Can Multi-Generational Living Arrangements Work for Families?

Multigenerational living arrangements
Multigenerational living arrangements can be a gift for the entire family if careful planning is done.

Multi-generational living arrangements are not new, and as people are living longer it may start becoming more common. Shared households bring many benefits, including convenience. Why should a nurse daughter travel 20 miles a day to take her mom’s blood pressure, asks The Mercury’s article “Do shared living arrangements make sense?”

There’s also the benefit of increased financial security. Two households merged into one can share expenses, including mortgages, property taxes, utilities and more.

Whether this works in each case depends upon the situation and the relationships of the individuals involved. If there is flexibility and relationships are good, it can be a blessing. Imagine grandparents and grandchildren who are part of each other’s lives on a daily basis, rather than a twice-a-year visit. That’s a gift.

Multi-generational living arrangements need to start with a lot of discussions and good understanding of the wants and needs of each participant. It also needs to be based on reasonable expectations. A happy joint living arrangement can swiftly be derailed if parents assume that grandparents are willing to be 24/7 babysitters, or if grandparents consider household chores something for their children and grandchildren to do.

Joint living arrangements must also address financial considerations, estate planning, and everyone’s personal experiences and convictions. What works for one family may not work at all for another. Each family must work through their own details.

Here are some examples where a multi-generational living arrangement works.

Parents and children buy a house together. When parents and children live too far away, and the parent’s house would require too much modification for them to continue to live there, both sell their homes and buy a much bigger home that can be made handicapped accessible. The parents make most of the down payment. The house is titled in joint names. Titling is critical. One half is owned by the father and mother, the other half is owned by the spouse and adult child. Each half would be tenants by entireties (in states where that form of ownership between spouses is available) as between the spouses, but joint tenants with rights of survivorship as to the whole.

Parent moves in with adult child. A widow or widower comes to live with a son or daughter and their family. The parent makes contributions to the monthly expenses. A written agreement is very important for Medicaid rules regarding gifting. If modifications need to be made to the house—a mother-in-law suite, for example—a written agreement would detail who contributed what so that it is not considered a “gift” by Medicaid.

Adult child moves in with parent. This is a “buy-in,” where an adult child obtains a home equity line of credit to purchase an interest as joint tenant with right of survivorship. The house can be inherited by paying one-half of the value.

None of these strategies should be done without the help of an elder law attorney who is knowledgeable about Medicaid, estate planning, tax planning, and real estate ownership. When it works, this multi-generational living arrangement can benefit everyone in the family.

Reference: The Mercury (AuG. 28, 2019) “Do shared living arrangements make sense?”

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How Joint Tenancy Creates Problem for Seniors

Joint tenancy
Joint tenancy may hold hidden dangers.

Parents adding children or other family members as joint tenants (joint owners) on their assets is an example of an overly simple “solution” to a complex problem. It doesn’t work, even though it seems as if it should.

As explained in the article “Beware the joint tenancy trap” from Monterey Herald, putting another person on an account, even a trusted child or life-long friend, can create serious problems for the individual, their estate, and their heirs. Before going down that path, there are several issues to consider.

When another individual is placed as an owner on an account or on the title to real property, they have a legal ownership in that property equal to that of the original owner. This is called joint tenancy. If a child is made a joint tenant on a parent’s accounts, they would be entirely within their rights to withdraw every single asset from those accounts and do whatever they wanted with them. They would not need the original owner’s consent, counsel, or knowledge.

Giving anyone that power is a serious decision.

Making a child a joint owner of assets also exposes those assets to claims by the child’s creditors. If either owner files for bankruptcy, the other owner may have to buy back one-half of the asset at its current market value. Or, if the child goes through a divorce, his portion may end up with your ex-daughter-in-law. Another example: if the child is in an accident and a judgment is recorded against the child, you may have to buy back one-half of your joint tenant property at its current market value to settle the claims.

There are other complications. If one joint owner of the asset dies, joint tenancy usually provides for the right of survivorship. The property transfers to the surviving joint tenant without going through probate and with no reference to a Will – which is what people focus on when they use this method as an end-run around true estate planning. What they don’t realize is that if the parent dies and the asset transfers directly to the joint tenant—let’s say a daughter—but the Will says the assets are to be split between all of the children, her claim on the asset is “senior” to the rest of the children. That means she gets the joint asset and the four siblings split any remaining assets that don’t have joint owners or beneficiaries.

