Implications of buying a house with mother in law ?

bolwin1

My mother in law (MIL) is in her mid 70s & is struggling to keep on top of her home, both financially & physically, although she is fairly healthy. She's also quite lonely, having lost her husband around 10 years ago - although my wife spends as much time with her as she can & she does see her friends from time to time. We do help her financially & help sort out the garden etc. etc 

We plan on selling both of our houses & buying one together - ours isn't quite big enough for her to move into. She will be contributing circa £80K & we'll be putting in circa £420K (proceeds from our house sale + savings). No mortgage required. We will also have one of our daughters living with us for the foreseeable future (22 years old).

The MIL is likely to get around £120K from her house after fees. She has negligible savings. She will be gifting circa £20K to my wife's sister, saving the other £20K & contributing £80K to the new / joint house. Her will will be set up so that the sister in law inherits any remaining savings, but my wife would inherit her share of the house. 

In the event that the MIL needs care as she gets older, the intention is that my wife would retire & look after her, although I appreciate things might not pan out like that. My wife use to work providing homecare for the elderly, so has a pretty good idea what it entails. 

This is early days at the moment - just started decorating / de-cluttering the houses to get them ready for sale. We'll be speaking to a solicitor to understand the implications & get things done 'properly', but would like to understand what questions to ask in advance.

Would appreciate any advice / things to look out for.  Thanks.

xylophone

It might be better for your MIL to make you a loan of £80,000 and take a first charge against the property - you could repay the loan on a monthly basis. It might also be wise to pay MIL some interest (which would need to be reported to HMRC). In the event that she ever did need care, you could take out a mortgage for the amount  still owed.. You would make sure that any loan agreement was properly documented and the repayments recorded.
It might be  better for her not to gift the money to your wife's sister - she could save/invest it on her own account.
Her will could be drafted to leave the benefit of the loan to your wife and her sister and the savings to be left equally between the two.
The above should  avoid any questions being raised about deprivation of capital ?

https://www.housingcare.org/downloads/kbase/3096.pdf

kazwookie

What if you and your wife split up?

Is sheltered accommodation a better idea?

AdrianC

Giving away 1/6th of her assets is also going to raise eyebrows when it comes to a financial assessment for care.

Yes, the £80k she has put into the property will be taken into account. Will there be any way that you can repay it without selling the property, if required?

bolwin1

Thanks for the comments so far. To answer some of the specific questions. 

If me & my good wife did split up, I've decent pension assets (DC & DB) - about twice the value of the intended house. We'd balance them off against the value of the house & we'd both be able to find somewhere suitable to live. I suspect my wife wouldn't need to downsize. I'm 55 in a few months, so could access my pension then, but plan on working for a good few years yet. My wife also works full time & has a modest pension built up.  We've been living together for over 30 years,so hopefully this is pretty unlikely. 

Re paying the £80K to the council without selling the house, yes this should be doable for the reasons stated above.

The MIL says that sheltered accommodation is her idea of hell (a couple of her friends are in sheltered accommodation) - not sure I have the same view, but it's not me.

Interesting idea about the loan - I'd not considered that & can see it working.

I have read the documentation around deprivation of assets - this move is to try & reduce the likelihood of her going into care, although whether the council would see it like that is a different issue. If it does happen, I suspect it will be many years away.

Skibunny40

When you say buy a house together, what do you actually mean? Separate living, sleeping and bathroom areas are a minimum requirement - we're currently living this reality with my father, and in hindsight, even that isn't enough separation! Do not underestimate the stress this will put on your relationship with your wife. What happens if your MIL gets dementia? When she "pops" into your room 5 times in an hour? What if your wife isn't fit to look after her? Sorry to be negative, but it's a lot harder in reality than it sounds. If I could go back in time, I wouldn't do it ( we're 8 years down the line and it's too late to change now) 

bolwin1

Skibunny40 - you have my sympathies. My mother looked after my gran for several years, who had fairly severe Alzheimers & my MIL looked after her mum for a couple of years before she passed away, so we'd be going into this with open eyes. 
We'd only consider places that had separate living rooms (with doors you can close - not all open plan), & separate bathrooms. A few of the places I've seen online in our budget range also have separate kitchens, which would be ideal.