Multi generation family living under one roof?

[kdonnel]

You don’t know that. Before he passed away, my dad was weeks away from entering a nursing home. He had about $800,000 when my mom died, plus a house worth $600,000 (which we are closing on next week), but his Alzheimer’s had progressed to a point that we could no longer care for him (he had a live in for years, but that ended up not working out). My friend built on apartment onto her house for her husband’s grandmother (grandma payed for it, no rent) and totally regretted it. After she died, she made sure her adult daughter moved in, because her mother wanted to.

Yes, I know that. They have zero savings at this point and have had to go back to work part time at 75 and 72. They have been using credit cards to make ends meet for the past 5 years. They are all ready in the high 10's of thousands about to cross into the first 100's of thousands of debt.

 

[kdonnel]

that's a pretty large range for anticipated debt. if it's b/c of no ltc insurance then getting an elder law attorney's advice could be even more valuable. i don't know how old your in-laws are but if they are older then having the agreement on the monies they expend for the basement documented in a certain manner could be vital if they find the need for medicaid. as has been discussed in another current thread the 'look back' period is comprehensive and absent doing the transaction in a certain way/documenting it appropriately it could create up to years of otherwise eligible coverage being unavailable.

The one thing they have covered is medical. He retired from at&t at a time where the retirement still covered all the necessary Medicare gap insurances plus dental for the life of the retire and spouse.

 

[Frozen Canuck]

I found the thread I was thinking of:

https://www.disboards.com/threads/looking-for-advice.3629354/

Thank you!!! I spent ages yesterday trying to find this post, because I could remember it as well. I had no luck, no matter what search terms I used. Now my mind can rest again...until the next thing that frustrates me comes along.

 

[Nancyg56]

This is where cultural differences lie.. For you this is a "business Transaction" for many cultures this is called "taking care of your own" and how family works.

This situation is not "taking care of your own". It is a business arrangement and one that may have zero benefit for the IL's outside of having a place to live. I have no idea what the costs will be or what that amount translates to for the iIL's or for the OP, but I can bet you dollars to donuts that if this arrangement did not work out, each party would have the cost down to the penny burned into their brains.

OP- if you want to open your home to yoru IL's, and if that entails renovating your basement then I would suggest you assume the cost of the renovation and expect that that cost is yours alone. If the IL's decide to move in, then the financial arrangement whole they live there could encompass the cost of the renovation, but call it what it is: Rent. Be sure you can afford the entire package on your own, and that if the IL's decided this arrangement was nto working out, or if they decided FLorida was calling them, that you woudl not be upset paying for your newly finished empty basement apartment.


My DD and DSIL lived with us for several years while they saved for their own home. It was not a perfect arrangement, but it was a good one. You know upfront that both families are giving up privacy, and you know that both families are compromising their lifestyles to be together, but knowing something and actually living that are two different things and you will not knwo if both of yoru families can make that compromise.

It seems to me that your MIL already has some concerns, and she may know a bit more about this kind of compromise, and how you all may react once this plan is in place than she wants to share for now.

My DH loved having our DD and her family with us and he really would have moved Heaven and Earth to add onto our home and have them stay indefinitely. (He adored our DGD then and does now still) however once he started mentioning that, DD and DSIL hotfooted it to the nearest REaltor and bought their home, and I did not blame them. For them, and for me, there was a difference in a temporary arrangement that was working well for the most part, and a long term commitment to giving up the majority of your privacy and control over many of your decisions. I think the best thing they did for them was to make that decision to move on, because their little family unit just got closer and closer, which is what we both really wanted for them.

For your IL's, if they agree to this long term plan, complete with a financial commitment, in writing or not, they are agreeing to give up a lot of their autonomy in order to have a home with you. If things go belly up there is a solid chance that their relationship with their daughter may suffer, so think long and hard how you approach this.

 

[mom2rtk]

Thank you!!! I spent ages yesterday trying to find this post, because I could remember it as well. I had no luck, no matter what search terms I used. Now my mind can rest again...until the next thing that frustrates me comes along.

You're welcome.

I was pretty sure I had posted in that thread, so just searched for posts from me in this forum with the word "addition". And there it was.

 

[clutter]

As for zoning allowing for a mother in law suite in the basement it is not an issue. It is not multi family but multi generational in a single family home. The basement would remain accessible from inside the home and would not be a totally separate apartment.

What you are talking about its multi family, not an in law suite, so you need to check the zoning.

Other than that, it doesn't matter what other people think, just what you and your family think. But you would probably want to hire an attorney to draw up a contract. Since your in-laws are paying a part of it, but getting no ownership rights, that isn't a good legal structure for them. They could loan you the money, which would be paid back to them or their estate (if your spouse isn't an only child and sole beneficiary), or you could sell them a share of your house.

Another consideration is everyone's ages. Are they retired? Are they working? It sounds like the parents have different ideas of what they see their lives being at this point of their life. Perhaps one will be giving up a dream of a bit of independent travel? What will your parents do if one or both of them decide they'd prefer to live in an independent living place with their peers? Or if one or both of them require assisted living and/or nursing care? I'm not asking for you to answer here, but these are all considerations for you all to have some very frank conversations about.

 

[ronandannette]

...Do you have siblings that will receive part of an inheritance? Have you thought about how you are going to settle the estate when they have money invested in your house as their residence?

Do you have a repayment plan for the basement if they decide it does not work out and they want to move out?

What about if you decide to move? Since the finished basement will up the value of the house on top of the money that was put into finishing it, will you have a legal document to give them their investment money back and a percentage of the increased value of the house?

Will you have a backup plan of where they will live if you need to move?

If they are just gifting you the money to finish the basement so that they can live there, are you prepared to pay the gift taxes over $30,000 ($15,000 gift from each of your parents?)

Although I disagree with having the parents pay to reno the basement, I also vehemently disagree with the bolded above regarding the "estate". The parents own nothing to any of their children in terms of preserving-the-wealth. They are alive, in charge of their faculties and entitled to spend whatever they have. Any financial decisions they make now are their own and it's really no business of anybody else's.

It's ridiculous to suggest the OP needs to divvy up with any other siblings. If he's coercing or manipulating the parents in some way for his own gain, well, that's another matter that the siblings should step into, but for the protection of the parents only - not their self-interest in a future pay-out.

Yes, I know that. They have zero savings at this point and have had to go back to work part time at 75 and 72. They have been using credit cards to make ends meet for the past 5 years. They are all ready in the high 10's of thousands about to cross into the first 100's of thousands of debt.

If this is the case, where are they going to get the money to pay for your basement reno?

 

[kdonnel]

Although I disagree with having the parents pay to reno the basement, I also vehemently disagree with the bolded above regarding the "estate". The parents own nothing to any of their children in terms of preserving-the-wealth. They are alive, in charge of their faculties and entitled to spend whatever they have. Any financial decisions they make now are their own and it's really no business of anybody else's.

It's ridiculous to suggest the OP needs to divvy up with any other siblings. If he's coercing or manipulating the parents in some way for his own gain, well, that's another matter that the siblings should step into, but for the protection of the parents only - not their self-interest in a future pay-out.

If this is the case, where are they going to get the money to pay for your basement reno?

They will clear about as much as is needed to finish the basement when their house sells. We have discussed them paying half the cost so leaving them with a cushion of cash that they could use to reduce their debt if they wanted(I see no reason to at this point, their debt would just die with them) or to actually enjoy life for a bit.

 

[ronandannette]

They will clear about as much as is needed to finish the basement when their house sells. We have discussed them paying half the cost so leaving them with a cushion of cash that they could use to reduce their debt if they wanted(I see no reason to at this point, their debt would just die with them) or to actually enjoy life for a bit.

A bit OT but since you raised it, at their ages they've got perhaps as much as 20 more years to live. They'll either need to service the debt for all those years or default on it at some point. That's pretty bleak and it makes me feel sorry.

 

[kdonnel]

What you are talking about its multi family, not an in law suite, so you need to check the zoning.

Is it really? Perhaps the definition varies by region in the country.

If it is it will not be a problem. There are already 3 fully permitted finished basements in my neighborhood that I know of with separate entrances and kitchens and many more where the basement was finished for a play room, home theater, extra bedroom, etc.

I know we have gone to many Street of Dreams events in the Metro Atlanta area and the some of the show homes always had fully finished basements with full kitchens in new construction in single family neighborhoods.

 

[kdonnel]

A bit OT but since you raised it, at their ages they've got perhaps as much as 20 more years to live. They'll either need to service the debt for all those years or default on it at some point. That's pretty bleak and it makes me feel sorry.

That harkens back to the fact that eventually they will probably end up living with us anyway. Either now or later after they go bankrupt or when they no longer have the skills to live on their own.

I see this as an opportunity for them to invest in the quality of their living space. Either way we will at some time in the future be responsible for their care and will need to provide a place for them to live.

 

[mnrose]

We purchased my MIL a home near us a decade ago, and "lease" it to her at well below market rates. It is close enough that we can get over there quickly and take care of any issues, but far enough that we both have autonomy. We discussed having her move in with us (and we already had a completely separate space in our house) but decided against it. I love her dearly, but day to day, she would drive me insane.

