Hey there, Legal Tea Listeners – This is your host, Jenny Rozelle. Welcome back for another episode, which is a “current trends” topic where we talk about things going on currently that are relevant and pertinent to my estate and elder law world, and/or maybe things I’ve seen on the news or stumbled across on social media. Well, today is kind of a fun one … and one that may surprise you that is happening “out there.” Today's episode explores, what is being called, senior co-housing, which I’m sure you’re wondering, if you’ve not heard of the term, is a super innovative and creative approach to housing for senior citizens and older adults. What it means is … it is where senior citizens and older adults deliberately choose to live together, and where they share resources, expenses, and financial responsibilities. Unlike assisted living or nursing homes, really …. this model emphasizes independence and autonomy, mutual support, and not a bad way to save a few bucks. Kind of interesting, huh! So, we’re going to talk about it as well as some estate and financial considerations to it, since you know, I look at everything through the lens of an estate and elder law attorney!
Now, I am calling this episode “Living like the Golden Girls” because an easier way to explain what I’m talking about is that show. Hopefully, you know the show, but if you don’t, it’s a CLASSIC. Golden Girls was a sitcom show where four older women shared a home in Miami, Florida. Why do they live together? Well, like I described just a second ago … it’s primarily for economic reasons and generally, companionship. By living together, they share expenses, provide emotional support to one another, and create like a “chosen family” that helps them navigate life’s challenges in their later years. You can imagine that this type of setup may not be the most traditional, the most normal type of setup – but you can also imagine that it’s not a BAD idea, especially for older adults who may be alone … or widowed … or single … etc.
Interestingly, this setup is actually starting to happen more-and-more. Is it happening a lot? No, not really. But is it happening more-and-more? Yes. So, I figured it’d be a good and fun topic to do on this podcast, especially under the current trends topic. Now, since I am like unable to look at something without viewing it as an estate and elder law attorney, when I first heard about this term, I was like, “Oh boy – there are .. or well … SHOULD be a lot of financial, legal, etc. dynamics to this topic.” So, I wanted to introduce you all to the term, if you have not heard of it, and then regardless if you have or have not, I wanted to discuss some of the financial and legal “stuff” that comes to mind.
Let’s first start with some financial considerations about senior co-housing: A few of the advantages of senior co-housing often cited are: 1) Shared mortgage and property expenses; 2) Reduced utility costs; 3) Collective maintenance investments; and 4) Lower per-person living expenses. So, all in all, everyone is saving money by sharing the cost of the home and ALL of the related expenses. As many know (and I’ve talked about before here on Legal Tea), senior living is expensive! Thousands of dollars – even for independent living. So, doing something like this is likely more affordable if you can make it work. For example, a $600,000 home that would cost one person $3,500 monthly could be split among four seniors, potentially reducing each person's monthly housing expense to $1,000 or less, covering mortgage, utilities, maintenance, and property taxes.
Another financial consideration that I really did not see being discussed was … paying cash for a property / a house versus getting a mortgage. Just a second ago, I said “sharing the expense of a mortgage.” I could see some groups of senior co-housing people pay cash for each of their portions, which we’re going to talk about how to deal with the equity and what could and should happen in an estate plan here in a second, but IF they have to do a mortgage – I am sure that would make the bank or mortgage company be like, “What are you all trying to do?!” Of course with a mortgage, you will all have to disclose a lot of personal and financial information – so you will have to be comfortable with this. Though, from the mortgage company’s perspective, more people on the Note means more guarantee that they’ll get repaid, so I doubt they’ll get grumpy about the number of individuals.
I think it’s a good time to shift to some estate planning considerations for anyone that wants to do this – and there are a lot of things to consider under this umbrella…so bear with me! Now, estate planning in senior co-housing should absolutely involve a careful and detailed legal strategy. Why? Well, when a bunch of seniors or older adults decide to live together, the legal stuff gets messy fast. I mean, think about it – take age out of the discussion. Imagine you and your buddies buy a big house together - who owns what? How do you make sure nobody draws the short stick if someone dies or wants to get out of the arrangement? I don’t know – maybe you are best friends, but learn you cannot live together. How do you untangle yourself from the mortgage, from the Deed, from the equity, from any contracts at play, etc.? That’s what I mean by “the legal stuff gets messy fast.”
