Tips for Moving Mom & Dad Back InPosted by in Aging
Whether a moral or economic based decision, Americans, like people in many other countries around the world are experiencing multiple generations living under one roof. With all family matters, some compromise from all parties must be made to accommodate the needs, routines, likes & dislikes of all family members Structural changes may need to be made to the home.
Remember, there are positive opportunities to be had in the midst of this change. A way to “give back”, be part of each other’s lives, honoring our parents, and a substantial financial savings As with most of life’s challenges, it becomes what you make it. Working adult children may not be able to care for their elderly parents during the day.
This is an example of a few hours of home care going a long way to improve a situation. A hired caregiver can provide companionship, transportation, safety and extra assistance during the day.
Making Room for Mom and Dad
The extended family is making a comeback—and presenting new financial opportunities and challenges for those willing to share living arrangements.
In 2008, a record 49 million Americans, or 16.1% of the population, lived in households with at least two adult generations or a grandparent plus one other generation, according to the nonprofit Pew Research Center in Washington. That is up 17% from 2000.
The trend is being driven in part by the economic downturn and the aging of the population. “With pensions failing and retirees experiencing shortfalls in savings, it’s going to become even more popular,” says John L. Graham, professor emeritus at the University of California, Irvine’s Paul Merage School of Business and co-author of “Together Again: A Creative Guide to Successful Multigenerational Living.”
In many cases, generations are squeezing under one roof, sometimes by building extensions. With a growing number of communities modifying zoning laws to permit second units, more people are adding separate guest cottages.
By living together, families say they are better able to meet one another’s needs for child and elder care. Moreover, money saved on rent can help finance a graduate degree, a job search or a down payment on a house, or offset the costs of long-term care.
Of course, such arrangements also pose challenges. Families say it is important to gauge compatibility carefully and set ground rules to ensure privacy and fairness.
“We call before we come over,” says Marti Monroe, 69 years old. In 2005, Ms. Monroe and her husband, Dane Steck, 64, financed the construction of a one-bedroom home on the seven-acre property her son and daughter-in-law, Mike and Jody Malterre, own in Eagle, Idaho. The Malterres and their two daughters live in an adjacent 4,200-square-foot home.
With full-time jobs, the Malterres “don’t have a lot of time,” says Ms. Monroe, a part-time educator. So she and her husband pitch in by ferrying their grandchildren to activities and tending to the property’s vegetable garden and fruit trees, among other things.
Before setting up an extended household, advisers say a family should devise a financial plan that works for all parties. Often, a simple written agreement is enough, says Peter Canniff, a Nashua, N.H., financial planner.
Those who prefer a temporary arrangement should “work out an exit strategy”—for example, by estimating how long it will take a person experiencing financial problems to regain his or her footing, he says.
In many cases, Mr. Canniff adds, it is a good idea to charge rent. “When kids end up back at home, it can hold back the parents’ ability to save for their own retirement,” he says.
Some “landlords” simply aim to cover the extra expenses they incur. In that case, they owe no taxes on the payments they receive, says Jeffrey Bloom, an elder-law attorney in Boston. Some even return the rent as a gift when a relative moves out.
When generations join forces to purchase or modify a property, each should retain an adviser to review the tax and estate-planning consequences and protect their investment in the event the union dissolves.
The most obvious solution—joint ownership—can cause estate-planning headaches, says financial planner Paul Royal. In 2005, Mr. Royal, 48, and his wife Bonnie, 39, purchased an Exeter, N.H., home with a basement apartment for his parents. (Mr. Royal’s father has since died.)
Although the home was a stretch for the younger Royals, they decided against joint ownership, as the elder Royals’ estate plan calls for their assets to be distributed equally among their three children. “We’d have a limited amount of time to sell the house and put the assets into the estate so they could be divided up,” Mr. Royal says.
Joint ownership also can pose problems for those who may need to rely on Medicaid to cover future nursing-home costs, says Mr. Canniff. Applicants must show that they have limited assets, and gifts to family members can delay eligibility for benefits.
In the end, the Royals financed their home with a mortgage and a second loan from Mr. Royal’s parents. As a lender, Lois Royal, 82, holds a lien on the property. Mr. Royal says he is able to cover his monthly interest-only payment on the family loan with the rent he charges his mother.
To generate cash to cover the principal—which will come due on his mother’s death—Mr. Royal refinanced his mortgage. Under the terms of the family loan, he adds, his mother has the right to forgive all or a portion of the obligation.
Some families structure loans from elders so the remaining debt is canceled upon a parent’s death, says Mr. Bloom. Yet another alternative: a so-called life estate. Under such an arrangement, a parent exchanges a lump sum for the right to live in a home until death, when the parent’s interest in the property evaporates. But if the home is sold while the parent is still alive, the life estate provides some protection in the form of a share of the home’s proceeds.