Caring for Mom and Dad: Financial Considerations of Sharing Your Home
As people age, their health and mobility can decline, and they may find it difficult to live independently. In some cases, elderly parents may need to move in with their adult children to receive assistance with daily tasks and medical care. While this can be a great way for families to come together and provide support, it likely also involves additional expenses.
Here are some of the most important financial considerations to take into account if you are thinking about having one or both parents move in with you:
Healthcare costs: The most recent study of healthcare costs in retirement by Fidelity found that the average 65-year-old couple will need $315,000 to cover medical expenses – and that doesn’t include long-term care. When elderly parents move in with their children, it’s important to consider how costs like prescription drugs, medical equipment, and doctor visits will be covered. If your parents are 65 or over, Medicare or Medicaid may provide coverage, but it’s always a good idea to check beforehand to see what expenses may not be covered.
Home modifications: If your mom or dad has mobility issues, it may be necessary to make modifications to the home to accommodate their needs. This could include installing a wheelchair ramp, widening doorways, or adding grab bars in the bathroom. These modifications can be expensive, so it’s important to budget for them and to consider any government programs that may provide financial assistance.
Living expenses: When your parents move in with you, how will you handle their everyday living expenses? While they may contribute to living expenses such as food, utilities, and household items, your parents may also need to budget for other expenses, such as the cost of a caregiver or home health aide. If you are able to have a money discussion with your parents, consider working out an agreement with them in advance of moving day, so you each understand your financial responsibilities.
Estate planning: It may not be something you’re thinking about now, but if your parents are living with you when they pass away, you should have a good understanding of their estate plan and your role in it. If your parents don’t have an estate plan, consider helping them set one up. This could include creating a will, establishing a trust, or updating beneficiary information on insurance policies and investment accounts. Estate planning can help ensure your parents’ assets are distributed according to their wishes and can help avoid disputes among family members.
Tax Implications: Depending on the type of living arrangement you have with your parents (i.e., whether it is a rental agreement or not), there may be certain tax advantages or disadvantages. Before finalizing your plans, consider consulting with a qualified tax professional to learn any potential tax implications, as well as how best to prepare ahead of time.
Inviting one or both parents to live with you is a major decision, not just for you and your parents, but also for others living in your household. Careful planning and good communication are essential as you navigate the challenges involved. Don’t forget to include your financial advisor (and/or your parents’ financial advisor) as part of the process – they may have experience working with clients in your situation and can share ways to make the transition as smooth as possible.