If there is any friction between siblings, not having equal inheritances could create a fracture in the family that can’t easily be resolved.

Income tax exposure is another risk of joint tenancy. When someone is named a joint owner, they have an equal ownership interest in those assets, at the original owner’s cost basis. When one owner dies, the remaining owner gets a step up in basis on the proportion of the assets the deceased person owned at death.

Let’s say a father adds his son as a joint owner on his home when its fair market value is $300,000. Dad’s cost basis (what he’s invested) is $250,000.When Dad dies, the fair market value is $350,000. At his death, the son gets a step up in basis on one-half of the assets—the assets that the father owned ($175,000). His half of the assets retains the original basis ($125,000). So his cost basis in the house is $300,000. If he sells it for $350,000, he’ll pay capital gains taxes on $50,000. But if the house was owned solely by the father, the son would get the full step up in basis on the father’s death ($350,000), and if it sold for that price, would have no capital gains taxes due.

Additionally, adding a joint owner to any asset will adversely affect both joint owners’ qualification for needs-based government benefits, such as Medicaid for nursing home costs.

Given the complexities that joint tenancy creates, parents need to think very carefully before putting children’s names on their assets and real property. A better plan is to make an appointment to speak with an estate planning attorney and find out how to protect the parent’s assets through other means, which may include trusts and other estate planning tools.

Reference: Monterey Herald (Sep. 11, 2019) “Beware the joint tenancy trap”

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State Taxes on Retirees Differ by Type of Retirement Income


Should I Buy Mortgage Protection Life Insurance?

Mortgage protection life insurance
Mortgage protection life insurance may not be your best option.

Mortgage protection life insurance (MPI) offers are often disguised as official and formal requests from mortgage lenders, with convincing details, such as the lender’s and borrower’s names, the loan type, and the amount owed. In bold lettering, these documents lead with shocking headlines like:




Investopedia’s recent article entitled “Why You Don’t Need Mortgage Protection Life Insurance” explains that these declarations are then followed by scare tactic statements such as, “If you died tomorrow, would your family be able to continue paying the mortgage and maintain their quality of life?”

They then explain why their program will protect your family, after a death, by paying off the mortgage.

However, mortgage protection life insurance policies are generally not worthwhile. Here are several reasons why:

  • No flexibility: With regular term life insurance, beneficiaries may use insurance payouts as they see fit, but many MPIs send benefit payments directly to lenders and the beneficiaries never see any money.
  • Large premiums: Even if you’re a healthy person who has never smoked tobacco, MPI is usually more expensive than term life insurance.
  • No transparency: It’s hard to get a quote for MPI online—a major concern, since mortgage MPI prices can vary widely.
  • Fluctuating premiums: MPI premiums may only be fixed for the first five years, then they could spike.

There are some MPI policies that do offer policies with fixed premiums for the policy’s duration, but in many instances, the payout on these policies may decrease over time as potential payouts are lowered. This type of MPI life insurance—also called “decreasing term insurance”—is designed to pay off your mortgage balance, while each month your beneficiary pays down part of your mortgage principal.  The MPI policy’s potential payout, therefore, shrinks with every mortgage payment.

However, some newer MPI policies have a feature known as a “level death benefit.” These policies’ payouts don’t go down. Some MPI policies will also return your premiums, if you never file a claim after you pay off your mortgage. However, the returned premiums will probably be worth far less because of inflation. You will also have likely forfeited the opportunity to invest any money you would’ve saved, if you’d bought less expensive term life insurance.

An MPI policy may be a good idea for those who don’t qualify for term life insurance due to poor current health, because MPI is typically sold without underwriting.

Keep in mind that MPI is totally different from private mortgage insurance (PMI), which protects your lenders, not you. If you make a down payment of less than 20% on your home, you pay monthly premiums to a PMI policy that will pay your lender, in case you default. However, if you die, your heirs must keep making mortgage payments, and PMI only kicks in if family members default.

Reference: Investopedia  (June 25, 2019) “Why You Don’t Need Mortgage Protection Life Insurance”

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Beware of Recorded Deed Scam

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What are Walt Disney’s Heirs Worth?

