Financial arrangement when parents move in?

12 years ago

I'm wondering how this works. This is not a caregiver situation at all. My parents just turned 70 and are independent.

However, they have no money. Well, they have very little money. Mom is retired and dad is still working but it's a physically taxing job and he's just not able to keep up with it anymore. They have a home with a mortgage and maybe $50 or $60k in equity. They have a small retirement fund ($400k) and of course SS but they can't make the mortgage without income.

This post isn't about the particulars about space and personalities, etc. I'm just curious about financial responsibility of parents. I'm not wanting to offer a "get out of jail free" card. I'm just thinking about offering an alternative that will allow my dad to retire.

Should I charge rent? Would it be outrageous to ask for the equity when they sell there house? How do I know if I'm asking for too little or too much? What if something happened to me or DH and our living situation changes?

I have no idea where to go to ask these questions, would a financial adviser have the answers?

Featured Answer

jakkom

12 years ago

Here's something nobody else seems to have offered:

First, nobody moves into your home without having completed/updated their legal and financial documents. This means wills (or trusts), financial PoA, and durable healthcare PoA, INCLUDING the POLST form done separately, printed in multiple copies in the advised bright (ultrabrite, actually, but regular bright will do) pink color.

If they live in your house you should be primary agent for healthcare decisions. Period. One of your sibs should be secondary agent. Do not do the usual "everybody shares responsibility" as co-agents. Blood does not mean everybody will agree in an emergency, do-we-pull-the-plug situation.

This means you, too, need your legal and financial house in order. All you need is for everybody to be in the car together and one dumb DUI driver runs a red light on you....imagine the worst. Then plan for it.

OK, now the legal/financial stuff is done. And you've all talked about what they want, should the worst happen. You know what their wishes are, and so do your sibs. Write it up, email it so it's in writing and clear. Ten years from now, you may need that, so keep it handy with the legal/financial docs which YOU are keeping track of, on their behalf (just in case). Yes, they should know where you're keeping them, as should your sibs.

You might want to set up the checking acct as a POD (Payable On Death) account, or at least have co-title on it. Remember that upon death, the last Soc Sec check is usually refunded back to the government, so there'll be less available cash than there looks to be at first. Liquidity is very important in dealing with any sudden disability or death. Otherwise, you'll need the reserves to cover emergency expenses on your own to be repaid later (with receipts), which can be a strain if you're not expecting it.

If they are 70, then save as much of their funds as possible to deal with extreme old age when they start to need help. Do NOT automatically open your wallet. Life gets more expensive as seniors age and become frail, so keep your reserves as deep as possible. The rule is usually, they need to use up their $$$ first, then look for city/county/federal aid, then family pitches in their $$$.

Figure out what's fair. My MIL had more $$$ liquidity than we did, so she was fine with sharing 1/3 the expenses.

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Comments (10)

rosefolly
12 years ago
I have an opinion. Well, you did ask.

I absolutely do not think you should ask for the equity they receive when they sell the house. That is their money, and if they want to use it for an emergency fund, occasional vacations, or even leave it to your ungrateful evil twin who never did anything for them, it should stay theirs. For example, if something should happen to you or your DH, it is all they will have to fall back on.

On the other hand, since they are becoming part of your household, and since they are competent adults, I think it reasonable that they should contribute, both in money and chores. If your house is set up with an in-law suite, they should take care of that part of the house. If not, they can do something else. Maybe your Dad would has a green thumb and would like to mow the lawn and tend the vegetable garden. Maybe your Mum is a great cook and could share in preparing evening meals. Or maybe one of them could pick up kids after school. Imagination is the limit.

Both the financial contribution and the designated chores should be negotiated before they move into your house. And here is the most important part: whatever is decided, it must feel fair to ALL the people involved. If not, you are setting up a situation where resentment will brew, tension will build, and your loving relationship will eventually be destroyed.

I like very much your idea of having a professional mediate the situation. You might actually employ a professional mediator as well as get financial advice.

Rosefolly
User
12 years ago
Depending on type of retirement fund at 70 1/2 it must be drawn from so they will have income but better to reinvest.

Negotiate before they move in or you will have problems. It sounds like even though they have retirement savings they may not be able to manage their money.

