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Living with Senior Parents: The Importance of Charging Rent

Living with Senior Parents: The Importance of Charging Rent

Having lived rent-free with your parents as a child, you might feel funny about charging your mom or dad rent for living with you now. However, many people are learning the hard way why you should charge rent when living with senior parents.

You probably feel that moving your aging parent into your home is the most loving way to deal with their expanding needs. Government regulations depend upon this and assume that children will care for parents as they age — free of charge. But seniors that receive “in-kind” room and board may become ineligible for some benefits, including Social Security and Medicaid.

Financial Benefits of Paying Rent

The Social Security Administration breaks recipients into four groups based on their living situation: those that live on their own, those that live with someone else for free, those that are under 18 and live with parents, and those that live in a long-term care facility. The key to getting full SSI benefits is to fall into the first category and avoid the second.

According to Social Security Administration, a person who lives on their own must either own the home, pay rent, or pay a share of the household expenses. Those in the second category are receiving what the administration terms “in-kind support and maintenance.” This allows their benefits to be reduced. In fact, they will receive one-third less than they would if they were paying rent, and the extra cash goes to the government instead of staying in your household.

Importance of Fair Market Rent

So you understand why you may need to charge rent — surely Mom can afford to chip in a little every month. Unfortunately, this approach simply won’t work. It’s important that your loved one pays a fair and routine amount for room and board. Paying too much is no better than paying too little, since Medicaid could consider the overpayment a gift. This could delay long-term care coverage if it becomes necessary.

Other Benefits

Government regulations aren’t the only reason you may want to consider charging rent. Paying for their room and board may also be beneficial to your senior. It allows aging seniors to feel like they’re contributing to the household and doing their part.

It’s no secret that living with senior parents can increase your expenses; however, the actual cost to share a home with a senior parent may shock many people. Additional money from rent can help defer these costs. Of course, there is also the fact that you can use the extra money to help pay expenses related to senior care. Consider joining a caregiver support group or investing in a medical alert device to monitor and support your senior when you cannot be there.

Living with senior parents is a decision most people make out of love rather than financial gain. But there are a number of reasons why it may be advantageous for your parent to pay fair market value for room and board. You can seek local caregiver support or contact a financial planner for more advice on making the right choices to help you and your loved one save as much money as possible when combining your living space.

If you’ve moved a senior loved one into your home, consider a medical alert system — the additional support can bring extra peace of mind to both caregivers and seniors.

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