What does Everybody Loves Raymond, Black-ish, and Jane the Virgin have in common? While these shows may seem wildly different, all display a household structure that is trending across America: Extended family living together under one roof.
As family structure and dynamics have shifted, cost of living has increased, and older adulthood has become more dynamic, with many grandparents working well into their seventies, multigenerational living is an attractive option. For one, many families are finding themselves with members in two camps: The “sandwich” generation and the “trail-blazing boomers” generation.
Those in the sandwich generation are simultaneously raising children while helping care for aging parents. Trailblazing boomers are finding new and innovative ways to experience retirement while remaining active and involved in the lives of their grandkids. For both of these groups, as well as families who may be trying to save money or minimize their ecological footprint, the idea of multi-generational living is appealing.
A recent study shows that 64 million Americans now live in multigenerational households – which is about 20% of the US population. This may be because an increasing number of families are seeing the value—both economic and intangible—of living together. Grandparents get to be closer to their kids and grandkids, and members of the sandwich generation get to have their parents close by as they age like Everybody Loves Raymond.
I’m “sandwiched” between raising two children while wanting to take a more active role in relationships with my parents and in-laws. We’ve absolutely talked about whether or not my husband’s parents, in particular, should move in with us. My kids adore them, and we love them. Additionally, my husband’s stepfather has Multiple Sclerosis, which makes the idea of having him close by to help with ongoing care appealing.
I believe that multigenerational living is the solution to a multitude of problems. You might be considering multigenerational living if:
- You need to care for aging parents who can no longer live on their own
- You want your parents to be close with their grandkids as they grow up
- You need help with child care, and grandparents are willing to fill that role, while you work full time
- Both generations want to live together to ease the burden of the cost of living expenses
While there are many benefits that come with multigenerational living, there is also a long list of questions to ask before making that kind of a commitment. Having been through it first hand, I know that there are some financial considerations to be discussed—before anyone packs their bags.
Talk through issues ASAP
As uncomfortable as these conversations can be, do you know what’s more uncomfortable? Running into a situation where there isn’t a clear expectation, and having everyone — living under the same roof — be disappointed or frustrated.
Although all parties involved should be polite and respectful of one another during these discussions, honesty needs to trump being “nice.” For example, if you still expect to go on a family vacation for spring break with your spouse and kids — sans grandparents —that needs to be said ahead of time to avoid hurt feelings and discontent later on.
It’s also important to make sure that you and your partner are on the same page, well before multigenerational living becomes a reality (and even before digging into the numbers to determine if this is something you should be exploring).
Even in the planning stages of making this type of move, talking through contingency plans and what-if scenarios can ensure that no one feels trapped if the situation doesn’t go as planned. If you or your spouse were to get a job in another city, what would happen? If grandparents experience a sudden decline in cognitive function or physical ability, what would options be then? Getting honest about what-if scenarios can stave off issues later.
Get specific about financials
Talking numbers and details might feel awkward, but it’s much better to lay everything out in the open when there are plans for everyone to live under one roof. Whether you’re a trail-blazing boomer who wants to take a more active role in grandparenting, or you’re the one wanting your parents to move in with you, there are some basic budget conversations that need to happen.
Mortgage, rent, and other assets
I firmly believe that, if it’s financially possible, grandparents moving in with kids and grandkids should be making some kind of financial contribution. Of course, there are instances where this isn’t possible, and that’s a separate conversation. A mortgage, or monthly rent, for a house that can accommodate a growing family and grandparents, can get expensive. When possible, grandparents who are moving in should either pay a portion of the monthly housing costs or find another way to contribute, perhaps through taking on childcare.
Utilities and monthly expenses
Adding additional, active adults to a household is expensive. Utilities like your water bill will go up. Grocery costs will increase. The amount of time you spend doing things together as a family, outside of the house, will probably go up, too. Having a conversation about who is covering what expenses is critical.
Before making a move, ensure that you understand the type of medical coverage and insurance benefits available to all parties. Does the older generation have a long-term care policy or expect to self-insure (or is the multigenerational living a part of their long-term care plan)? Outline coverage available and expectations of care from in-house family members until what clearly defined point when outside help may be needed. Also, discuss responsibilities for care payment.
Housing additions or improvements
My husband and I have had this conversation with his parents in the past. We knew they’d be visiting more frequently, but our bathroom wasn’t accessible for my father-in-law’s medical condition. Remodeling the bathroom was a cost that we hadn’t been actively planning on, so we discussed having them contribute. In the end, we worked out an agreement where we both contributed something to the remodel, and everyone was happy. Now my father-in-law can visit comfortably, and that means that my family gets to see him more often.