Walt Disney World
Walt Disney’s heirs may have more money than Scrooge McDuck, but it hasn’t bought them a fairy tale life.

It’s not known just how much Walt Disney’s heirs are worth. GOBankingRates estimated the company’s net worth to be roughly $130 billion. Roy O.’s grandson, Roy P., said at one point that the family owns less than 3% of the company. Even so, that would put their fortune around $3.9 billion (not counting any investments in addition to Disney holdings).

Wealth Advisor’s recent article entitled “Disney Family Feud As Heirs Battle For $400 Million Trust Fund” says that in 1925, Walt married Lillian Bounds, a studio inker. Eight years later, she gave birth to Diane, and the couple later adopted their daughter Sharon as a baby.

Walt is said to have adored his 10 grandchildren. When he died in 1966 of lung cancer, he left numerous trusts and family foundations for his family.

Walt’s younger daughter, Sharon, adopted one child, Victoria, with her first husband, Robert Brown. She then had twins, Brad and Michelle, with her second husband, Bill Lund. She died from breast cancer in 1993 at age 56. Michelle has never had a job and owns three homes, spending a lot of time in Newport Beach, CA according to Gardner.

Victoria reportedly lived an extravagant lifestyle that included $5,000-a-night suites at the Royal Palms in Las Vegas. One report notes that she once went on a Disney cruise ship and destroyed her suite to such a degree that Michael Eisner, then-CEO of the company, had to ask the trustees to pay for the damages. Her share of the family fortune was added to Brad’s and Michelle’s after she died in 2002 from health complications. However, Sharon’s twins later became embattled in a years-long feud over their $400 million trust fund. That inheritance was supposed to be distributed in annual payments and lump sums at five-year intervals at ages 35, 40, and 45. However, the trustees dispersed the payments to Michelle and withheld Brad’s.

Michelle and the trustees argued that Brad wasn’t able to take care of his share because of a “chronic cognitive disability” and that Bill, their father, was taking advantage of this to gain money, according to NBC News.

Bill said that the trustees were manipulating his daughter Michelle. Bill was previously a trustee but resigned after an allegation that he used trust money to gain more than $3 million in kickbacks from a real-estate deal. He reportedly agreed to an annual settlement of $500,000.

Moral of the story? Money can’t buy happy families. Enjoy yours while you’re alive, and protect them when you’re not.

Reference: Wealth Advisor (Feb. 11, 2020) “Disney Family Feud As Heirs Battle For $400 Million Trust Fund”

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Including Cryptocurrency in Your Estate Plan

Bitcoin app on phone
Cryptocurrency accounts rely on a sophisticated private key; someone you trust needs to have access to that key when you become incapacitated or die.

If you own any cryptocurrency, such as Bitcoin, you need to take some additional steps to make sure it can be accessed if you become incapacitated or die. This article explains that cryptocurrency is currently treated under probate law as an asset – like your house – and not as currency. Unlike a bank account or your house, there’s no physical record  – it’s all digital and can only be accessed via a computer. If someone doesn’t have your key (a sophisticated private passcode), your digital wallet cannot be accessed and the money is gone forever.

Be sure to mention your cryptocurrency in your Durable Power of Attorney, Will, or Revocable Living Trust. But don’t put your key in the documents – just provide instructions on where to find the document that describes in detail how to find and access your cryptocurrency.

Digital assets are a big part of our lives now, and should be included in everyone’s estate plan.


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Beware of Recorded Deed Scam

Recorded deed scamMy husband and I recently executed a deed to transfer a piece of real estate to our revocable living trust, and today we received the notice you see in the photo. We had a good laugh – this wasn’t our first rodeo, so we knew it was a scam – but then I realized many people wouldn’t recognize it as a scam.

The letter looks pretty official – it has the correct names, property address, parcel identification number, and description of the property. Even though it states that they’re not associated with any governmental agency, people tend to overlook that. I get phone calls quite frequently from clients wondering whether they should send this company (or others like it) $95 for a copy of their deed and a copy of the Property Assessment Profile Report. I assure them they should NOT send anyone any money for those things.

First, if you signed your deed in a Florida attorney’s office, he or she should have mailed you the original signed deed after it was recorded (I do). So, you likely already have the original recorded deed somewhere in your papers.

