15 May 2018
Sharing your home with an older parent
By Miranda Marshall, Director, Hayes + Storr.
This is a companion to last month’s article on the topic of ‘The Bank of Mum and Dad’, which dealt with parents helping their young adult children put their first foot on the housing ladder. Here, I consider arrangements where children help and support their parents with housing in later life.
This can be provided by combining one home into two or by a ‘granny annex’ arrangement; usually, but not always, done with the best of motives. It may involve an element of a gift but, with that comes risks and sacrifices. The solicitor has a major role to play in putting in place a plan and/or giving independent advice.
Possible arrangements are:
- Buying something together, possibly a house with a granny annexe;
- Buying two homes close together, with each household still being independent;
- Adapting/extending one of their homes;
- Squeezing the parent into the current home; this is usually the least good option.
Important points to consider are:
- Differing interests and potential conflicts; especially between the in-laws. Ideally, all arrangements should be as open within the family as possible, even if it is not what all the family would have chosen. Here, clear legal advice is critical and all the possible future problems need thinking through in advance. ‘Stress tests’ are best applied at this point, rather than in a crisis.
- If there is a gift element, is it in return for the provision of care? Would this include buying in specialist nursing care?
- If there is to be joint ownership, who is to own what? If building work is done, the cost of it is not usually reflected in an increase in property value. What if the child needs to raise a mortgage to provide their contribution?
- What if it all goes wrong? Who are you to turn to for advice/support? What about the loss of mental capacity? A Lasting Power of Attorney appointing an independent trusted advisor can be a God-send.
- Achieving fairness, especially upon the parent’s death. Who gets what and when? Might the carer-child and their family lose their home if they can’t afford to buy out the siblings after the parent’s death?
- What if the parent needs residential care? How is it to be paid for? Is there to be a buy-out option?
- Taxation complications: Watch out for the new Inheritance Tax: Residential Nil Rate Band and the 3% surcharge to Stamp Duty Land Tax, especially.
There is a lot to think about and every family is different. Clear and independent advice is so important. A bespoke solution is worth the investment.
This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek our specific advice.
If you would like further advice on this matter please contact Miranda on 01328 710210. If you require advice on any other legal matter call 01263 712835 or email firstname.lastname@example.org.