The holidays: a time for reassessment and change
As families gather around the Thanksgiving table this year there is much to be thankful for. Some of it might be in terms of making it through difficult times and being spared the worst. Some comes in terms of rebuilding.
Regardless of circumstances, the time when everyone comes together for the annual feast might also be a time when we make announcements and decisions. We assess living arrangements, financial arrangements and planning for next year. When we were younger, we remember Thanksgiving and Christmas as ideal times to announce a coming marriage engagement. That could be true for elders now, too, with second marriages coming later in life.
Parents might decide to move to downsize or to relocate to an independent living community or assisted living. Adult children might move in along with their families to their parents’ larger home. Conversely, parents might decide to move in with an adult child and, together, they might plan to add an in-law suite or additional living area to the home they are building together.
The time between Thanksgiving and New Year’s Day is an outstanding time to decide since otherwise we rarely have time from our hectic schedules to step back long enough to think matters through.
All of the changes I have mentioned have legal and financial consequences. This means that families making these changes could seriously benefit by legal and financial advice.
Taking each of these life changes in order, here are some considerations.
Marriage. I was recently asked by an attorney friend if I prepare prenuptial agreements. Actually, this makes sense in the over age 50 group since second marriages involve balancing the interests of a second spouse with the interests of children by a prior marriage. A prenuptial agreement would be just the beginning since wills would need to then be examined, powers of attorney reviewed and possibly modified, and living arrangements decided. Older adults might also want to review the effect on Social Security benefits, pensions, health insurance and taxes before proceeding and then make the necessary changes.
Moving to downsize. If the house is going to be placed on the market, parents and adult children assisting them would need to assess whether work needs to be done on the property or whether it can be sold “as is.” They would need to identify the source of funds for any upgrades. If the children advance funds to upgrade or to help their parents to move, then they need to have a written family agreement to assure that repayment by their parents on sale would not be considered a gift.
Agreements of sale are legal documents. Sellers are also required in Pennsylvania to provide specific disclosures.
If parents give or lend money to children from the proceeds of sale of the house, this should also be in writing in a family agreement before transferring any cash to prevent later concerns under Medicaid.
Sometimes downsizing means moving to more affordable housing and possibly subsidized housing. Such housing needs to be located.
Moves to continuing-care retirement communities, independent living and assisted living are accompanied by detailed contracts that are legal documents.
In selling a house, it would be helpful to know what costs are tax deductible and which are not, whether there is transfer tax on a transaction, what insurances are needed, whether there is capital gains tax if the property has appreciated in value since date of purchase and whether there are any special programs available to help with mortgages.
If parents change the titling either of real estate or bank accounts, both parents and children need to know the tax and inheritance effect and whether a parent’s Medicaid benefits might be impacted.
Children moving in with parents and parents moving in with children. Combined households present some legal and financial challenges but they are probably a wave of the future. Some of the most challenging and the most rewarding arrangements I have worked on included parents and adult children buying properties together, modifying them to meet their needs and combining households. Written agreements are a “must” in this situation to prevent later penalties if parents later move to skilled care.
They are highly recommended even if Medicaid never becomes an issue to describe the understanding of the parties.
We live in a world and at a time when every major decision has legal or financial consequences or both, and these may be either positive or negative. Knowing the impact of decisions in advance can make all of these transitions easier for everyone.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.