Second, if you can’t find a copy of your deed, you can go online to the appropriate county’s Official Records (sometimes called Public Records) website, type in your name, find your deed (note: very old deeds may not be viewable online), and download or print an unofficial copy which shows when it was recorded. It’s free in most Florida counties. Here’s a link to Sarasota’s Official Records search.

If your deed is too old to be viewed online, or you actually need a certified copy of your recorded deed for some reason, then jot down the Book and Page number (usually in xxxx/xx format) or Instrument Number you found in the Official Records and contact your county clerk’s recording office to find out how to get a photocopy or a certified copy – generally for under $5.00.

Third, all the other information they want you to pay for is free on your Florida county’s Property Appraiser’s website. Here’s a link to Sarasota’s.

So, don’t be fooled by these scammers. Whenever you get something you’re not expecting, READ IT CAREFULLY. If you’re still not sure, and you’re one of my clients, call me. I’ll let you know if it’s legit or not.

Other articles you may find interesting:

Why are Seniors So Vulnerable to Scammers?

IRS Scams: What You Need to Know

Blended Families Need More Thoughtful Estate Plans

Planning for a blended family is like playing 3D chess.
Planning for a blended family is like playing 3D chess.

Estate planning for blended families is like playing chess in three dimensions: even those who are very good at chess can struggle with so many moving parts in so many dimensions. Preparing an estate plan requires careful consideration of family dynamics, and those are multiplied in blended families. This is another reason why estate plans need to be tailored for each family’s circumstances, as described in the article “Blended families have unique considerations in estate planning” from The News Enterprise.

The Last Will and Testament is often considered the key document in an estate plan. But while the Will is very important, it has certain limitations and a few commonly used estate planning strategies can result in unpleasant endings, if this is the only document used.

Spouses often leave everything to each other as the primary beneficiary on death, with all of their children as contingent beneficiaries. This is based on the assumption that the second spouse will remain in the family home, and will distribute any proceeds equally between the children, if and when they move or die. However, the Will can be changed at any time before death, as long as the person making the Will has mental capacity. If, when the first spouse dies, the surviving spouse’s relationship with the deceased spouse’s children is not strong, it’s very possible that the surviving spouse may eventually change his or her Will.

If the stepchildren don’t have a strong connection with the surviving spouse, as often occurs when the second marriage occurs after the children are adults, things can go wrong. Their mutual grief at the passing of the first spouse does not always draw stepchildren and stepparents together. Often, it divides them.

The couple may also want to select different beneficiaries. The husband may name his wife first, then only his children in his Will, while the wife may name her husband and then her children in her Will. This creates a “survival race.” The surviving spouse receives all the property and the children of the spouse who died first won’t know when or if they will receive any assets.

Some couples use trusts for property distribution upon death. This can be more successful, if done properly. It can also be just as bad as a Will.

Trust provisions can be categorized according to the level of control the surviving spouse has after the death of the first spouse. A trust can be structured to lock down a portion of the trust assets upon the death of the first spouse. The surviving spouse remains a beneficiary but does not have the ability to change the ultimate distribution of the decedent’s portion of the assets. This gives the survivor the financial support they need, and provides the flexibility for the survivor to change the beneficiaries for his or her remaining share.

Not all blended families actually “blend,” but for those who do, a candid discussion with all, perhaps in the estate planning attorney’s office, is one way to ensure that the family remains a family when both parents are gone.

Reference: The News Enterprise (November 4, 2019) “Blended families have unique considerations in estate planning”

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What Is Probate and How to Prepare for It

Probate court
Probate is the legal process of finalizing a deceased person’s affairs and distributing any remaining assets.

The word probate is from the Latin word, meaning “to prove.” It’s the court-supervised process of authenticating the Last Will and Testament of a person who has died and then taking a series of steps to administer their estate. The typical situation, according to the article “Some helpful hints to aid in navigating the probate process” from The Westerly Sun, is that someone passes away and their heirs must go to the Probate Court to obtain the authority to handle their final business and settle their affairs.

Many families work with an estate planning attorney to help them go through the probate process.

Regardless of whether or not there’s a Will, someone – usually a spouse or adult child – asks the court to be appointed as the executor of the estate. This person must accomplish a number of tasks to make sure the decedent’s wishes are followed, as documented by their Will.

People often think that just being the legally married spouse or child of the deceased person is all anyone needs to be empowered to handle their estate, but that’s not how it works. There must be an appointment by the Probate Court to manage the assets and deal with the IRS, the state, creditors and all of the deceased person’s outstanding personal affairs.

If there is a Will, once it’s validated by the court the executor begins the process of identifying and valuing the assets, which must be reported to the court. The last bills and funeral costs must be paid, the IRS must be contacted to obtain an estate taxpayer identification number and other financial matters will need to be addressed. Estate taxes may need to be paid, at the state or federal level. Final income tax returns, from the last year the person was alive, must be paid.

The probate process takes several months and sometimes more than a year. That includes distributing the assets and making gifts of tangible personal property to the heirs. Once this task is completed, the executor (or their legal representative) contacts the court. When everything has been done and the judge is satisfied that all business on behalf of the decedent has been completed, the executor is released from his duty and the estate is officially closed.

When there is no Will, the probate process is different. The laws of the state where the deceased lived will be used to guide the distribution of assets. Kinship, or how people are related, will be used, regardless of the relationship between the decedent and family members. This can often lead to fractures within a family, or to people receiving inheritances that were intended for other people.

Reference: The Westerly Sun (Nov. 16, 2019) “Some helpful hints to aid in navigating the probate process”

Other articles you may find interesting: 

Is a Will Contest Worth It?

Should I Use a Bank as My Executor Instead of a Family Member?

What Should I Know About Reverse Mortgages?

reverse mortgages
With a reverse mortgage, there are no monthly payments of principal and interest. The interest is added to the loan and the debt is paid off when you leave the property, die, or sell.

Many people age 62 and older may consider talking to lenders about reverse mortgages.

The Dallas Morning News’ article, “The pros and cons of reverse mortgages,” explains that to get an FHA reverse mortgage—the most common type and what the government calls a Home Equity Conversion Mortgage (HECM)—at least one owner-occupant must be age 62 or older. The property must have enough equity to support the loan amount being sought.

With this type of mortgage, the required monthly cash payments, that is the payments for principal and interest, are zero. These payments are deferred. If you have $150,000 on an existing mortgage with $700 monthly payments for principal and interest, the cash cost will be zero if you refinance with a reverse mortgage.

But understand that you’re not getting “free” money. The interest you defer and don’t pay each month is being added to the debt. Therefore, if you begin the process with a $150,000 balance, you’ll owe more each month. Said another way, a reverse mortgage is a “negatively-amortizing” loan. The size of the debt increases over time.

The debt is paid off when you leave the property, die, or sell. Because an FHA reverse mortgage is an example of “non-recourse” financing, you and your estate can never owe more than the value of the home. Your other assets cannot be touched.

These mortgages, however, can be foreclosed like any other mortgage. This can be done if a borrower fails to pay property taxes and retain appropriate insurance coverage. The borrower must also pay condo association and homeowners association fees. Failing to make the required payments means the borrower is violating the contract.

A study by the California Reinvestment Coalition and Jacksonville Area Legal Aid found that there were more than 3,600 reverse mortgage foreclosures each month from April 2016 to December 2016.

However, HUD has developed some new safeguards to protect reverse mortgage borrowers from foreclosure. For more information on this type of financing, speak with an experienced mortgage broker, or discuss the pros and cons with an elder law attorney.

Reference: The Dallas Morning News (October 26, 2019) “The pros and cons of reverse mortgages”

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The Funeral Rule

Funeral shopping? There are federal laws funeral homes must follow.

Did you know that the federal government regulates funeral homes? I don’t remember seeing that power mentioned in the Constitution, but…

Yes, the Federal Trade Commission (FTC) mandates that people shopping for burial and cremation services must be provided certain information and must be provided itemized price lists for services and caskets so they can compare apples to apples as they shop. For example, prices must be provided over the phone as well as in person, and the funeral home must explain that embalming isn’t always required (no state laws requires routine embalming for every death).

But the FTC isn’t sure how well its rules are actually working, and is asking for your input as to whether the Rule is still needed and what your shopping experience was like.

You can learn more about the FTC’s Funeral Rule and give your input by clicking here.

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