The kids are out of the house, your office building is a faded memory, and you’ve got lots of time and space all to yourself. Those are some of the purest joys of retirement. But a sudden change in circumstances could have you considering whether to live with one of your adult children once again.
It might be the death of a spouse, mounting medical and household expenses or a disability that has you mulling over an invitation to move in with one of the kids. Or maybe a job loss or a divorce brings the kid to your doorstep with suitcases in hand and boxes in the trunk of the car.
Yan Ross, an attorney who shares his Arizona home with his wife and 89-year-old mother-in-law, says living arrangements like his are still much more common than when an adult child moves in with a retiree. But he can see a future where more middle-agers might be seeking shelter with their parents.
“I suspect that with the direction the economy has been taking, it will become a more common situation,” says Ross, co-manager of Boomers and Elders, a Cave Creek, Ariz., financial planning service for seniors and adult children with aging parents.
Whether you or your child is making the move, follow these six tips for the financial and emotional survival of your blended household.
One of the first things you’ll need to do is agree on how much the newcomer in the household will contribute to paying grocery, utility and other bills. What’s fair may be tempered by each person’s financial means, but it’s important to get this issue settled up front — and it’s probably a good idea to get it in writing. An attorney or financial adviser may be able to help you draw up a document.
“We prepare what’s called an expense sharing agreement, and we list what expenses are going to be shared and in what percentage,” says Jan Warner, a partner in the law firm of Warner, Payne & Black in Columbia, S.C., which specializes in elder law.
Leave property taxes and mortgage payments off the list, since those are not affected by how many people live in the home, he advises.
Beyond everyday household expenses is the matter of upgrading the home to accommodate physical limitations or simply to add needed space. Warner has had many cases in which the sale of the retiree’s home helped to pay for the changes. Other clients have funded the construction by purchasing a life interest or term interest in the child’s home. This arrangement, also known as a life estate, gives you the right to occupy your child’s home for as long as you live, or in the case of the term interest, for a specified period that does not exceed your life expectancy.
Actuarial tables are used to determine the value of the life estate by a percentage of the home’s value. The life interest decreases as the purchaser gets older. For a 75-year-old person, the life estate would be worth just over 52 percent of the home’s value, Warner says, while the owners would keep the remainder interest of about 48 percent.
Generally, you become responsible for the taxes, insurance and upkeep as long as you occupy the house. The owners will likely incur a long-term capital gain tax when they sell you the life interest, says Warner. If you are looking at this option, you should definitely consult a good attorney.
Sometimes resources can be pooled from a group. Drew Tignanelli, a Certified Financial Planner and president of Financial Consulate in Hunt Valley, Md., says that before the mother-in-law of one of his clients moved in, her four children chipped in a total of $100,000 to pay for renovations. “They basically built an in-law suite onto the house for her,” he says.
Being able to tolerate each other’s habits — and agree on the boundaries for what’s not acceptable — is essential to making this arrangement work. It’s a lot like learning to get along with your college roommate, only more complicated because of the inherent complexity of familial relationships.
Will your hovering instinct kick in every time Suzie stays out a little late, even though she is 43? Or maybe it will be your late-night habits that cause conflict. Say you’re used to staying up till the wee hours watching old sitcoms with the volume maxed and laughing as loud as you please. Sonny, daughter-in-law and the grandkids have to turn in early so they can get to work and school on time in the mornings. If you’re going to share living space, be prepared to make a least a few lifestyle compromises.
Valerie Wiener, author of “The Nesting Syndrome: Grown Children Living at Home,” dedicated the book to her father, a successful attorney and businessman who lived with her for the last four years of his life, starting at age 77.
“He said, ‘You don’t have to take care of me,'” says Wiener, who is now a Nevada state senator. “Well, the first dinner I cooked, he made that clear because he went into a bedroom and watched the ballgame. So I didn’t set the table anymore. But we were very good friends.”
Because of his independent spirit, Wiener sometimes had to remind her dad to let her know of his whereabouts so she wouldn’t worry about him. “That’s what you would do for a friend,” she says. “The family should be no different.”
Maybe you’d rather cut off your right arm than even think that your Sonny or Suzie might take advantage of you. But look at it this way: The controls you put in place now as to how much of your assets they can touch could save all of you from hurtful misunderstandings later on.
Warner recommends that the child you’re living with stay out of your personal financial affairs. “There’s too much of a close fiduciary relationship,” he says.
On the other hand, Evan Beecham, a Certified Retirement Financial Advisor and owner of Beecham Financial Services in Hillrose, Colo., says the decision depends on how well you and your adult child/roommate get along. “I think it’s a good idea many times, if the relationship is good with the child and the adult, to be able to work together and for the child to help the retiree,” Beecham says.
One more thing: Think twice before changing the deed to your home. Tignanelli recalls the case of a 60-year-old widow who had a large mortgage on her home. Her married daughter proposed moving her family into the house and helping to pay the mortgage. The son-in-law thought the couple was entitled to part of the equity in the house in exchange for these payments, so their names should be added to the deed.
“She agreed to this, even though her lawyer warned her not to do it,” Tignanelli says. “A year into living together, they couldn’t stand living with each other anymore.”
The mother decided to sell the home and move. After paying just $9,600 toward the mortgage over 12 months, the couple received $60,000 for their share of the proceeds, while the mother got $90,000. “Now, either they were the greatest investors since the beginning of time, or they ripped their own mother off,” Tignanelli says.
Even if the relationship doesn’t sour, there are other reasons why your kids’ names should stay off the deed.
Some of the choices you make now about giving financial support to your children or reimbursing them for expenses could affect your ability to afford long-term care down the road. Say you need nursing home care at some point, but you’re strapped for cash because of the large amount you put into renovating Sonny’s house when you moved in. You look to Medicaid for help, and then comes the catch, says Tignanelli: “You report giving money to build the in-law suite, and you could become ineligible for Medicaid assistance.”
A nursing home may not be your only option. “Absent being bedridden, there’s no reason why parents can’t stay in their children’s home for a long time with a companion caregiver, at about two-thirds of the price that they’re going to experience if they go to a nursing center,” says Dan Taylor, president of Wealth Capital Group in Charlotte, N.C. and author of “The Parent Care Conversation.”
The point is that you need to plan ahead. Beecham warns families he works with that long-term care “could be one of the biggest drains on their assets.”
Ross says he and his wife encourage his live-in mother-in-law to speak up for herself when it comes to making family decisions about finances, lifestyle and care giving. He also urges clients to communicate their desires and expectations, and for the parents he adds another piece of advice. “If you don’t have a will, get one,” he says.
Along with a will, Taylor would add a power of attorney and a health care directive to the list of must-have documents. “They don’t have to read those things to their children, but they should let their children know where those documents are, especially if the children are named as authorities inside those documents,” Taylor says.
Sharing a home with an adult child again may not have been part of your retirement plan. But if you think carefully about what you need to make the situation work and discuss it upfront, the change could become less about losing freedom than about gaining a great companion. Even Wiener’s free-spirited father told a business colleague that the best years of his life were the time he spent with her.