Goodspeed: The complexities of living in a parent’s home

Multi-generational households have grown quite dramatically as a result, first of the Great Recession a decade ago, and now because of the pandemic.

QUESTION:My husband and I are both still working. We want to get into something a little smaller, but instead of buying a new house, we have decided to move in with my mom who is in her 80s and has started to fail a little in health and has stopped driving.

Her house is paid for, but needs quite a bit of work. My husband and I told her we would pay for the renovations, which will cost more than $100,000 according to estimates we got. She wants to keep ownership of the house, but we want to get paid for the renovations.

What is the best way to do this to avoid taxes and confusion when she passes or if we sell before she passes?

ANSWER: Multi-generational households have grown quite dramatically as a result, first of the Great Recession a decade ago, and now because of the pandemic.

As your question illustrates, such households raise some interesting questions about how much each family should contribute financially to the household. In your case, where you are contributing a very large amount for the renovation of the house, the simplest solution would be for you and your husband to buy into the household with the cash you are putting up for the renovation, and own it equally with your mom and share expenses equally going forward.

Before you do anything, you should have a discussion with your mom about what she wants to happen to the property after her death. Does she want you and your husband to own the property outright? Or share it with other heirs?

If there are other heirs, but also other assets, her will could include a provision that leaves you the house and other heirs the assets of equal value (minus your contribution for the renovation). As part of this mix, you should consider the care you and your husband may have to provide for her as her health continues to decline.

If your mom wants to retain ownership of the property, perhaps you could loan her the money to make the necessary renovations. You should hire an attorney to draw up the loan documents which should include a minimum amount of interest under federal law to avoid gift tax issues. Make sure you all sign the loan documents and record them in the local registry of deeds.

If your mom is unable to pay the loan back during her lifetime, the loan documents can be structured in such a way that allows her estate to repay the loan.

Whatever you do, you should talk to an attorney. After you make such a significant investment to renovate the home, its value will likely increase substantially, and if she decides to sell, there could be significant tax ramifications if the profit exceeds the allowable $250,000 exclusion allowed single people.

You should also talk to your mom and attorney and draw up a document outlining who pays for what, including taxes, insurance, upkeep, utilities and other ongoing expenses.

There are many ways this situation could play out, and you and your mom should definitely seek legal advice on the best way to proceed for all of you.

Linda Goodspeed is a longtime real estate writer and author of “In and out of Darkness.” Email her at: