ADUs finally are here and will make it much easier for elders and disabled persons to remain at home for longer.
Things to think about:
- If it’s the parent’s house and kids are moving in:
- Are the kids going to pay for the addition or renovations? If so, how to make them square if you eventually sell the house?
- Do you have other kids? If the home is your major asset, and you don’t want the child living with you to lose that when you die – how to ensure this while also leaving a fair inheritance to your other child? Is that important to you?
- How to protect the home if the parent needs nursing home care – so that the kids don’t lose their home?
- How to preserve a step-up in basis on the parent’s death? And how to ensure tax benefits to the child that inherits the house?
- If it’s the kid’s house and the parent or disabled sibling is moving in:
- Is the new resident putting money towards the addition or renovations? If so – when they die, do they want an equal amount to go to their other children (siblings)? And, if the parent or sibling ever needs nursing home care, how to ensure that MassHealth will consider this payment a fair market value transaction, and not a disqualifying gift?
- If the homeowner gets divorced, how to ensure that the parent / disabled sibling’s construction contribution isn’t lost?
- How to ensure the parent / disabled sibling’s right to remain in the home, even if the relationship sours? Or if the homeowner runs into financial trouble?
- How will you split expenses, like utilities and maintenance?
- What feels most fair to all of you?
- Tax implications?
- Effect on public benefits?
There are a host of tools we can use to address all of the above, such as life estate deeds, joint ownership, rights to occupancy, contracts, trusts, and more. The tools that we use depend entirely on the facts that your family presents. Whose house is it? Is the new resident providing funds? Might you need nursing home care someday? Do you have long-term care insurance? Do you have other children? Etc.
There is no single answer as to how to set up the legal arrangement between the homeowner and the new resident. All these issues need to be thought through carefully, on a case by case basis.
ADUs are a fantastic concept, I am excited they have finally arrived. Reach out to our office to create a plan that works for your particular set of facts.
Until next time, take care…