Things to think/discuss about is what happens if they become unable to take care of themselves. Starts to be fairly common at about 70. Are they expecting you to take care of them? Can mean leaving your job with loss of income. It could mean that you will have to hire someone so you can sleep as it often turns into a 24 hour job.

What about your partner's parents. Do you have room for them to move in? If you have children what do they think? If they are really active will they have to give up some of those activities when they move.

It might be better for them to move to an apartment or assisted living arrangement than moving in with you until such time as they need care.
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PhoneLady
12 years ago
First of all, it is really nice to hear from a son who would make this kind of sacrifice to try to make sure his Dad can get out of the rat race. I retired at 63 from a desk job and can not even imagine hanging in there until 70. Fortunately DH and I had the means to do so because the thought of moving in with any of our children (and love them all dearly) is one thing I would hate to do.

Have you crunched all of the numbers without your father's income and investigated all of the reasonable options for your parents to live independently within that amount? I would go that route and have them moving in with you only as an absolute last resort unless they have some specific health concerns where their physicians say they will not be able to take care of themselves very soon.

They have equity in their home, SS and some investments. Sure a million in investments would be much better, but they are far better off than millions of Americans making do on less.

Here in AZ, the new rage is building multigenerational homes with separate and distinct living areas. As much for in-law apartments as for those kids who return home or never leave. But those homes are built with that in mind. I think that's the only way I would ever be comfortable living with any of my children and their families.
marie_ndcal
12 years ago
Look into either senior apartments or assisted living for your parents. I made the choice to go to Asst. Living after DH passed away. Where I live it is based on income. I do not want to live with any of my kids. My choice. And in turn, years ago, my parents did not live with me. As they needed help, I found someone to live at their house. One thing I would suggest, is to get all the legal papers in order--medical, wills, etc. I was on my Mom's account so it saved a lot of problems. Now, with DH gone, one of my DD's is on all my accounts, and I updated my will with my 3 kids equally to manage my affairs if I cannot. I would suggest talking to a tax advisor about the income, also I would look around your area for Senior Counsel on Aging, Senior Centers, AARP (for information only) etc There is a wealth of information available ---supplement insurance with Medicare.
PhoneLady
12 years ago
Apologies.....you may be a daughter, not a son!
Elmer J Fudd
12 years ago
My suggestion depends on whether you're an only child, or if your parents have other children in addition to you.

Please advise.
MagdalenaLee
Original Author
12 years ago
Thank you everyone for your responses thus far. I'm in the spitballing stage and these responses have been helpful.

To answer some questions raised:

Are they expecting you to take care of them?
I don't think that would ever be the case however, I would be willing/able to help although not full time.

What about your partner's parents. Do you have room for them to move in?
Partner's parents are gone.

If you have children what do they think?
Child is grown and out of the house. He would be thrilled - one stop visiting!

Have you crunched all of the numbers without your father's income and investigated all of the reasonable options for your parents to live independently within that amount?
I don't have exact figures of what they have/don't have. I was prompted to look into this because my mom was looking at alarmingly cheap/inappropriate homes to purchase in very sketchy areas. Mom tends to make rash decisions and dad just goes along with whatever she wants.

My suggestion depends on whether you're an only child, or if your parents have other children in addition to you.
I have two siblings, both live far away (I live in same city as parents). One sibling has way more financial ability to assist parents and the other has none.
Elmer J Fudd
12 years ago
Here's my suggestion, it may work for you, it may not -

If you feel an obligation to your parents, it should be unconditional, not with an expectation of getting something in return. If they need financial help, you and your siblings should equally help out as best you can. If one can't contribute, keep track of what's given for splitting the pot (if there is one) down the road. If they live in your house, you get credit for rent and other expenses not charged and the others should contribute cash if needed.

We support one of our parents in this way, even though the sibling relationship has been sour for a long time, and it works fine.

I think it's great that you want to help your father have a comfortable retirement. Make it a happy outcome,
emma
12 years ago
Maybe they could buy a cheaper home with the equity and get lower payments. I think you all need your privacy. When we bought a new home we kept our old home for rental and to live in if our new mortgage was not paid off. That is what I would do if I lost my pension, I would never live with anyone. Having them live with you is very kind but it may not work out, then what. There are a lot of nice older homes in nice neighborhoods.

If they do come and live with you I would just ask for a little help with the food and water bill.

Financial arrangement when parents move in?

jakkom

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Financial arrangement when parents move in?

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