Multigenerational Living and Your Money

I still have happy memories of my grandmother living with us when I was a child. If I ever had a problem, I would run and talk to my grandmother, and she always provided comfort and support. Fast forward several decades, today across our society we are seeing this type of housing arrangement become more common.

It's called the reverse boomerang. Instead of young adults moving back in with their parents, an increasing number of aging parents are moving in with their adult children, just like my grandmother lived with us. The percentage of the U.S. population living in multigenerational homes has more than doubled over the past 50 years, according to a 2021 Pew Research study. And for those 65 and older, 20% of women and 15% of men live in multigenerational households, Pew said.

Financial issues are the top reason Americans form multigenerational households today, Pew said. The second major reason? Caregiving. The caregiving goes both ways. It includes adult children caring for their aging parents and parents taking care of their grandchildren.

I saw firsthand the extraordinary joy and family connection that can come from these living arrangements. Yet challenges and emotional tensions can also emerge. Before your parents move in, it's essential to have open and honest communication. In any family situation there will be bumps in the road. But talking through these five questions could help smooth the path relating to your finances. Discuss these questions with your parents, siblings and partner. For this to be successful, everyone needs to be on the same page regarding roles and responsibilities.

1. What is your parents' financial situation? Ask questions so you understand the full picture of their financial assets. Will they need your financial support now or down the road?
2. What kind of caregiving help do your parents need? Maybe your parents are in good health and this move will benefit you both, for example, if they can take care of your kids when you are at work. But find out where they are at physically and health-wise before setting expectations. I had a client whose mom wasn't fully upfront before she moved in. The mom said she was healthy, but once she moved in with her daughter, my client realized she needed a good deal of help. My client worked full-time and wasn't prepared to take on the additional caregiving tasks (and related costs) her mother needed. You may want to consider talking with your parents' physicians if there are medical issues. To do so you would need a medical power of attorney and HIPPA release form. Find out if your parents have a long-term care policy and learn about the benefits the coverage provides. Before anyone moves in, conversations must happen.
3. What home modifications are needed and who will pay? These updates can range from replacing a bathtub with a walk-in shower, installing grab bars, or adding an outdoor ramp, to making larger financial commitments like building an in-law suite or even a backyard home for a separate living space.
4. How will your siblings help? With family comes complexity. It's better to have discussions early. Understand who your family is, how you interact with each other and be realistic about expectations. If one of your siblings has significant unresolved issues with your parents or has a limited relationship with them, there's a higher probability they may not want to chip in financially or with their time. Find out if your siblings can or will contribute to living expenses, provide back-up caregiving, or take your parents to doctor appointments. It can help to document expenses and show them a spreadsheet.
5. How could this impact inheritance? I had a client who was the primary caregiver for her mom. My client took her mom to all her doctor appointments, and she was the one who got woken up at 2 a.m. when her mom wasn't doing well. My client had two brothers who showed up for the holidays but didn't help with day-to-day caregiving. My client expected to be compensated through additional inheritance and she wasn't. There was angst to say the least. Again, before anyone moves in, have conversations, and set clear expectations.

Generally, if your parents have the financial resources, it's best for them to pay for their needs using their own money, including food, clothing, medications, and personal items. If you will provide significant financial support to your parents, save your receipts, and keep records of your caregiving and support expenses. You may be eligible to claim them as a dependent and/or deduct their unreimbursed medical expenses if you qualify for the child and dependent care credit.

On the surface, this is a beautiful experience and can create lasting family memories. I still remember when I was a child, running into my grandmother's room and snuggling whenever there was a thunderstorm. Yet underneath there can be challenging undercurrents including tensions in the parent-child relationship, sibling rivalries, financial trade-offs and even issues around inheritance. There are no easy answers. But it is important to be realistic and thoughtful and to look at the situation from different points of view. No family is perfect, but open and honest communication can help you go into multigenerational living with your eyes wide open.

Money can be complicated. That's why we're here to help. Email us your money questions at moneytalk@schwab.com for consideration in a future article. We regret we cannot reply to questions individually or provide personalized financial planning guidance via email. If you have a question about your Schwab account or for general inquiries, contact Schwab. Thanks!