Multigenerational Living Arrangements

“Aging in place” is frequently what a person most wishes to do. There is nothing like the comfort of the familiar family home, particularly if neighbors, friends and other members of the family come by for frequent visits. For many elders, though, staying in their own home just isn’t always feasible. They may have problems that are creating high risks of injury and illness. They may not be aware that they are even having these problems.

It may be too difficult and unsafe to climb up and down stairs. They may not be able to do everything for themselves any more, such as doing their own grocery shopping or taking showers without help. This might be because of physical problems such as arthritis, degenerative spine disorders, swelling in legs and ankles, or vertigo. It might be because of confusion and disorientation that can be caused by a host of medical conditions. They may need assistance managing medications because otherwise they might forget to take their pills or may inadvertently take too many.

In many respects, the medical cause of the inability is less important than the “facts on the ground” – that living alone is no longer a safe option. Hiring live-in care is an option if the parent has substantial savings. Moving to a new place with assistance is another.

How about the option of moving into the home of one of the children? This arrangement often solves those problems and creates a way to stay within the family setting. There are plenty of legal issues to consider, though. Here are some of them. The parent should consult with an elder law attorney and a financial professional to make a plan that addresses the parent’s situation. The child should consult with his or her own attorney and financial professional as well – these are major financial and legal transactions which will impact the parent and child differently.

• Determine the Level of Care Needed It’s important at the outset to be realistic about the level of care needed to assure that the parent is physically safe. Does there need to be someone at the house with the parent at all times? Is the parent cognitively impaired, so that in an emergency they wouldn’t be able to phone for help or get themselves up from a fall or out the door? Is it truly sufficient for the parent to be home alone during the day, with assorted neighbors or kin dropping in?One cannot assume that if the parent has serious cognitive impairment, they will simply “sit in the living room and watch TV” all day. Will they remember to take their scheduled medication? The cost of in-home daytime care can be several thousand dollars per month. Even for a parent with no assets and low income, Medicaid’s home care program is quite limited, and currently no one whose gross monthly income exceeds $2,130 can even apply.
• Zoning Restrictions Can the one-family house be converted into a mother-daughter or a two-family house? Will a variance be required? If that isn’t feasible, can the child build a different sort of extension onto the house to accommodate the parent without a separate kitchen? (This is sometimes called a “bounce-back room”.)
• Ownership The parent was a homeowner and is now becoming a tenant. Does the parent want to become a partial owner, to provide the parent with greater security?
• Who Pays for the Construction? If the parent gives the child the money for the construction and does not receive an ownership interest, this payment may be viewed as a gift or “uncompensated transfer of assets” if the parent has to apply for Medicaid to pay for nursing home or home care services within five years.
• Sale of a Partial Ownership Interest to the Parent The child can sell the parent a partial interest and receive payment at fair market value for that partial interest. If the property is ever sold, the parent will receive their pro rata share of the proceeds. The sale would be handled with the same formality as any other closing. The child may have to pay transfer taxes, capital gains taxes or other fees to the state or federal government depending on the laws in effect at the time.
• Contribution Towards Household Expenses An agreement for the use and occupancy should be developed so that the parent is paying an agreed amount every month in lieu of rent. Payments should be done by check. It is preferable for this agreement to be in writing and signed by all parties. The dollar amount can be adjusted every year.
• Other Payments to the Child to Thank Them for Helping Out The parent needs to be very cautious with these kind of arrangements. Simply handing over money could be viewed as a disqualifying “gift” if the parent applies for Medicaid within five years. If they are paying wages to a child for actual care-giving services, then an employment contract should be signed at the start of the arrangement, which specifies the rate of pay, the amount of hours per week and the duties the employee will perform. Appropriate tax reporting should be done by both the parent and the child/employee. Payment of wages should be done on a weekly basis, by check. The child should maintain work records, documenting hours spent and tasks performed. The parent should save the documentation for at least five years, including copies of the cancelled checks. Even with all this documentation and contracting, if the parent applies for Medicaid within 5 years, this arrangement will be examined to see if a gift was being made by the parent to the child.
• Have a Family Meeting When there are multiple children in the family and the parent chooses to move in with one of them, there can be friction with other family members who may be suspicious, or may worry that their access to the parent will be disrupted, or may worry that the parent’s health care or finances will be improperly managed by the child. The child who the parent is now living with may want to place limits on visitation by other family members. Talk things through so that reasonable arrangements can be made.

Careful planning can prevent a crisis. By thoroughly analyzing all the issues before entering into a multi-generational living arrangement, everyone’s interests can be protected and family harmony can be preserved.