Oral Agreements

Oral Agreements - 1/15/09

Kim: Many older people move in with their children when it becomes too hard to live on their own. However, even dealing with family, it is important for the parents to come to some understanding of financial obligations such as rent, utilities and other expenses. Here to discuss these issues is attorney Michael Solomon.

Kim: A parent moves in with a son or daughter, do they really need to have a legal document?

Mike: That depends on what is involved. There was a recent case decided in Common Pleas Court where a father gave his son real estate and almost $100,000 to build a new home. The father claimed that his son had promised him that he could live in the house for the rest of his life. There was no legal document. The father then claimed the son wouldn't let him live in the house and sued his son to try to get his property and his money back. The Court held that, because there was nothing in writing, the dad was out of luck. With some limited exceptions, any dealings with real estate—like a right to live in a house, rental payments and other financial obligations needs to be in writing.

Kim: If a parent is moving in with a child, what should they do to protect themselves?

Mike: I would recommend, in order to protect both the parent and the child, that they put in writing what they each are expecting of the other—basically, a lease:

Here are some of the issues to consider:

  • RENT: How much rent, if any, should the parent pay?
  • UTILITIES/EXPENSES: Does the parent pay for any extras such as food and utilities?
  • ACCESS: Does the parent have use of the whole house, or are some rooms restricted? This may seem picky, but maybe you want to watch TV late at night and it is too noisy for your parent. Or maybe your parent has a car, who gets to use the garage?

The more issues that you can hammer out in advance, the fewer surprises later.

Kim: Sometimes it's not the parent moving in with the children but the reverse, the child moving in with the parent. Do the same issues apply?

Mike: Generally, yes. Suppose a child is moving in with a parent and has to spend money on the house to fit his or her needs and possibly a grandchild's needs. Then an agreement is even more important. For example, if a child moves in, spends $20,000 on improvements to the house, and then the parent dies and has left the house to the child and his brothers and sisters, there is no right to be reimbursed for the improvements. The child is out $20,000. The child and the parent should consider an agreement to address this, or possibly the parent should address this in his will. His will might provide that on the sale of the house the child gets the first $20,000.

The bottom line: the more that can be worked out in advance in writing, the less chance of a messy dispute later on.

Kim: Thanks.