My parents are interested in giving money to my little family (husband and 2 kids) to increase our down payment on a home that includes space for them - either an in-law apt or extra bed/bath. What are things I should be considering with this? The extra funds has made us start looking at places that would otherwise be out of our price range - will this work? How do I factor in the taxes, heating, cleaning, repairs, etc of a larger home into a potential future budget?
Thanks for starting this discussion, Sara! We look forward to your future contributions.
Wow - What a really hard question. We purchased our current home with help from my parents because it would have been out of our price range. The question is: How old are they? Will they move in right away and pay rent? If they die soon, will you be able to afford the additional costs of either staying in the house or moving back to something smaller?
My parents ended up buying a house in our neighborhood - actually - one right next door. They have their own space, but are independent from us. What other conversations have you had about their assumptions about long term care, etc.? Are you available to help them when they need it? It has taken us a few years to figure out our relationship now that we are neighbors - they are 79 and 80 and extremely independent. When one of them is sick or away, it is fabulous being right next door.
Good luck trying to figure this out!
Sara, I love the idea of multi-generational living (assuming that everyone can get along, of course). As you and Lyn have already mentioned, there are a lot of legal, financial and interpersonal arrangements to be discussed and finalized.
Personally, I would not feel comfortable charging my elderly parents rent. Especially since I think that grandparents can be very, very helpful to all of the younger generations in the home. However, I think that it would be fair for your parents to give you enough money up front so that your down payment and mortgage principal are no different from what you expected to pay yourselves. Say you and your husband had decided that you could afford a $220,000 house-- which means approximately $20,000 down plus 200,000 mortgage. A similar home with an in-law arrangement might cost $260,000. That would mean $26,000 down plus a $234,000 mortgage. So they should give you $40,000 towards the cost of the house. I think that they should also pay their fair share of taxes, utilities and maintenance (perhaps prorated based on square footage). Beyond that, they should help you with the household chores and child care as best they can and you should help them with whatever they need as best you can. Like family!
#1 would be to look at any place with an eye towards how much it would cost to remodel for Universal Access. Disability or illness can strike without warning, and in an emergency you do not have two weeks (or sometimes even two days) to widen a doorway to accommodate a walker or wheelchair, or rip out carpet and install all smooth flooring.
#2 is that NO communal living takes place without the parents' legal and financial docs being put in order. No wiggle room on this one! It is imperative you or your spouse have legal standing as a healthcare agent and the right to talk privately with their attorney and/or financial and tax advisors when it becomes necessary - because it will, sooner or later.
#3 is that they be aware of the tax implications of gifting to you and your spouse. They can do a 5-yr carryforward on gifiting; just talk to the tax or financial advisors FIRST. Do not accept the gift without understanding how it fits in holistically with your and the parents' finances. The gift will be tax-free up to a (very generous) amount, but it needs to be reported to the IRS on their tax return.
#4 is the general conversation: will this gift to you seriously impact their ability to pay for increased eldercare costs? If you don't want to become a 24/7 caregiver at some point in the future, do they have sufficient funds to hire someone?
The greatest gift you can give elderly parents is your time, not your money. A lot of people forget this, and end up robbing their retirement to pay for their parents' care. Help them with the legal and financial, include them in your daily lives so they feel a part of them - while still allowing them their own privacy and social lives. As they age, be the one who manages the details of their care. There is a lot of help out there but it's chaotic and requires paperwork, something all the elderly are grateful when someone assists them with it.
And you may have to be proactive. My MIL came to live with us and didn't want to go into a "nursing home, because that's where you go to die." But she didn't fit well in our lives and it just worsened her dementia. Finally we moved her to a beautiful senior facility nearby, and she fell in love with it. Initially reluctant, she was active enough to fit into their daily activities and loved having people her own age to talk to, who had similar interests. The time she was there was the happiest we'd seen her since her husband died.
Sometimes we have to remember, we are family, but love isn't always enough. Our parents need friends as much as we ourselves do. If you can't supply that - we could not, for my MIL - having a home with the 'perfect setup' is only half the solution.
Good luck to you going forward. Having your parents with you can be an enriching experience, and especially for your children.
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