Downs Law Firm, P.C.

aging in place

Planning for a Caregiving Children?

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A not uncommon estate planning scenario is an elderly parent who lives with an adult child, either at the parent(s)’s home or at the child’s home.

What should be included in a will or trust when planning for a caregiving child?

A child serving as a caretaker can take many forms. A few common scenarios we see are:

  1. A child long living at the parent’s home who assumes caretaking over time as the parent’s capacities decline,
  2. A child who moves in after a parent is disabled to allow them to age at home,
  3. An aged parent moves in with a child’s house.

Each such situation when planning for a caretaking child requires estate planning to protect the arrangement for both the parent and child—being prepared for the parent’s incapacity and what may happen if and when the parent needs to move to a care facility and passes away.

Sometimes the child who considers themselves an asset for the family is resented by siblings for having leeched off the parents by living at home for a lifetime.

If the child is caring for the parent at the parent’s home, the parent’s estate planning often allows the child to remain at the parent’s residence. It may also allow the child (or some other family member) to access the parent’s bank accounts if the parent becomes mentally incapacitated. A recent article from Lake County Record-Bee, “Estate planning for parents with caregiver children,” says if the planning is not done correctly, a series of unintended problems may arise, including disagreements with other family members and allegations of elder abuse, especially financial abuse.

The parent’s estate planning documents should include agreed-upon terms of any living arrangement. These terms, even if perfect when drafted, need to be reviewed regularly, as the degree of care and dependants might justify some compensation to that child, which wasn’t required at the outset. If the parent has a living trust, the trust may allow the child to remain in the family home, so the document must clearly state the terms of the living arrangement. If the parents live in a rental property, the POA may be used to authorize the child’s continued occupancy and use of the parent’s money to pay household expenses. The rental agreement would need to include the child as a tenant.

What if the parent lives in the child’s home? The child’s estate plan would need to reflect on what terms the parent may remain in the child’s house if the child becomes incapacitated or dies unexpectedly. Consideration would also need to be given to how the parents receive care.

The arrangement ends if the parent dies or moves into a nursing home or when the child moves out. What happens next? It depends on the situation. The parent may leave the residence to the adult caregiving child. The following is also to be addressed: how are expenses, including the mortgage, to be paid, and is there an expressed transition period before the child moves out? If the parent intends to leave the family home to the adult caregiver, the estate planning documents must gift the residence to the adult caregiver. This may include lifetime gifting or renting the place to provide income for the parent’s needs.

If there are siblings or a spouse from a second marriage, the estate planning documents must say whether and how other family members participate in the residence. The parents may want to gift the place to all children, subject to an exclusive life estate for the caregiving child to live in the family home. Perhaps lifetime use is too much, but several years of usage might be more appropriate. When the caregiving child becomes incapacitated or dies, the family home is usually sold, and the sale proceeds are divided between the parent’s living descendants.

Something to be careful about: if the caregiver child is treated more favorably than siblings. While the parents are entitled to decide how to distribute assets, a disgruntled sibling may object to how assets are distributed. An estate planning attorney can formally document the parent’s wishes and prepare the estate for any challenges.

The intention of the parent being clearly set forth when he or she can do so is paramount.

Finally, suppose no advance planning is done. In that case, the parent may end up needing a guardian and conservator to care for their finances and well-being, respectively, if they become incapacitated. This becomes an expensive situation, so court-supervised administrators may not agree with how the parent wishes their affairs to be handled.

Reference: Lake County Record-Bee (Feb. 4, 2023) “Estate planning for parents with caregiver children.”