The growing cost of long-term care, rocketing household bills and the inability of first-time buyers to get on the housing ladder will and is leading to a growth in the number of extended family households.
But such arrangements can have implications for the funding of long-term care and inheritance tax, so experts are warning families to get advice.
Currently only 2% of the population live in households where there are three generations or more. This was among the findings in a report by the new Centre for the Modern Family, a research initiative by insurer Scottish Widows (Part of Lloyds Banking Group).
But analysts say tough economic conditions are likely to cause more families to consider this as a way of cutting costs
But whilst offering a parent a place in your home is often done with good intentions, it can have far-reaching consequences and families should get financial advice.
When placing an elderly relative in a Care Home there is a lot of guilt around elderly parents and nursing homes. So more families are considering looking after the older generations at home with them. This area will surely grow as Care and Care Homes becomes even more expensive.
If elderly parents gift money or property to their children when they move in with them, this has inheritance tax implications. As the 7 year rule on gifts applies – after this the gift is considered to be outside your estate for IHT, though taper relief applies after 4 years.
And if an elderly parent sells their property to move in with their child and gifts a lump sum to that child, this could be viewed as ‘deliberate deprivation’ by local authorities if that parent later needs to go into care. This is because authorities will assess a person’s wealth and assets when awarding State funding for care.
Grown-up children who move in with an elderly parent could also leave themselves vulnerable if that property becomes their only home. If the parent needs to go into care, the local authority could demand the property be sold to pay for the care. And if there are other siblings in the family when the parent dies, the property may need to be sold to split the estate.
Based on all the above it is vitally important to communicate to ensure that everyone within the family knows and is aware of what is happening. So always get sound, impartial advice and keep all records of any gifts made etc. As giving away part of their property or estate to their child needs to ensure that they have specialist advice to protect their rights.
For example, you don’t want to be evicted or kicked out of your own home if your child separates and divorces and so needs to sell the property – this happens I know!
Living with elderly parents
Elderly parents tend to move in with their adult children in a crisis – when they have become ill, had a fall and are unable to remain in their own home. So this isn’t well planned and tends to be long term when there is no other option. And the suggestion of a care or nursing home is out of the question financially. And also because the last thing the parent wants to do is leave their family home, or see it sold to finance their care home fees.
This means though that the adult parents are left as 24hour Carers and the elderly parent is both relieved at finding a loving and caring environment but is also guilty for the upheaval they have caused.
Should you have to care for an elderly parent then please remember the following:
- Once the crisis has passed, revisit and discuss all options openly on how best to continue living together. As also ask the elderly parent what they would actually like to do, as opinions change.
- Never presume, patronise, or ignore their thoughts.
- Get help in the event of an elderly parent’s extreme needs and dependency such as respite care to allow you to relax and continue caring once the batteries are charged.
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