Erin L. Nunes, Esq., Managing Partner
The phrase “aging in place” has long been a goal for many Massachusetts families. The desire for seniors to remain in their homes, surrounded by loved ones and familiar communities, is strong. But the reality of high costs for assisted living and in-home care often makes this dream difficult to achieve. The recent passage of the Affordable Homes Act in Massachusetts, which simplifies the process of building Accessory Dwelling Units (ADUs), offers a powerful new solution. However, this opportunity is not without its legal complexities.
As an estate planning attorney, I’m seeing a significant shift. ADUs, often called “granny flats” or “in-law apartments,” are no longer just a quirky housing option. They are becoming a component of elder care and estate planning. But building one is just the first step; properly integrating it into your legal and financial plan is critical to protecting both your assets and your family relationships.
The Intersection of ADUs and Estate Planning
An ADU is more than just a home addition; it’s a valuable asset that must be addressed in your estate plan. Without a clear plan, this new asset can lead to family disputes and financial complications. Here’s what you need to consider:
- Who owns the ADU? This is the most crucial question. While an ADU cannot be sold separately from the main home, its value can be a source of conflict among heirs. For example, if one child helps finance and build an ADU for a parent, should that child receive a larger share of the estate? A properly drafted Family Agreement or Contract can clarify the financial contributions and expectations, including how the adult child will be compensated, whether through credit against their inheritance or a direct payment upon the home’s sale. This document is essential for preventing future “inheritance resentment.”
- Deeds and Trusts: Legal documents must be updated to reflect the ADU. A Revocable Living Trust is a powerful tool here. It allows you to place the property, including the new ADU, into a trust, which can then dictate who has the right to live there and for how long. It can also outline responsibilities for maintenance and expenses. For example, the trust could grant a life estate to the senior for the ADU, ensuring they have the right to live there, while protecting the property for the benefit of all heirs.
Beyond Aging in Place: ADUs for the Next Generation
While the primary focus of the new ADU law is often on “aging in place,” its potential impact stretches far beyond elder care. The Affordable Homes Act creates a vital opportunity to address a parallel crisis: the crippling expense of the housing market for younger adults and the critical need for supported living arrangements.
A Launchpad for Young Adults and Privacy: For many young adult children, the soaring cost of housing makes achieving independent living nearly impossible. Living at home offers financial stability but often comes at the cost of personal space and privacy, which can strain parent-child relationships. The ADU offers a perfect, legal middle ground. By moving into an on-property “carriage house” or “garden cottage,” a young adult gains a truly separate dwelling with its own entrance, kitchen, and living space—a crucial measure of independence and privacy. This arrangement allows them to save for a down payment, pay off student loans, or establish their careers, all while providing the family unit with the necessary separation to thrive. From a planning perspective, the initial Family Agreement that details financing for a senior’s ADU can be easily adapted to specify rent, maintenance contributions, and the expected duration of the young adult’s tenancy, thus setting clear boundaries and financial expectations from the start.
Independence for Special Needs Individuals: The ADU framework holds particular promise for families supporting special needs individuals across the lifespan. Creating a secure, private, but physically proximate residence can be a transformative step toward independence. For an adult child with intellectual or physical disabilities, an ADU offers an opportunity to live separately from their parents or caregivers while remaining close enough for immediate support and oversight. This model promotes self-determination and dignity, allowing the individual to manage their own home and routines with an unparalleled level of safety. Legally, a Special Needs Trust (SNT) could be integrated with the ADU planning. The SNT could own the ADU or hold funds specifically for its maintenance and utilities, ensuring the beneficiary can utilize this independent living arrangement without jeopardizing their eligibility for essential government benefits, such as Supplemental Security Income (SSI) or MassHealth. This strategic combination of housing and legal planning safeguards both the individual’s future and their right to an independent life.
ADUs and Public Benefits: A Strategic Connection
The cost of assisted living or a nursing home can be staggering, often depleting a lifetime of savings. This is where an ADU can become a strategic financial tool, but it requires careful planning to avoid jeopardizing eligibility for public benefits like MassHealth (Medicaid).
- Rental Income and MassHealth: If you plan to rent out your ADU to a non-family member, the rental income is considered an asset. It can impact your eligibility for public benefits. An estate planning attorney can help you navigate these rules, ensuring that any income generated is managed in a way that doesn’t disqualify you from the benefits you may need in the future.
- The “Caregiver Child” Exception: This is one of the most compelling reasons to build an ADU for a family member. Massachusetts law has a “caregiver child” exception to the MassHealth five-year look-back period. If an adult child lives in the parent’s home (which can include an ADU) for at least two years and provides care that delays the parent’s need for institutionalization, the parent can transfer the home to that child without a penalty. This can be an incredible way to protect the home from MassHealth’s Estate Recovery Program. Documenting the care provided is critical for this strategy to be successful, and an attorney can guide you through the requirements.
The Next Step
The new ADU law is a game-changer for elder care and housing in Massachusetts. It provides an opportunity for families to create multi-generational living arrangements that promote independence, reduce costs, and strengthen family bonds. But don’t make the mistake of viewing an ADU as a simple home renovation.
Before you break ground, consult with an estate planning attorney. We can help you:
- Draft a comprehensive plan that addresses ownership, financing, and future inheritance.
- Establish clear agreements for young adult children utilizing the ADU to promote financial independence and privacy.
- Integrate the ADU with a Special Needs Trust (SNT) to create safe, supported independence for special needs individuals without jeopardizing benefits.
- Protect your eligibility for public benefits.
- Document care arrangements to leverage legal exceptions, like the caregiver child rule.
- Create a clear legal framework to prevent family disputes down the line.
An ADU can be an elegant solution to a complex problem. The time you spend now on legal planning will ensure that your family reaps the full benefits of this new opportunity for years to come.
©Surprenant & Beneski, P.C. 35 Arnold Street, New Bedford, MA 02740, 336 South Street, Hyannis MA 02601, 45 Bristol Drive, Easton, MA 02375 and 20 N Park Ave #5, Plymouth, MA 02360. This article is for illustration purposes only. This article does not constitute legal advice. There is no attorney/client relationship created with Surprenant & Beneski, P.C. by this article. DO NOT make decisions based upon information in this article. Every family is unique and legal advice can only be given after an individual consultation with an elder law attorney. Any decisions made without proper legal advice may cause significant legal and financial problems.
