When the Kids Need a House
BOOMER's Betty Booker investigates what's best for the family.
For generations, parents carved a parcel off the family farm for grown children to build a house, or they built their children a house next to the family residence. Some still do.
Flats were created: older parents lived downstairs; children and grandchildren up.
Some still are, if zoning allows.
Or relatives piled into one house, especially if multigenerational living was a cultural norm. That also happens, though not as often.
IT’S HARD TO SAY, ‘I CAN’T HELP YOU’
Old customs may be returning as families bind together as best they can in tough times.
“We’re adapting to a new way of supporting the family,” said Gordon Laroussini, a realtor with ReMax Commonwealth. “It’s hard to let go of family, to say, ‘I just can’t help you.’ So many families are stepping up as they can.”
Boomers’ adult children are living longer with parents. More than a third of the Millennial Generation (now ages 20 to 33) lives with parents, according to census data. Researchers say many of these young adults aren’t finding self-sustaining employment. Even multiple part-time jobs may be insufficient to cover living expenses and college debt.
Fortunately, parents and unmarried adult offspring may find living together, temporarily or for life, a workable solution if all are congenial – but troublesome if not.
Do parents help pay for rent or mortgage? Are the parents able to buy another house, and if so, do they share or retain ownership or gift outright? Or do they make a decision that most parents pray to avoid: Tell habitually problematic, but physically and cognitively capable, offspring to leave?
THE SOLUTION MAY BE RENTING TO YOUR CHILDREN
There are no easy answers, says family law expert Edward D. Barnes, founder and president of The Barnes & Diehl law firm. Barnes is also founder and chairman of the National Center for Family Law at the University of Richmond.
But parents have found creative ways to help children who have fallen on hard times, he noted. For example, one father bought a house that he rented to his five children to live in together. After all became self-sufficient and moved out, he sold the house.
One retired couple says their middle-age son lost his job. When his ex-wife didn’t pay their mortgage from her support, the home was foreclosed. His parents then bought a house for him and his children. The parents retain ownership; the now-employed son’s rent covers mortgage and taxes.
Parents who rent a house to a child must claim the rent as income. But the cost of rental property taxes, mortgage interest and rental expenses often offset the parents’ increased taxable income, Barnes noted.
One landlord’s 40-something child received parental help in the form of reduced rent stipulating (in the lease) eviction for nonpayment. The arrangement works.
‘GIFTING’ MAY BE AN OPTION FOR SOME
Any property “gifted” to married offspring should be deeded solely to the child, Barnes continued. The deed should include legal protections so mortgage payments made by the child and any increased property value remain the child’s separate property. The holding does not become marital property to be divided in a divorce.
Clarity is key, said divorce law specialist Terry Batzli, president and shareholder of Batzli Stiles Butler, a family law firm.
Loans should be secured by a promissory note or by co-signing on a down-payment loan. If gifting money, checks should be payable solely to your child, even if the money is used for the young couple’s jointly owned property, Batzli said.
Helping is more complicated with grown children who have trouble becoming self-supporting. In such cases, Barnes might suggest family counseling to see whether an agreement with the child can prevent homelessness.
Long & Foster realtor Cathy Saunders, a Richmond Association of Realtors top award winner, has clients who help offspring buy a house “almost as if the child is getting their inheritance ahead of time.”
However, Barnes cautions, “If you don’t trust the child to live up to an agreement, don’t buy them a house.”
One additional note: Housing problems for the young are so pervasive that the General Assembly this year created a housing savings plan similar to the state’s 529 education savings plan. Starting July 1, up to $50,000 can be put in “first-time home-buyer savings accounts” through mutual funds, bro- kerages, banks and other investments. Earnings will be free of state taxes.
For “Tips on Multigenerational Living,” visit blog.aarp.org and search “multigenerational.”