided by parents or elder care provided by children. In either case, what are the expectations? What happens when care of parents begins to interfere with the child's work? Will the child be compensated in any way and, if so, how will this be determined? Will caregivers be hired? Who will make this decision?
- Construction. If house improvements need to be made to accommodate the new resident, who will pay for them? And then what happens if the living arrangement doesn't work out or doesn't last very long? For instance, if mom pays $100,000 for an in-law apartment to be added to her daughter's house and then passes away after living there for just a year, should this be considered an advance on the daughter's inheritance? The siblings might argue yes, since their inheritance was reduced by this amount without much benefit to their mother. The daughter may argue no, since the in-law apartment did not add that much in sales value to her house and she had to suffer through the construction. It would be good to discuss this ahead of time and find a middle ground.
See Kathleen O'Donnell's article in the May 2014 ELR.Margolis & Bloom, LLP, practices estate, long-term care and special needs planning in Boston, Dedham, Framingham and Woburn with a strong commitment to client service. If you have questions about these or other legal matters, do not hesitate to contact us by e-mail by clicking here or by calling us at 617.267.9700.