Except in the case of the superrich, the apartment is most likely the parents’ major asset, and their children understandably want its future resolved while their parents are still in good shape mentally and physically. They want to avoid unnecessary estate taxes, capital gains taxes and other financial penalties should the parents die or move to smaller, easier-to-manage quarters.
They might want to raise cash to pay for possible medical expenses down the line or to reduce assets so a parent needing health aides or nursing-home care will be eligible for Medicaid. They might be eyeing the apartment for their own use.
How do children nudge often-reluctant parents toward making sound and fiscally smart decisions about the future of the family home? How can assets be protected while keeping a roof over the parents’ head? What are the main issues that need to be kept in mind as planning goes forward? How do children, or in their absence, other close relatives, begin the difficult and sometimes painful conversations needed to resolve these issues? In the case of apartments that have sharply escalated in value, how do you guide parents unused to dealing with large sums of money?
Frances Katzen, a broker with Douglas Elliman Real Estate, well knows what can happen when families fail to act in a timely manner. Her experience involved a onetime grande dame of the world of fashion journalism who lived alone in a two-bedroom Park Avenue co-op she had owned for decades. At this point in her 80s, never married and without children, the woman was mostly bedridden. Her nephew, her main caregiver, invited Ms. Katzen to join a discussion of the apartment’s future.
“I witnessed two very long and emotional conversations,” Ms. Katzen said. “When the nephew told his aunt that she’d have to sell the apartment, she became terrified and insisted that it be taken off the market. She couldn’t picture moving to a one-bedroom rental, and she began to cry. The nephew wanted to be respectful of her wishes, but the whole effort proved way too stressful.”
Every family’s situation is different. But lawyers and other estate planning professionals agree that taking a few basic steps early on can be extremely helpful and can avoid problems in the future. Some of the suggestions may seem self-evident, but as Aaron Shmulewitz, a partner of Belkin Burden Wenig Goldman who represents co-ops and condominiums, said: “Many older people are deeply reluctant to relinquish control of where they live. If this advice were so obvious, there wouldn’t be so many messy situations.”
Don’t Drag Your Feet
On one point the experts are unanimous: When it comes to determining the future of a home, start early. Don’t procrastinate. Catastrophic medical situations can arise out of the blue. People are struck by cars or severely injured in falls. Even a seemingly healthy person can die unexpectedly.
The process should begin while the owners can still think straight, see and hear well, and are relatively mobile. Because a person of sound mind will find it easier and less stressful to make complex decisions and complete necessary documents, children are encouraged not to wait until they see glimmerings of fuzzy thinking or memory loss.
Dementia can start years before symptoms manifest themselves, and as Anita Rosenbloom, a partner at Stroock Stroock Lavan and a longtime specialist in estate planning, put it, “There’s never a clear line as to when a person starts to falter or decline.”
Begin the Conversation
Of all the intimate conversations that take place among people close to one another — “Should we get married?” “Should we have a baby?” — few are as fraught as the one about how to dispose of a long-held family home. For parents who belong to the so-called silent generation, born in the 1920s, ‘30s and early ‘40s, and intensely private about their affairs, the reluctance to discuss financial matters can be fierce.
“My dad’s 84, and he won’t say one word about estate planning,” said Steven Sladkus, a partner at Wolf Haldenstein Adler Freeman Herz who represents co-ops and condominiums. “My brother and I have repeatedly tried to raise these issues, but he resisted us every step of the way.”
Even among younger parents, the need for tact is enormous, which is why some estate-planning experts suggest raising the issue in a nonthreatening setting, perhaps over drinks or a meal.
“You might say you’re doing your own financial planning as regards your home and then segue to asking your parents what they’d like to see happen to their home,” said Stephen Hartnett, the associate director of education of the American Academy of Estate Planning Attorneys.
“A child might mention an article she read about estate planning and offer to pass it along. Sometimes it’s helpful to bring in an outside expert, to help defuse the situation.
Article source: http://www.nytimes.com/2013/06/30/realestate/mom-and-dad-lets-talk-real-estate.html?partner=rss&emc=rss
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