Due to the sputtering economy, the baby boomer generation approaching retirement age, and the ever increasing life expectancy, multi-generational households are becoming more common than they have been in decades. Due to the need to combine family incomes or in order to take care of an elderly or ill relative, grandparents, parents and children are sharing living space in increasing numbers. According to the Pew Research Center in Washington, D.C., in 2008, 49 million Americans or 16 percent of the population lived in households with at least two adult generations, an increase of 17 percent from 2000.  This trend comes with numerous legal implications and issues, some of which are discussed below.
When a parent and adult child choose to live together, numerous elder law and estate planning issues arise. First, Medicaid issues need to be considered. What if a parent contributes money for the child to add an addition to the child’s home for the parent to live in?  This could be construed as a gift that might affect parent’s eligibility for Medicaid if this becomes necessary within the next five years.  What if parent and child purchase a home together?  If parent is on the deed, parent’s ownership is an asset which would have to be liquidated and spent before Medicaid eligibility is attained. If parent is not on the deed, once again, a gift has been made that could affect Medicaid eligibility. The likelihood of running out of money and having to apply for Medicaid must be considered and discussed before entering into any of these arrangements. Also, a written lease should be executed if there is to be any exchange of monies, so that valid proof exists of expenditures of reasonable rents being paid as opposed to gifts being exchanged.
Estate planning issues also must be considered.  If parent and child own a home together, when parent dies, will the home have to be sold to pay decedent’s debts or an existing mortgage on the home? If child is not the only beneficiary, will the house have to be sold so that the estate can be divided among all of the beneficiaries? Should a survivorship deed be used, resulting in the ownership in the house transferring solely to the surviving owner, or are there other children to consider? How will the parent’s financial contribution to the house affect parent’s possible desire to treat all of the children equally after death? Would a trust help?  Possibly, depending on whether Medicaid assistance is likely to be needed in the near future.  Appropriate power of attorney designations also become more critical when an elderly relative is living with other family members.
All of these issues, as well as all possible future financial and health scenarios, must be evaluated thoroughly when entering into such a living arrangement. Discussing these issues with an elder law and estate planning professional prior to entering into a home sharing arrangement can help prevent possible unfortunate repercussions in the future.
© 2011, Ohio Family Law Blog. All rights reserved.
Joseph Balmer manages the Probate, Trust and Estate Administration department at Dayton, Ohio, law firm, Holzfaster, Cecil, McKnight & Mues, and has been certified by the Ohio State Bar Association as a specialist in Estate Planning, Trust and Probate Law since 2006.