For US, the answer was the separate home very close. Works great....but even that has not been without controversy. We work through it....it's certainly different than having an "arms length" landlord/tenant relationship. We make modifications to the property that we would NEVER do for another tenant, and she asks us for things she would never ask another landlord to do. So there's that. But, overall, it's been the perfect solution for us. IF you can truly maintain separate lives under the same roof, your suggestion could also work, but it would have to be (in my mind) understood that everyone gets their privacy and neither side should feel free to drop in on the other without clearing it in advance. I don't just "drop in" on my MIL...we call and find out if it's a good time. The same should apply even if it's the same structure you live in.

 

[lifesavacation]

We purchased my MIL a home near us a decade ago, and "lease" it to her at well below market rates. It is close enough that we can get over there quickly and take care of any issues, but far enough that we both have autonomy. We discussed having her move in with us (and we already had a completely separate space in our house) but decided against it. I love her dearly, but day to day, she would drive me insane.

For US, the answer was the separate home very close. Works great....but even that has not been without controversy. We work through it....it's certainly different than having an "arms length" landlord/tenant relationship. We make modifications to the property that we would NEVER do for another tenant, and she asks us for things she would never ask another landlord to do. So there's that. But, overall, it's been the perfect solution for us. IF you can truly maintain separate lives under the same roof, your suggestion could also work, but it would have to be (in my mind) understood that everyone gets their privacy and neither side should feel free to drop in on the other without clearing it in advance. I don't just "drop in" on my MIL...we call and find out if it's a good time. The same should apply even if it's the same structure you live in.

That seems like a really fair arrangement.

 

[Pea-n-Me]

If we’re talking about alternatives, another option (that I’ve seen people do) is to purchase a house together that either already has an in law or something like a duplex or two family. I think you would still need to think about handicap issues with such a situation, though, as well, and ideally use an attorney so all issues - if this is a concern - are above the table. I imagine some will bring up the credit issue, but if they sell their house, it sounds like they will have cash on hand to work with.

Nursing care issues are real - and they don’t necessarily happen only when very old. People can start having medical issues any time, plus there are two of them to be considered. And there can be a long way between “Ill” and “nursing home”. Generally in a living situation like that, family will be expected to help out, at least somewhat. Think about that, as it can impede the lifestyle you enjoy now if it comes to that. Also discuss their assets with an elder attorney in case nursing home care is needed. (That is a whole thread by itself, and I think there have been some recent threads on that subject, too.)

 

[Bianca and Bernard]

If my MIL ever moved in with us, DH and I would be divorced in less than a year. There is NO NO NO way it would ever work. She can't even come over for dinner without leaving emotional chaos, and my BIL had a similar setup as you - 1-bedroom basement apartment with an entrance that she didn't share with the upstairs - and she STILL caused drama in that house.

We have had many family members of DH's live with us for various lengths of time over the years, and after this last one, we both agreed that it causes too much stress on our marriage and we will say no for now on. We started rearranging our house flow the day the last relative left back in April to create living spaces out of the mainfloor bedrooms, so instead of having a 4 bedroom+finished basement bedroom we now have 2 bedrooms+finished basement bedroom and ZERO extra space for an added person. In 5 years when DS13 is done with high school and we move, we will look for a small open-concept home that fits the two of us perfectly with no space left for inlaws. The way DH's family works is that if there is a spare room or a finished basement, they think that that means there is extra space for them to come and live.

Nope. No way. Not ever again!

OP - as everyone else has said, you have to determine whether you REALLY want your in-laws living so closely to you. I have a few relatives where your scenario would work, but for the most part, I wouldn't want to live that close to anyone.

My MIL lived with us for 3 months. I was so happy she decided that her daughter needed her again (I guess more than her own health, but hey, not my problem) and she left. So many headaches dealing with her....

 

[Hrhpd]

They will clear about as much as is needed to finish the basement when their house sells. We have discussed them paying half the cost so leaving them with a cushion of cash that they could use to reduce their debt if they wanted(I see no reason to at this point, their debt would just die with them) or to actually enjoy life for a bit.

You may want to talk to a tax attorney before they sink their house proceeds into your house.

The IRS is going to want accountability for the money earned from the sale of the house. Will their be capital gains on the proceeds? The money will either be a gift to you to help you finish your basement or a purchase of goods that might be seen as part ownership.

1) you will owe gift taxes after a certain amount if this is a gift to you to finish your basement. Case in point; a really good friend gifted their son with an expensive ($75,000) gift for their college graduation. After claiming $30 in gifts (IRS allowable $15k from each parent) he got hit up for having to pay expensive gift taxes for the remaining $45,000.

2) If it is an investment, creditors are not going to see it that way (their debt dying with them) and might be able to demand payment from their estate (your basement)

3) What are the implications to your taxable rate? How is having to claim rental income going to affect what you owe? Is it worth it?

