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SHOULD YOU BUY A HOME WITH YOUR CHILD?
By Liz Perry
It is becoming more common for adult children and their parents to consider buying and sharing a home together.
Two factors which contribute to this phenomena are a) we are living longer, and b) it has become increasingly difficult for young adults to save enough to buy their own home. Therefore, it's not uncommon for a parent and a child to decide to pool their resources and buy a home together.
If all goes well, everyone will be a winner. The parent will be able to reduce the likelihood of going to a nursing home since there will be family members near at hand to assist him or her. An adult child who may not have been able to save the down payment for a home and who was concerned about an elderly parent living alone will be able to solve both those concerns.
If you are considering sharing a home with your child, you and your child should sit down and deal with how you will handle the unexpected. Ideally, you will then put your agreement in writing. Some of the questions that you should address are the following:
1. If you need Medicaid, have you thought through the possibility and implications of a Medicaid lien on your home you own with your child?
2. Is your current medical condition so severe that it is not realistic that you will be able to stay at home for long – even with a child nearby?
3. If there is an element of gift between you and your child when you set up ownership, how long will that gift disqualify you for Medicaid?
4. Should both your and your child’s name be on the deed?
5. How should you define your interest in the house if you, for instance, are providing the down payment and your child is paying the mortgage payments?
6. What do you do if your child gets divorced and his or her interest in the house is an asset that gets distributed in the divorce?
7. Do you have more than one child? How do you deal with the natural desire to leave your assets equally to all of your children but avoid the difficulties of having one child then be a co-owner of his or her home with siblings who may want their money "now”?
8. What if the arrangement does not work out and one party wants to leave? Can they force a sale or should the agreement give a period of time for the other party to be able to refinance or sell in an orderly fashion?
9. If your child, who is supposed to be paying the mortgage doesn't do it, what is the most efficient way for the you to step in, make the payment and be able to assume full ownership of the house?
10. What if one of the parties pays the cost of making significant additions to the house? How will their increased interest in the equity of the house be recognized?
11. How do you split the taxes, maintenance and insurance especially if you are not going to live there year-round?
12. What if your child or their spouse gets transferred to a new job location?
Parents and children sharing a home can meet many of the emotional, financial and physical needs of both parties.
However, to be successful, it is important for all parties involved to forthrightly discuss how potential contingencies will be met and dealt with. It's much better to deal with those issues while everyone is optimistic and positive about the situation. Tensions are common when people share living space no matter how much they love each other. By having an agreement beforehand, hopefully you will avoid hard feelings.
Elizabeth A. Perry has been helping Clark County residents with their estate planning and probate needs since 1976. She is a frequent seminar speaker. Her practice emphasizes probate, Medicaid issues, wills, trusts, incapacity issues, guardianships and durable powers of attorney. Phone: (360) 816-2485 Fax: (360) 816-2486
(The above should not be construed as specific legal advice and is intended for general information purposes only.)
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