Multigenerational estate planning is common today, where grandparents, parents, and children live in the same home. In the old days, it was quite commonplace, states Rudy Beck of Beck & Lenox Estate Planning and Elder Law. You would never consider having to write arrangements down on paper. In today’s culture, with more than two generations living in one residence, everything is more complicated and estate planning issues can arise. Here’s a recent article from Kiplinger on the topic, “How to Handle Estate Planning for Multigenerational Living Arrangements.”
For instance, if a grandparent pays for a separate apartment on their child’s property, who owns the apartment? What if an adult child living with elderly parents pays for updates on the property or provides caregiving services to the parents? Should these arrangements lead to unequal inheritances? All of these issues can be addressed through estate planning.
The first issue to address is home ownership. Should the title be taken jointly, as tenants in common, with a life estate, in trust, as a family partnership, or in some other manner? Which family members are allowed to live in the home? And again, how will this arrangement impact inheritances?
For many families, using a trust to detail all aspects of use and ownership is the best solution. The trust document can address everything, including the right of first refusal, language governing who has priority to buy the property upon the death of the parents, equalization language between beneficiaries to account for gifts to certain family members during life, and tax provisions to ensure beneficiaries pay applicable taxes, equally or proportionally.
The trust may also be used to address the incapacity or death of a family member and what will happen to the property for future generations. The level of detail can be extremely important when dealing with multigenerational shared real estate purchases and uses.
For some families, an LLC (Limited Liability Corporation) or LLP (Limited Liability Partnership) allows for easier fractional property ownership. LLCs and LLPs also help with asset protection and maintaining privacy.
An LLC operating agreement specifies which members will be in charge of the daily operation of the property, payment of expenses, and how ownership interests are divided. Intrafamily loans can be leveraged to pay for improvements on the property, and the agreement can be used to address many different scenarios for the family.
If one child provides care for an aging parent, or a grandparent provides regular daycare for working parents, should these arrangements be monetized and factored into the estate plan? What about a sibling who does not live in the home and does not provide any care for elderly parents or young children? There is no one answer for these or the many other situations arising from multigenerational living arrangements.
An experienced estate planning attorney can ensure your estate documents align with your wishes and address these issues. Often, having a professional in the room when mapping out a multigenerational estate plan can alleviate some family dynamics, making these matters less emotional. Beck & Lenox is not only happy to help you with this, we can offer other resources to help with mediation, if needed. Click here to begin the conversation with one of our attorneys.
Reference: Kiplinger (June 29, 2023) “How to Handle Estate Planning for Multigenerational Living Arrangements”