Would it be expected that at the time of sale, a portion of the proceeds are shared back with the siblings who equally contributed financially?

If I were able to contribute and if I had a sibling who was capable of taking care of my Mom, I would just take my contribution towards the addition as a payment for future care for my mother.

Here is what I mean by that. Let us say that each sibling had to fork over $10K towards the addition (and assume that each has the money) And there are four siblings (including the one taking the parents in). The sibling to takes the parents in are conceivably receiving a $30K gift from the siblings in future equity.

Well, I say that is not enough compensation for what said sibling is on for. When my mother first moved in with me, she was going to live her own life in her attached apartment and maybe have family dinners with us.

Ooooh, how that was not the case. In two years, my mother's health has deteriorated to the point where she cannot be left alone. In addition to paid caregivers, I log in much more than 60 hours a week (of waking time) taking care of her and my sleep in interrupted often when she rings her bell in the middle of the night. Many dinner have gotten cold as Mom realizes that she needs to go the bathroom just as the dinner hits the table. And then I discover that it is too late, she has already soiled herself.

Utility bills go up. Food costs go up but what is the biggest drain is that our family has had to sacrifice so much. We can no longer go out to dinner or take a spontaneous trip to the store. Vacations will require arranging respite care.

So, if you have a sibling who is willing to take on your parents "till death do us part" pay them whatever you can afford and don't worry about if you will ever get that money back if/when they sell the house.

I find it very sad that because of the 5-year look-back worry, many elderly folks won't have the option of moving in with a family member. Instead of thinking of the possible increase to the sibling's home, I would be thinking of what they are definitely giving up -- like their freedom & privacy. Any family member willing to give those & more up so a parent could be live out their final years amongst family should be fully supported.

My mom moved in with us more because I was willing to step up when my four siblings backed off.
Mom is now 95 and its been since 2004. I love my mom, so for the most I'm ok with the arrangement. Two sibling contribute financially every month and two when they can. They give the same amount they gave in 2004. No cost of living increase. They never offered and I didn't know how to ask. That's on me, I know. Believe me none of it has made for a great family life for my family. Nothing was put in writing. No long term things were ever discussed. Honestly, I never thought it would last this long. I am in my 50s and all but 1 of my siblings are older by 15 years. I'm beginning to think she may outlive us.
If I was a contributing sibling rather type than the caregiver, I think I'd pay my part and consider myself on the sweet end of the lollipop.

Dave, will your parents be contributing to the cost of the addition? If yes, it could become very complex is later down the road 5 years from now they need Medicaid.

I realize the concern that the sibling will be adding value to their house. But in the meantime while your parents are living there, that sibling will be paying a much higher property tax, higher gas/electric and water bills, higher homeowner's insurance.

And there is always an economical curve where value of houses do go up, or will go down. I've owned my home for 20 years and I live in a large metro area, and I have seen the market value change. over the years.

As your parents age, they will need more help then your sibling can give. It is physically and emotionally exhausting to do the work for 3 full-time caregivers each and every day, with no days off. Thus, that sibling will need to hire professional caregivers to help out.

Then it come to a point where your parents might need 24 hour care, and having 3 full-time caregivers from an Agency each and every day can run up to $20k per month, yes per month. Thus moving your parents into Assisted Living would drop the cost more than half, same with Independent Living.

But if your parents cannot afford to do that, then Medicaid can help out with paid nursing home care.... the issue would be the 5 year look back. If your parents had contribute any funds for the building of the addition during that 5 year look back, then there will be a problem. Medicaid would consider that "gifting".

Plus, will the city/town/county allow an addition to the house? Check with them first before spending too much time thinking about an addition.

Another difficulty is determining exactly what value is added to the sibling's home. How are you going to put a figure on that? Markets fluctuate, features go in and out of fashion, and in the end any property is worth no more and no less than someone is willing to pay for it; so even assuming everyone agrees and no one gets emotional - and good luck with that - how are you going to divide up the increase in equity between what is market forces and how much is directly attributable to the alterations?

Just for a flippant example, we former caregivers might counsel future homebuyers to put a premium on houses that couldn't possibly accommodate a dependent elder, and for that very reason. Sorry mother! If only you could move in with us, tsk, oh dear no room what a shame...

For all sorts of reasons, not just this, if I were you I would sit down with your volunteer sibling and talk this through again. How much does - let me guess here, she? - he or she know about the whole process of aging and final years? How thoroughly have you all discussed your parents' future care needs? What other options have your parents considered?

