What happens to your retirement when your parents move in?
Tilkie Singh and husband Lawrence Coleiro are the quintessential sandwich-generation couple. With 19-year-old twins and Singh’s aging parents living in the same house, plus full-time jobs, these 50-somethings have their hands and hearts full.
Singh’s parents, Chan and Daya, moved in with their daughter and her family in 2009 after Singh began worrying about their health and safety.
“When they lived alone they had independence of a sort, but neither of them can drive, so my siblings and I would take them to appointments and to get groceries,” she says. “But things changed when we often couldn’t reach them because the telephone hadn’t been properly returned to its cradle, which meant frequent trips to check on their well-being.”
The choice to welcome her parents into their home was not made alone. Singh discussed the issue with her siblings and spouse. “We made the decision as a family, with my husband pushing hardest for them to stay with us,” she says.
Singh and Coleiro have a large home and backyard with a pool, where family get-togethers that include Chan and Daya’s 19 grandchildren and three greatgrandchildren are frequent.
“Our home is a gathering place where my parents can be active and the family close,” Singh says.
Moving mom and dad in didn’t happen overnight. Renovations were necessary to ensure safety, mobility and everyone’s need for privacy, says Singh, whose mother uses a walker and scooter because of severe arthritis. This required an open floor plan and wide door openings in their separate living quarters. A chairlift was also installed for ease of access to the upper level.
Renovating a home to accommodate seniors can be an expensive undertaking. Costs vary depending on the age of the home, foundations or additional support requirements and equipment choices, says Ernesto Arduini of Ridgestone Homes in Woodbridge, Ont.
“Chairlifts cost between $5,000 and $6,000 and an elevator $30,000 — plus any structural modifications that are required,” he says. “Handicapped fixtures also mean extra costs, with walk-in tubs often three to four times more expensive than a regular tub.”
But who pays? And what is the effect on retirement savings, taxes and estate planning?
Whenever living assets are comingled, whether through a conjugal or other kind of relationship, it’s important that each party have a clear understanding of the other’s financial situation, says Robert Luft, a portfolio manager with HollisWealth in Vancouver.
“In Canada, one of the big taboos between adult children and their parents is talking about money,” he says. “But if they’re all living under the same roof, they need to know about debt, income and expenditures and how each will contribute to the household.”
There are also tax implications when parents move in: Luft says he’s often asked if rent that parents pay must be claimed as income (the answer is yes), and if losses on the property can be claimed against income (it depends).
“If the rent being collected is below market value, the Canada Revenue Agency will not allow losses. There must also be proof that an exchange of money took place,” he says.
Lastly, there are estate considerations. For example, if parents sell all or some of their assets to help the eldest child renovate or buy a new home, who ultimately benefits from property value increases?
When it comes to inheriting parents, you can’t simply say “mom and dad, we love you. Move in,” Luft says. “There must first be a down-and-dirty family discussion to figure out just exactly where everyone stands financially. Then document, document, document.”