Thursday 23 May 2019
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Multi-generational Living – The Pitfalls

bp collins

It’s estimated that more than one million British households have three or more generations living together under one roof.

Multi-generational living – also called intergenerational living – is a rising trend, one which has seen an estimated 30% increase in the past decade.

The difficulties for the younger generation in getting on the housing ladder has resulted in a generation of “boomerang kids” coming back home to live with mum and dad; while at the other end of the age scale, elderly parents are living longer and often need more care.

For an increasing number, pooling the family resources together to either buy one larger house or extend an existing property can help to save money and benefit everyone involved.

Before taking the plunge however, it’s important to take both legal and independent financial advice in order to avoid potential family disputes in the future.

Mike Wragg, an associate in the residential property team at Buckinghamshire law firm B P Collins LLP, says: “As life expectancy increases, often so do care needs, and while for some this may mean moving into an assisted living facility or a care home, others are relying on the support of their adult children.

“There are several different options – one is to sell both homes and buy one larger property together; another is to sell the parents’ home and use that money to build a ‘granny flat’ at their son or daughter’s home; while the third is for an adult child to buy their parents a suitable property nearby.”

The biggest challenge says Mike, is to realise that although plans can be made with the best of intentions, circumstances can change, leaving living arrangements that seemed like a good idea at the time no longer viable.

Take, for example, the case of a middle-aged couple who build a granny flat extension to accommodate the wife’s parents. If, some years later, the couple run into marital difficulties and split up, then the entire property may have to be sold as part of the divorce settlement – leaving her parents effectively homeless and with no equity of their own.

In addition, if an elderly couple’s money has been invested in a property rather than being set aside to pay for care fees, the authorities could potentially take a charge over the family house in order to recover money when it is ultimately sold. This means it is a decision that could come back to haunt the family in years to come and one which may also have inheritance tax implications in the longer term.

“Investing in an existing property or buying a new home together which is big enough to cater for all your needs might seem like a good idea but it can be a legal minefield,” continued Mike. “If the property is sold, there could there be disagreement about the ownership of part of the house or, alternatively, if the elderly parents need to liquidate some of their own money in years to come to pay for care home or nursing fees, they could find it very difficult to do so as you can’t sell ‘half’ a house.”

It can also complicate matters if elderly parents have several children to whom they wish to leave their estate. If their money has been poured into an extension to live with one son or daughter, then the remaining children could effectively each claim a share of the extension, but only recoup their inheritance such time as the house was sold – potentially putting undue pressure on the couple who opened their doors to look after their elderly parents.

Another scenario may be if the middle-aged couple has to move for any reason – perhaps work-related, in which case the parents will feel duty bound to pack up and move with them. And of course, on a work-related theme, if the husband or wife runs a business which gets into financial trouble, then the whole property may have to be sold by creditors.

This can also be the case if, rather than having them live together in one house, a son or daughter has bought their parents a suitable property nearby. If at some stage their financial or personal circumstances change, then it is entirely possible the parents’ property may have to be sold.

Mike also recognises that in order to broaden their options, some older people may want to access cash from their property by way of an equity release scheme, but he cautions against the “very high” interest rates and says it can be more cost effective to look for an alternative.

“There are different options available, for example, if you are unwilling to move in with your family, you may be able to borrow a sum of money which could make a difference to the way you live. If so, then it’s important to ensure the agreement is properly and legally documented to avoid future confusion within the family,”

he said.

“What these examples show is that what seems like a simple solution can be a legal minefield. As you get older, moving house becomes so much more of an upheaval and what you don’t want to do is unintentionally force more stress and pressure onto your parents at a time when they should be able to relax and enjoy their retirement years.

“I can’t urge strongly enough the importance of seeking advice before making such a momentous decision. We offer families the chance to talk through initial advice without charge, enabling them to understand why it is so important to get it right. After all, if you’ve worked hard all your life and invested in property, you want to make sure you all reap the right rewards.”

Bp Collins have more information on their Residential Property page.

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