Our current column delves into the complex issue of empty nests and the various emotional and financial adjustments that come with children leaving home. However, what should you do if your adult children choose not to leave or frequently return home?
Dealing with “boomerang kids,” or adult children who keep coming back home, requires a delicate balance between providing support and avoiding being taken advantage of. When faced with an adult child planning to stay home, parents often ask themselves, “Should we charge them rent?” This question is usually followed by concerns about responsibilities such as laundry and meals.
Before diving into these concerns, take a moment to analyze why your adult children are still living with you and formulate a plan to help them permanently leave the nest.
Understanding the Reasons
There are several valid financial reasons why adult children may choose to stay at home or return to the nest. These reasons include pursuing further education to improve job prospects, paying off student loans and medical expenses, and facing the high costs of childcare and rent relative to their current income.
When navigating the complexities of boomerang kids and their evolving financial needs, it can be incredibly beneficial to seek the guidance of a financial planner. A financial planner can help develop comprehensive strategies to ensure the economic success of both you and your adult child. Additionally, within a certified financial planner’s practice, a junior associate may have unique insights into your adult child’s situation and be able to offer assistance with their financial plan.
Sometimes, the reasons behind a child staying at home are not purely financial. Emotional connections and co-dependency can make it difficult for young adults to fully embrace independence. Furthermore, a lack of life skills or neurodivergent conditions such as ADHD or learning disabilities can pose challenges to independent living.
Tasks that we often take for granted, such as budgeting, cooking, and maintaining a home, can be difficult for some adult children. Are they unable to reach their full potential due to a low-paying job? Are late nights, bad habits, or addictions hindering their success?
It’s important to approach these realities and limitations without assigning blame. Recognizing these gaps provides an opportunity for growth, both for the young adult and the family. Seeking the help of a behavioral therapist can be beneficial in these situations.
Creating an Exit Plan
Once you understand the circumstances behind your adult child’s living situation, it’s time to work together on a strategy for them to regain their independence.
Consider creating a plan based on why they are still living at home. Instead of charging rent, perhaps your adult child can set aside funds in a savings account to eventually move out. Set a firm date for when they need to leave, such as their 25th birthday or when they should be completing their education or internship.
One of our clients downsized to a condo and rented three moving vans for her three adult sons to move their belongings. On a fateful Saturday, all three sons drove off and became independent adults. This example shows that if you desire your own space, there are responsible ways to help your adult children establish their own households or shorten the time they are invading your space.
Providing Financial Assistance
Offering temporary financial assistance can give adult children a sense of autonomy while showing your support. Figure out a workable budget, calculate the monthly shortfall, and see if you can contribute to cover that amount. It’s important to note that while gifts are generally not taxable, filing a gift tax return may be necessary in some cases and could impact your estate taxes if you have a high net worth.
Exploring Housing Options
If you own additional properties, such as rentals, you could allow your adult child to live in one while contributing towards the property expenses in the form of reduced rent. You can even arrange for them to eventually own the property. Consult with a tax professional to understand any implications related to gift taxes.
Building an accessory dwelling unit (ADU) on your property, such as a granny flat or garage apartment, offers a balance of proximity and privacy. ADUs will be discussed in detail in next month’s column.
Assisting with Homeownership
Providing a down payment for a home can have a significant impact on a young person’s long-term financial well-being, especially when the local real estate market is unaffordable. This assistance becomes even more valuable if you wish for your child and grandchildren to remain close. Keep in mind that gift taxes may apply, and consulting with real estate and financial professionals is advisable to make informed decisions.
A client of ours helped their adult sons and their children purchase a home near their own residence. The parents gifted a down payment of approximately $100,000, which required filing a gift tax return. However, no gift taxes were owed. While the investment may seem substantial, it allowed the clients to enjoy their home to themselves for the first time in over three decades while still having the option to see their grandchildren regularly.
When determining whether to rent or own, economic conditions, interest rates, and real estate market dynamics should be carefully considered. Consulting professionals will help you obtain the most accurate and up-to-date information for your specific situation.
Navigating the realm of boomerang kids requires open conversations, empathy, and financial wisdom. It is not just a matter of household contributions; it’s about helping your adult child achieve financial stability and independence for life.
Michelle C. Herting specializes in succession planning, business valuations, and settling trusts.
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