Making Cents: The Financial Side of an In-Law Apartment

US Wealth Napolitano |

By: John P. Napolitano, CFP®, CPA, PFS, MST, RLP®

Elderly parents whose children are willing to allow them to live in their residence are lucky. Although I'm not sure that everyone involved in this arrangement agrees with me. There are at least three or more people that have to embrace this concept for it to be a success.

For family harmony to work well, both spouses at the child level need to be completely on board. Beyond the elderly parent’s children, the grandchildren should also have a voice about grandma and grandpa living in their home. It isn't likely that the grandchildren's opinion will dominate the conversation, but having them a part of the discussion is important.

It is equally important to be sure that both elderly parents are completely on board, and looking forward to this next stage of life. The loss of independence is a big fear of the elderly. With this in mind, it is ideal to have a completely separate living area, complete with cooking and bathing facilities so that the grandparents may still enjoy private time in the comfort of their own space.

Regarding the finances, have a clear agreement up front about the cost of building out such a space and the maintenance costs. Many develop very loose plans about the money side which can cause later concerns.

Who pays the cost of constructing this separate living space in your single family home? Will it be paid for by the providing children, or will there be a reimbursement from the grandparent’s estate?  In many cases, the addition of an in-law living space in a single family home does not add tremendous value to the home. Another question is whether the grandparent’s other children will contribute to this cost or any other costs associated with providing their parents quality living with their sibling. Decide up front who pays for what, and whether there should be any offset or reimbursement later.

Also consider the consequences of a divorce or the loss of one of the grandparents. In the event of divorce, the grandparents may want some protection that their new investment to build out their living space isn't cut short by a forced sale of the home to settle the marital estate. Should one of the grandparents pass, assess the possibility that the surviving grandparent may need in-home care and companionship, and what that may do to their cost of living, or your work schedule.

Also ask about the contribution of any siblings. It is common that rifts develop between siblings over matters including care, cost and visitation. No one wants a casual visit to the grandparents by your brother’s family to turn into a full blown family gathering each and every time.

When considering all these aspects, hopefully the in-law apartment will be a smashing success.


John P. Napolitano CFP®, CPA is CEO of U. S. Wealth Management in Braintree, MA.  Visit JohnPNapolitano on LinkedIn or The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and US Wealth Management are separate entities from LPL Financial. He can be reached at 781-849-9200.