The potential need for a new house or property
There was a point in time where my husband and I were looking for a new, NextGen home. These homes are designed to contain a “home within a home” – which are ideal for multigenerational living. It would be the equivalent of having an accessible Mother-in-Law Apartment or a tiny house on your property for your parents or in-laws.
When we were looking at NextGen homes, we had the same conversation with my in-laws, and we were all on the same page. If we moved forward with purchasing a Next Gen home under the assumption that my in-laws would either move in with us permanently or visit for several months at a time, there would be a capital commitment from them to offset the higher-than-normal mortgage we’d be taking on.
I think this is a good rule of thumb for anyone looking to purchase a new home that fosters multigenerational living. If both generations are going to live there comfortably, both generations need to try and make a reasonable financial commitment to making the idea a reality.
Household division of responsibility
If two households are merging, it may be tricky to figure out which family member is in charge of which task. Financially, accounts should still be kept separate, with Power of Attorney documents in place if needed, but roles such as cooking, chores, driving kids to classes, scheduling and more should be discussed to ensure everyone is clear on a role.
Financial considerations for the homeowner
If you’re a homeowner and are considering making your household multigenerational, you need to keep a few things in mind. First, any rent that is paid to the homeowner should be claimed as income on your taxes. Second, call your homeowner’s insurance company to determine if you need to make adjustments to your coverage. Third, you may also need to discuss whether or not the party who has moved in with the homeowner will be claimed as “dependents” on the homeowner’s taxes.
To have someone qualify as your dependent, you have to be shouldering more than 50% of their cost of care and living. This is more applicable if grandparents move in because they need help with medical care, and aren’t paying any form of rent to the homeowners. If grandparents who’ve moved in are paying rent, or compensating the homeowners in some way, they probably don’t qualify as a dependent.
The homeowner should also know that just because they’re renting out a portion of their home, their tax rights as a homeowner don’t go away. For example, they can still write off property taxes and expenses even though someone is helping to shoulder the burden of monthly mortgage costs.
Prepare for an adjustment period
As much as multigenerational living can be a solution to financial and emotional family dilemmas, you need to walk into this with eyes wide open, both concerning financial implications and emotional shifts. There will be moments where it’s not easy. Setting clear boundaries ahead of time and building open lines of communication ahead of time can help to bridge the gap while everyone adjusts to sharing a living space. Also, if you’re paired off, have regular check-ins with your spouse to ensure that you’re both on the same page or if adjustments are needed to how things are being managed.
Put boundaries in place
It’s worth asking one another what you each want the new living arrangement to look like. Are grandparents treating this as their home, too? Is it their “home base” while they travel during retirement? Do you expect to still have “family time” that excludes your parents or in-laws? What are the expectations for how much or little your parents or in-laws will help with child care, meal preparation, or planning events for the family? Knowing where everyone stands ahead of time is crucial, and the homeowner should be clear about what works and what doesn’t in their home.
Plan ahead (as much as possible!)
On top of all the money conversations, one other topic to ensure you’re covering is estate planning. Before moving in together (and really, as soon as possible if your documents aren’t in order), ensure that you’re having conversations and documenting your wishes around powers of attorney for finances and healthcare, guardianship provisions for minor children, healthcare directives and distribution of assets. Having clearly defined expectations and steps for some of life’s major “what ifs” will ensure that an unfortunate situation doesn’t become even harder than necessary on the family. Ensure that all parties know where documents and information are securely kept.
Sometimes multigenerational living is a forced situation of circumstance. Maybe a grandparent falls ill, or you suddenly need help taking care of the kids when you need to go back to work and your child care plans fall through. However, when possible, it’s best to plan ahead for the possibility of multigenerational living if you think it will be part of your life.
My husband and I know that there’s a possibility for my in-laws to either move in with us permanently or stay for extended periods of time. My brother-in-law is also aware of this possibility and is preparing his new own home around accessibility and the idea of multigenerational living. When all generations think about these things in advance (and if necessary, loop in a moderator such as a financial planner or family therapist), you can have the hard (and the exciting) conversations before any decisions are set in stone – which makes it a better experience for everyone.
Mary Beth Storjohann, CFP® and Founder of Workable Wealth, is an author, financial planner and accountability partner working to help clients in their 20s-40s across the country make smart, educated choices with their money. Her recent accolades include the “Top 40 Under 40” by Investment News, “10 young Advisors to Watch” by Financial Advisor Magazine, and “10 of the Best Personal Finance Experts on Twitter.” She frequently appears on NBC as a financial expert and her expertise has been featured in The Wall Street Journal, CNBC, Forbes and more. Opinions are her own.
Haven Life Insurance Agency offers this as educational information. Haven Life does not offer investment or tax advice and encourages you to seek advice from your own legal counsel or tax professional. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel.