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When Parents Move in With Kids

What if money problems force you to live with adult children?

You hear a lot about parents taking in adult children who are out of work. What's much less noticed is the opposite trend — adult children taking in parents who find it hard to make it on their own.

Their numbers are rising dramatically. In 2008, 4.05 million parents were living with an adult child. By the end of 2011, the number had risen to 4.6 million — a 13.7 percent increase. (I was one of those adult children: My late mother-in-law lived with us for nine years.)

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Most parents give up their own households reluctantly — usually because of frailty or loneliness after the loss of a spouse. Increasingly, however, older people are going broke. They might have lost a job in their late 50s or early 60s and run through their savings. And their children are their safety net.

Still, "it's not a decision to make quickly or in crisis," says Gregory French, president of the National Academy of Elder Law Attorneys. "Having good visits with your children doesn't necessarily promise a good co-living arrangement."

If you're thinking of moving in with one of your children, for whatever reason, what are the rules of the road? Three issues are paramount: financial arrangements, duties and privacy.

You will probably want to contribute something toward family expenses, so discuss what's best. If you need personal care, will you pay your child for it? Can you afford a home health aide if your child works? Everything should be talked through and written down, to avoid misunderstandings, French says. Your child might be embarrassed to ask for a written agreement, so bring up the subject yourself.

French also suggests that you, your child and the grandchildren still at home discuss what might happen during a typical week. Consider meals, chores, TV use, daytime appointments, religious services, music, pets and social activities (yours and your family's). How much do you want to help and what will your child expect? Can you drive or will you need to be driven? Will you go on family vacations? Do you think your grandchildren aren't being raised well? (Warning! Think about whether or not you can hold your peace.)

Some form of privacy is essential, says John Graham, coauthor of Together Again: A Creative Guide to Successful Multigenerational Living. You and your child's family each need a place to retire to. Perhaps the house could be renovated to create a separate living space, with bedroom, sitting area, bath, microwave and refrigerator. Even a single-bed sitting room with TV, good light and a comfortable chair would help. If zoning laws allow, you might build a cottage in the backyard. Or you and your child might invest in a larger house together.

Run your ideas past an elder care lawyer or financial planner. You can pay for your own expenses without tax consequences. But if you make a formal agreement to pay your child for care, those payments are taxable income for the child — giving rise to Social Security and unemployment taxes, and, in some states, workers' compensation.

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Alternatively, you can treat the payments as gifts. But if you enter a nursing home, gifts could affect your eligibility for Medicaid (the government looks at money transferred over the past five years when deciding when it will pay for nursing home care). What if you buy a house with a child or pay for renovations, and take part ownership in the property? That won't affect your Medicaid, but the program might try to collect its expenses from the value of your equity when you die.

"There are many ways of dealing with compensation, equity ownership and inheritance," says elder law attorney Howard S. Krooks of Boca Raton, Fla. Involve all your children in these discussions. "What's important is that everyone be on the same page."

I've left the best for last. Sex. If you're single, companions — and intimacy — are possible. Can Mom and her boyfriend snuggle in the family room? Can Dad's girlfriend sleep over or do they need to get a room somewhere else? Your kids shocked you with sex once. Now you can do the same to them!

Jane Bryant Quinn is a personal finance expert and author of Making the Most of Your Money NOW. She writes regularly for the Bulletin.

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