There are people who have looked after their parents this way, and been glad to do it, and it has all gone well, and the family played as a team. Not saying it can't happen. But I will bet that there are virtually no caregivers out there who don't wish they'd been better prepared, and who wouldn't do at least some of the job very differently.

So. A lot more to discuss than who pays for the building alterations and do they get their money back.

Personally I vote no to this plan for the reasons you mention and a few others as well. There is a whole lot more to consider than the cost of the addition. It sounds as though you and your sibs envision a simple apartment where your sister will be close by to keep an eye on things, but what happens when your parents get older and need more care? Will sister expect to be paid for her help? What if their care needs exceed what she can/will handle? Then there is an added tangled web of your parents financial interest in the home if they ever need a higher level of care and have to apply for Medicaid some day.

Some great answers. We did this exact thing 19 years ago with Mother and daddy. Brother added on to his home with the "verbal" (terrible idea) that when the addition was complete, dad & mother would pay off his home in entirety. Brother did the addition work himself, over about 18 months, and with the physical help of the family. He did gain a very large family room above the apartment he added on. His home was re-valued at that time and when he went to mother and dad for the payment due---he found that they had already taken out a huge mortgage for older brother and he had squandered it. Instead of having the $100,000 to pay off the house and addition (remember, this was 19 years ago!) They had just a small amount that they took and invested. Brother had a huge mortgage, considering his income--and he almost lost his home. All 3 of the sibs who could, helped him out, mother and daddy took back some of their investment & gave to brother--hurt and strained relationships all around. (DO NOT trust in a verbal contract!!)
Mother and Daddy moved in, it was not a pleasant first year for anyone.
Until daddy passed, 7 years later, mother was able to drive and take care of him. She has since gone slowly downhill to the point brother is her primary caregiver and I step in a couple days a week if she will let me.
Hindsight is 20/20. We should have moved mother and dad to an assisted living apartment. The strain on familial relationships has been terrible. Oldest brother who swindled the folks never repaid a dime and died 4 years ago, having spoken to none of us since he took the money. Money has been tight for caregiving brother, and the same 3 sibs who helped out at first, find ourselves still helping him, financially. We don't keep track, there's no point.
To look at doing this as a "financial investment" is just crazy talk, in my estimation. Too many variables in the wind, too many emotions. We give what we can, when we can and write it off. Brother has certainly borne the lion's share. He doesn't have a good relationship with mother, I can't say she's been happy with the arrangement and as her health deteriorates, she is less happy. She and dad dragged their feet for too long in making decisions, they let my older brother steal them blind, they didn't plan for the future at all---it has been a sad situation, and mother is grateful she has a safe and comfortable place to live---BUT, she would have been a lot happier not living with brother's family. Too much drama, too much stress. Caregiving round the clock is exhausting and there isn't enough money in the world to make someone "whole" after they've done that.
Trying to look at it in purely financial terms--you just can't.

Our story is a little different from yours. We live in Norway. My MIL had 2 homes. One in Illinois, way out in the country, and one in Northern Wisconsin. One day we received a phone call from one of her friends that someone needed to come check on her as she should not be living alone. My husband contacted his siblings and they all said they were too busy to go. They all live in Illinois. So – we flew from Norway to Illinois. My husband rented a car and drove up to see his mom. After he arrived there, he called me up and said she could not be in either of her houses any more. Everything was in very bad repair, holes in the floors, rats running around. She also can’t be in her house in IL because she fell once outside and laid there for several hours until someone drove by and just happened to see her. We got the siblings together to see if she could move in with any of them and they all said absolutely not. So, we bought a house right next door to my mom and tried to make it handicapped assessible. She lived in it, paying no rent, not helping with the mortgage, no utilities, nothing for almost a year and it wasn’t working out. She needed an apartment built on that could meet all of her needs.

My husband has 3 siblings and each of them had enough land that they could add on to their house but nobody wanted too. So it fell to us. We talked to everyone ahead of time and told them that MIL was footing the cost and we didn’t intend to pay her estate back at any time. MIL has enough money in her pocket that she can live another 7 years without needing to touch Medicare and she’s lived in the addition for 2 years already. One sibling wasn’t comfortable with that and we told them that we would fully support them if they wanted to do the addition to their house instead and they quickly agreed that she could build it onto our house instead. (If you read posts I’ve posted about problems, you will see why nobody else would do it.)

