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An elder lady wth several servere health problems has a caregiver, can they live with her legally?

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Yes, if she has the mental capacity to make such a decision for herself. But maybe it also depends upon where she lives... is she in her own house in a community where this is permitted? Sometimes 55+ senior communities or an HOA have rules that don't allow it.

Can you provide more details? What are your concerns about this arrangement?
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