Mom and Dad, Let’s Talk Real Estate
Constance Rosenblum | New York Times | June 28, 2013 | link
In this city of 350,000-plus co-op apartments and an aging population, it’s a quintessential New York story. A couple has owned an apartment for decades. Long after the children departed the nest, the parents have stayed, rattling around in quarters too large for their needs. Yet even if the apartment has grown shabbier, its value has soared.
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.” Read more…