Multigeneration living, where adult children and their parents or grandparents share a home, has many benefits. This includes the ability to care for each other, as well as providing emotional and financial support. But multigenerational households can also create a variety of financial issues, especially questions about homeownership.
In 2017, 79 million adults in the U.S., or nearly 32% of the adult population, lived in a “shared household” – meaning two or more of the adults in the home are not intimately attached, according to the Pew Research Center. More recently, and partly because of the COVID-19 pandemic, a record number of younger adults 18-29 are living with their parents, the Pew Research Center reported.
No matter what brings families together under one roof, there are questions that should be answered to avoid potentially costly legal and tax issues should a member of the household die.
Three Questions to Ask in Multigenerational Homes
- Whose name is on the deed? The family-occupants may consider becoming joint owners, which creates rights of survivorship and helps avoid the probate process if one of the joint owners were to pass away. Another option is to become tenants in common, which would likely not avoid the probate process should one of the owners predecease the others, but could lead to better financial equality for the deceased owners’ heirs.
- Who is paying expenses, like property tax, repairs, food, etc.? A family member who is not a homeowner may be contributing to household expenses and may even pay for an addition to the home. Financial contributions to a home by a non-owner can create sticky situations should the non-owner need to move away without enjoying the financial benefits, including increased home value, of their investment.
- Is there a chance that someone in the household or co-owner of the home will need to apply for Medicaid anytime soon? Medicaid applications are scrutinized to determine if an applicant has assets to pay for care and if assets were gifted to family members to become Medicaid eligible There could be unintentional ramifications to one’s actions that may inhibit a family member from becoming Medicaid eligible soon.
Multigenerational Homeownership Options
There may be other options to consider, such as the creation of a life estate for one of the household members by changing the language in the deed to the home or creating a family trust. All these options must be carefully considered to provide the best outcome for all family members living together. And, if there are family members that have an interest in the home but don’t currently live there, there can be additional issues around inheritances. However the matter of home ownership is handled, it is critical that estate planning documents, including Wills and trusts, clearly state the owner’s or owners’ intention(s) for what happens to the home upon his or her death. It is very important to consult with an elder law attorney whenever a multigenerational household is being formed to help avoid many of these issues.
There are many good reasons for multigenerational living. Timothy Rice Estate and Elder Law Firm provides guidance to families to minimize financial risks and protect everyone’s interests. Contact us at 856-782-8450.