It might be a natural step for an aging parent, who cannot or simply doesn’t want to live alone, to move in with their adult child — but there are serious financial implications you should consider before making this plan a reality.
Even if your relationship is healthy and you feel loving toward one another, having well-established financial boundaries can ensure the experience of multi-generational living is positive for everyone involved.
Here are specific money questions to address before moving your aging parent into your home.
What expenses will your parent contribute toward?
One survey of family caregivers showed 68% provided financial support to their aging parent. The biggest cost categories were medicine and food. When determining the changes to your household budget, you should also consider the cost of professionals such as lawyers and financial experts in addition to transportation costs.
All of those costs are in addition to your fixed costs, such as utilities, and your mortgage or rent. You’ll have to decide which of these (if any) your parent will help with. If you need to move to a larger home to accommodate your parent, they might wish to contribute toward the real estate purchase. That raises another set of questions such as whether their name should be on the mortgage of your new home — this could impact who makes decisions about the house later on if you need to refinance or take on a second mortgage.
On the other hand, if you have poor credit and your parent has excellent credit, they could help you obtain a better rate or preapproval amount for a mortgage while you’re house shopping. In competitive housing markets, it’s often hard to buy a home without preapproval, which usually lasts between 30 to 60 days.
Alternatively, your parent could choose to gift you the funds for a down payment. Keep in mind they could incur a gift tax if this amount is over the annual exclusion, which was $30,000 for each donnee in 2021.
Can you afford the extra costs if your parent can’t help?
So far we’ve just talked about basic living costs, but there will likely be extra costs on top of those that your household will incur over the course of caring for an aging parent. Depending on how much care your loved one needs, you might need to install an emergency alert system, hire a home care nurse, arrange for respite care or cover the cost of certain therapies.
Then there are also the practical changes that you might have to make to your home to adjust for an aging relative. You might need to install ramps for wheelchair access or renovate the bathroom so they can maintain independence when it comes to bathing or using the toilet. These costs can add up, fast.
An average bathroom renovation project in the U.S., for example, cost $8,098 in 2021 — that’s 20% more than it cost the year before. If you do not have the resources to take on these extra expenses, it’s important to have a frank discussion with your parent and extended family early in the process so you can plan for alternatives. Those could include financial assistance from your extended family, a renovation loan or possibly looking at a different living situation for your aging loved one.
Will you be able to work the same hours?
With all this talk of expenses, you don’t want to forget that your income might be impacted by the schedule changes caused by having an aging parent in your home. How much of your time will be dedicated toward their care?
Keep in mind that statistics show adult children providing care to their aging parents spend about 77 hours per month doing so. If they need 24-hour care, it might not be practical or even possible to maintain the same work schedule. Depending on your loved one’s health, you might also need to allot time for doctor’s appointments or any specialized treatments.
If you decide to reduce your work hours, consider how this will impact your lifestyle and household budget, especially at a time when your expenses could be increasing.
Can your parent manage their own banking?
You should also have a clear plan in place to understand who will manage financial affairs for your parent, now and in the future. Even if your parent is still able to look after their own finances, you should work with a lawyer to have the proper legal documents in place in the event that their health changes suddenly.
An estate planning attorney can set up a power of attorney to indicate who should control your parent’s finances if they are unable to do so themselves. Though it’s worthwhile to be on the same page as your parent, depending where you live, this could cost another $3,500 or more — yet another expense to consider.
If your parent still has the mental capacity to manage their finances, it could be helpful to discuss how you can support them to remain independent with their banking for as long as possible. This could mean establishing a certain day of the week that they visit the bank or helping them to navigate online banking.
Bottom line
Living with your parent as they age can be incredibly beneficial to you and your family — but in order to make the situation as healthy as possible for all parties, it’s important to ask the tough questions in advance.
There are many financial implications to opening your home to an aging loved one. Knowing how you’ll navigate money issues as a family can help you set reasonable limits to your own generosity and protect your aging parent at the same time.
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Jolene Latimer has her Master's in Specialized Journalism from the University of Southern California. She writes about personal finance, marketing and sports.