One of the most difficult things to accomplish is creating a framework that addresses individuals’ property rights, inheritance plans (if someone dies or becomes incapacitated), and contingencies for changing life circumstances (like they want or need to move out … I don’t know, maybe they need to go into memory care). I’d say one of the best ways to ensure there’s a nice framework is by creating some type of entity for the house – whether that be something like a Trust or a business entity like a LLC. Regardless, what you should be looking for is basically a bucket to hold the property. Think of it like a friendship contract with money involved. Each person gets a slice of the pie - like shares in a company, but for your house. This way, if someone passes away or needs to move out, there's a clear roadmap for what happens next. For example, the roadmap should definitely provide or define a valuation method for property shares, a timeline for potential sales or transfers, and mechanisms for resolving disputes that might arise during these times.
Something else you need to consider so your kids or beneficiaries one day are not left with a mess is … inheritances. Inheritance gets tricky when it comes to this co-housing setup. Do your kids or beneficiaries get your share in the Trust or LLC? Can the surviving group members (in the co-housing cohort) buy you out at that point? These are things you need to think about and talk through with the other members of the cohort. What you should NOT do are handshake agreements, pull contracts off the internet, etc. This is a perfect example of something that you need to get really, really good professional advice on. Don’t try to DIY this – there are so many moving parts, that I’d about guarantee you won’t cross all the Ts, dot all the Is. Guess what – since you’re going to get used to sharing expenses, you could share the legal bill too. Ha! So yeah – hear me loud and clear: Have everything - and I mean EVERYTHING - written down. No handshake deals, no assuming everyone's on the same page. Get it in writing, get it reviewed by lawyers, and make sure everyone understands the game plan.
Another couple things that I want to mention are in regards to 1) taxes and 2) healthcare decision-making. I’ll make these a bit quicker than the prior points – first, taxes – Taxes are another wild card. Sharing a property isn't as simple as splitting a pizza bill. Property taxes are probably the easiest – because it’s really about splitting the expense. But what about income tax implications (i.e. whether it’s tax REPORTING or potential tax CREDITS related to shared housing). Another tax consideration is when the property is inside a Trust or LLC – how does that impact people’s individual tax reporting? All in all, you will want a tax professional who understands how these shared living arrangements work, so you don't get surprised by Uncle Sam. The second thing, healthcare decision-making, is really just about – if something happens to you while at home, does it make sense to name a housemate your medical power of attorney or keep it as a family member? I would assume most would still want their family member, but it’s just something to think about and consider – your co-housing roomies will be right there!
You know … I love that this concept, this senior co-housing idea, seems to be gaining traction. If there’s one thing I hear over-and-over-and-over again, it’s that “I don’t want to go into a senior living facility” or “I will not let me Mom/Dad/whoever go into a nursing home!” I hear those statements all the time, I promise. The stinky part is that sometimes, those statements are well-intended, but life happens, medical events happen, whatever … and those same people end up in a senior living community – even if it's independent living. So, the more options we can give our parents, our grandparents, our older adult friends … the better we will all be. Rather than forcing them down some traditional path of a senior community or bringing Mom/Dad/whoever to live with us, which poses a lot of challenges, know there are more options that just those traditional things – like, senior co-housing. Just promise me something – if you or a loved one embark on a journey like this, just make sure you get the financial and legal “stuff” in good order; otherwise, things may go sideways quickly!
Alrighty, let’s wrap this episode up, shall we? Next week, we’re back to the “celebrity estate planning” type of episode – and during that episode, we are going to dive into what happened estate-wise following the passing of the famous actor, Matthew Perry – who recently passed away. I wanted to give it some time before I did an episode to allow some estate-related information to hit the public, so I think enough time has passed. So yeah, next week will be on him, so tune in. Alrighty, Legal Tea Listeners, talk to you then and stay well!
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