Building an annex

bluebaron

Hi all,

Anyone got any ideas on how to proceed with the following?

My mum (68) has £100k available in which to get a place to live. In the south east options are limited a flat would be around £120k and house more. She doesn't want to have relocate miles from the family.

I have a large house that could easily accommodate an extension. My mum wants to ensure that her four children have an inheritance( even though we are all in well paid secure jobs and not bothered).

If we decide to build the extension then the value of my property would increase but as I have no plans to sell then that to me is worthless in money terms.

Can anyone suggest a way to make her inheritance planning fair?

She is suggesting that as I have now benefited by the increase in my home the money should be given to the other 3. That's fine by me but assuming she spends £75k on the annex then I would have to find £75k when she dies to repay my siblings. I would not want to be forced to sell my home to realise the capital investment.

We want to find a fair way forward but I'm not willing to compromise my retirement planning!

HELP!

BitterAndTwisted

What would her response be if you told her this annexe idea would devalue your home by a hundred grand? So when she dies you will be expenting your sibling to come up with 25K each in cash before the funeral...

Ivana_Tinkle

The current solution, where you have to pay your sibilings, effectively forces you to pay for an extension (albeit partly from your inheritance) and let your mother live in it rent-free for the rest of her life, which is clearly not fair to anyone.

One starting point would be to work out how much the extension is actually worth to you. The amount it actually costs to build and the amount it adds to your house value are irrelevant if you're not planning on selling.

But to be honest this sounds like such a can of worms. Even if you and your siblings are all genuinely not bothered about the money, there's so much potential for people to feel hard-done-by.

G_M

It's more complex than that I'm afraid.

But first: where does she live now? Is the £100K coming from realising equity in her current home?

What about rent? If she 'gives' you the money to build the annex, (and expects you to compensate your siblings in due course), then presumably she will also be paying you (a fair) rent for as long as she lives there.

You also need to consider 'deprivation of assets' (google it). If she gives away her money, and later needs full time care or care home, which is means tested, then the local authority will take the £100K into account (otherwise everyone needing care who has savings would just give it all away!).

As for the inheritance, my view is that

* yes, you will financially benefit from increase property value but
* this will only be realised if/when you sell and
* the value of the increase will only be known when you sell (and even then will be a guess!)
* you should not be expected to sell before you wish- your siblings should accept they may have to wait for any share of the inheritance
* you will also inevitably become her main carer (with your siblings visiting presumably, but not caring to extent you inevitably will in due course - has this a 'value' or cost?

You need to discuss all this with your siblings. The last thing you want is any resentment when the time comes.

And possibly draw up a Deed of some kind, once you've agreed what to do financially

[Deleted User]

As you have said that you and your siblings are in well paid secure jobs, and the difference between the cost of a flat and her available capital is c£20,000, depending on how many siblings you all are could you not all chip in and get her into a flat near by? As you have said the asset is going to be split between you all anyway through inheritance (care fees not withstanding, should that be necessary) it might be a less complicated solution.

Atomix

Don't think it'll add 75k to your house, not many people want an annex - there's a house up the road here with an annexe - been on the market for years - your house will be far more sellable without it... Imo

witchy1066

how large is your garden ?

what about something like this http://www.gardenlifelogcabins.co.uk/ranges/log-cabin-homes/index.php

I was looking for a garden pod and spotted these , I think you would have to have planning permission and not sure about full time living but I could certainly live in one of these

another thought for you mother , have you any mobile home sites near you , or maybe think about buying a nice modern caravan and putting it on your own land , I know of a few people who have done that for their parents, you definitely do need planning permission though,

bluebaron

Thank-you everyone for your input.

There is no ideal way to deal with this.

If my mum was to 'lend' me £100k to build my extension then I would charge her rate and in turn pay her interest. All things being equal then these figures would be the same.

ie: 6% interest = £500 a month
rent = £500 a month,

At the end the capital remains the same.

Alternatively some people are suggesting that she give me the £100k and in return gets a rent free home for the rest of her life with nothing at the end.

That will work in my favour in some ways but is it a fair way? She is very keen to leave a sum to her children.

Im keen to help but her main concern is not for her current/future planning but whether her not her children get anything!

Has anyone had a similar situation and how did you resolve this?

BitterAndTwisted

The only way that your mother can protect the investment she puts into your property, and to have her share distributed amongst her inheritors is to change ownership at the Land Registry and have her as tenant-in-common with you, so she owns a specified percentage of the whole property. This is unlikely to work if the property is still mortgaged.

If your siblings change their positions in future (and family can do totally unexpected things where money is concerned, especially if circumstances change. Like redundancy, ill-health, divorce, debt etcetera) ) and decide that they do want to realise their shares upon your mother's death they would be able to force a sale of the property, or compel you to remortgage in order to buy their shares from them.

It goes without saying that should all this happen in 20 to 30 year's time you might not be in a position to remortgage, so you would have to sell up if you didn't have the cash to hand.

If she wants to leave a share to her children then she should buy a separate property in her own sole name and cross her fingers that she wont need that asset to pay for her care in her old age. Anything else is shoring up trouble for you at a time in your life when it could be least welcome.

There might be an alternative solution which I haven't thought of, so I suggest both of you seek separate professional advice before a decision is made.

pmlindyloo

I have to agree with most posters when they say that this is very complicated.

If you all agree with a certain proposal then do make sure that it written down in a legally binding agreement and all parties sign it.

To be honest in this day and age 68 is still young and anything could happen in the next decade or so.

We built an annex for my MIL but my OH was the only son so no problems with inheritance. It does seem an ideal solution but can be fraught with difficulties which can have a very detrimental effect on everybody.

I do not honestly believe that there are many secure jobs in these times. Let your imagination run wild and think of all the possible 'happenings' in the next ten years or so which would impact on your proposal now.

Have you thought of alternatives? Housing for the older person? There are schemes around where you can part buy part rent - all kinds of different options. Do a bit of googling in your area and see what comes up. There may be something that suits. At the same time make sure that you investigate these schemes thoroughly and read the small print of any contracts if you consider signing your mum up to one.

Lastly and not least of all. What does your Mum want?

xylophone

Your mother has £100000. Perhaps you and your siblings could lend her the balance of the money required to buy a property? The loan could be interest free but index linked on repayment.

Professional advice should be taken.