As mentioned before, we are paying a much higher property tax, higher gas (MIL wants the house kept at 80 all winter long and in IL it gets cold. We’ve had $900 gas bills per month plus $500 for electric), we had to double our trash and sewer bills per month as she shops and shops and shops and then throws so much away. Home owner’s insurance doubled. We had to hire someone to come in and clean for her 2 times a week and we needed to have my family (as his family has refused) go and pick up lunch for her every day from Meals on Wheels. (We currently live overseas and can’t do this ourselves) When we go home 3 times a year we do a deep clean, we prepare lots of meals to freeze for her so her groceries are less and we try to schedule all of her doctor’s appointments at that time. She runs us ragged. She eats meals with us every day (3 times a day), she has me running errands for her constantly. I’m really not looking forward to moving home for good. In my opinion, whatever benefit we get from the house will not pay the additional costs and wear and tear on our sanity if she lives a nice long life. Seriously, we would have been THRILLED to have someone else take this on but nobody would.

When it came time to actually planning the building of the apartment, we had her social worker come in. She told us all the things that the elderly need as they become more dependent. And then we had her social worker meet with the builder. As she was paying for it, she could have anything done that she wanted EXCEPT she wanted carpet in the bathroom and we refused. She has horrible diarrhea and the thought of that was just disgusting. And after she talked to both, we talked to the builder ourselves. Our home is a 2 story. This house would never have been my idea of a dream home as we are in our mid 50’s and I wanted a 1 story so I didn’t have to worry about stairs. When discussing with the builder we talked to him about support walls – after she dies, we will incorporate her apartment into our master bedroom. Currently in order to get to our side of the house, she just opens the door between her kitchenette into our living room. Things have been planned to make it easier for us in the future.

Somethings that we had done are:

Handicapped shower large enough for a wheelchair to go in. There is no lip to the shower. It will roll right in.
She’s always had problems with toilets. Even handicapped toilets are too low for her so we had an European toilet put in. They attach to the studs in the walls so you can place them at any height.
Doorways wide enough for wheelchairs.
Counters at a height that she can reach them from a wheelchair.

MIL is not in a wheelchair at this time, but she uses a walker. We are looking at this long term.

Whoever said this, said it best “Instead of thinking of the possible increase to the sibling's home, I would be thinking of what they are definitely giving up -- like their freedom & privacy. Any family member willing to give those & more up so a parent could be live out their final years amongst family should be fully supported.”

This is the way my cousins handled this.

The total cost of the addition was split 4 ways. A realestate appraiser was hired to run the numbers on the house as it stood...and again on the house with the In-Law apartment attached. With those numbers, everyone knew the basis for the house valuation going in.

The contract was drawn up by an attorney that everyone agreed to use. The contract stated that...a lien was placed on the property for the value of the addition, but also..each would receive a percentage above the 1/4th the initial value. The same percentage of the increase in the total value. So..if the house sale price increase by 50% between the initial appraisal for the basis determination and the final sale, then that same 50% would apply to the potition Attributable to the in-law apartment in the basis evaluation.

So..make it simple. The total cost of NEw in-law apartment is $100,000. The house valuation at the time the basis is determined is $200,000 before in-law apartment...and $260,000 at completion (it never adds as much value to start as the actual costs). Each paid $25,000. The house is sold 15 years later for $360,000. That is 72% increase in value over the basis established when the addition was completed. Each of the cousins gets back $25,800. $25k initial cost plus 72% increase in value over basis. (Not over total cost...as the total cost does not translate into increase in basis....return in value on construction never get anywhere near 100%....kitchen is the best ...and it only increases the value of the home by 75% in average).    Again...this is not 72% on the $25k...it is 72% on the original Valuation (called the basis).    Or $60k X 72%.  Or $43,000.  Plus the original valuation of $60,000 Is. $103,000 divided by 4 is $25,800.   

So..each cousin gets back from the deal...and...the important part is..Mom and Dad got a nice place to stay and the cost was shared equally.   No one got much pay back on the deal..but no one got cheated either.  

Remember..important to place that lien on the title. It is the only way to be certain no one can sell without you all being at the table.

Katiekate's cousins handled fairly sharing the cost/return on the parents' living quarters. Was any consideration given for the care given by the sibs who owned the house? The physical house is definitely not the only expense involved. Did all the sibs share the cost of respite care, for example?