 

[Hrhpd]

Although I disagree with having the parents pay to reno the basement, I also vehemently disagree with the bolded above regarding the "estate". The parents own nothing to any of their children in terms of preserving-the-wealth. They are alive, in charge of their faculties and entitled to spend whatever they have. Any financial decisions they make now are their own and it's really no business of anybody else's.

It's ridiculous to suggest the OP needs to divvy up with any other siblings. If he's coercing or manipulating the parents in some way for his own gain, well, that's another matter that the siblings should step into, but for the protection of the parents only - not their self-interest in a future pay-out.

If this is the case, where are they going to get the money to pay for your basement reno?

It has nothing to do with parents having to divvy up with any siblings. There can be legal ramifications for investing money into a property that has the possibility of becoming part of their estate. If they are not investing in the property, they are givng a a gift of money to the OP, where he will have to account for it and pay gift taxes if owed. Or if it is a purchase from the OP of part of a basement, it might be seen as a tangible item which is now part of their estate. Siblings, creditors, others may have legal claim to it. Best to consult an attorney and have everything lined up legally such as a will that leaves the basement to the OP upon their death.

Also, what if they move out and sublet their basement apartment (that they now own part of) to someone else that the OP doesn't care for?

My brother and I had this very conversation about selling my mother's house and building an addition onto our house for her. After talking to the attorneys, financially, it was not worth it. Capital gains on her house alone would take a big portion of her proceeds. We would have to charge her rent, which we didn't want to do, but had to otherwise her social security and pension could be affected with our household incomes now being added in. Add to that the change to our tax liability for having to charge that rent, the additional yearly property taxes due to substantial improvements, and all the legal nightmares of her investing her money in a residence in our house, we decided it was not worth it. Her will divides her house between the two of us, so we would have to jump through hoops to make sure he got half of what the house sold for at the time of her passing. Which meant we would have to "buy back" the addition to give him his money as I would never, ever try to short him.

He is now living with his daughters in her house where he can oversee the home health aides and we will deal with the house and the estate as directed in the will when the time comes.

 

[barkley]

Although I disagree with having the parents pay to reno the basement, I also vehemently disagree with the bolded above regarding the "estate". The parents own nothing to any of their children in terms of preserving-the-wealth. They are alive, in charge of their faculties and entitled to spend whatever they have. Any financial decisions they make now are their own and it's really no business of anybody else's.

i agree with this BUT, having had to execute an estate for a family member whose asserts upon death were greatly less than some beneficiaries anticipated entirely based on the sale of their home a handful of years prior to their death i quickly learned it can fall upon the executor in their fiduciary capacity to account for where the money went and determine if there were any outstanding loans.

it's pretty straight forward if an executor can see that x was the net income from the house sale and they spent y each month of that money to supplement their income, or they invested z in a bad investment that went south but where it gets sticky is when you see chunks of money being given to family members or a large sum to someone on behalf of a family member. unless there's something in the corner of the check that says 'gift' (and if it's at the taxable amount for the giver-they reported it on their tax return for the corresponding period) it can get nasty-quick. nastier still if the estate has significant outstanding debt. it works out much better for all concerned to have things spelled out.

Yes, I know that. They have zero savings at this point and have had to go back to work part time at 75 and 72. They have been using credit cards to make ends meet for the past 5 years. They are all ready in the high 10's of thousands about to cross into the first 100's of thousands of debt.

if that's the case then before i committed any money to a project of this scope i would want to make sure they don't have any current outstanding liens or judgments, let alone that they are current in their mortgage and/or property taxes. if they have such minimal income from pension/social security/2 part time jobs that they've had to amass approaching 6 figures of debt to keep going month to month then it wouldn't surprise me to see that they've done something to use the home as security for that debt.

 

[kdonnel]

We purchased my MIL a home near us a decade ago, and "lease" it to her at well below market rates. It is close enough that we can get over there quickly and take care of any issues, but far enough that we both have autonomy. We discussed having her move in with us (and we already had a completely separate space in our house) but decided against it. I love her dearly, but day to day, she would drive me insane.

That is the approach we took with my parents. We owned the home and leased it way below market rate to them. It worked out great but they wanted to live near a military base to capitalize on their retire benefits so it was not close to us. Once it was just my dad, he moved up closer to us and pretty quickly moved in with us.

 

[kdonnel]

if that's the case then before i committed any money to a project of this scope i would want to make sure they don't have any current outstanding liens or judgments, let alone that they are current in their mortgage and/or property taxes. if they have such minimal income from pension/social security/2 part time jobs that they've had to amass approaching 6 figures of debt to keep going month to month then it wouldn't surprise me to see that they've done something to use the home as security for that debt.

They amassed the debt because they retired 15 years ago and did not change their lifestyle at all despite their annual income dropping by 70%. A little tiny bit at a time until they owe what they owe.

They are current on their taxes and mortgage and do not have any liens or additional mortgages on the home beyond the first.