Buying with elderly father - pitfalls?

New_Beginnings

Hi,

Hope this is in the right place...

My dad (82) is currently living in a council flat which he now hates having lived there for roughly 30 years - originally they were for over 55s only but now a mixture of young families and drug addicts are housed there. Sadly he is in the early stages of dementia so some kind of care will be likely in the future. Ideally, he would move closer to me (i have a 25% share in a flat in a different town roughly 12 miles away which I shall keep), but having only been living here for 3 years he is not eligible for a transfer (local council need me to have lived here for 5 years before they'll even allow him on the waiting list).

Our options are:

1. He can buy a bungalow for roughly £120k cash which after fees would still leave him with a cash sum of £20-£25k for repairs/renovations;

2. He can buy a bungalow for £170k using cash plus potentially a small(ish) loan from me of ~£20 to £30k;

I realise that he may need part-time care in the future so it would need to be a 2-bed bungalow to allow me/a carer to stay overnight if necessary and may need full time care in the not too distant future. As there is a better choice at the £170k mark, I would be happy to contribute to the purchase as long as I can protect my share from the possible care home fees.

Questions:

1. Can I (easily) protect the percentage of the property that I may have lent dad to buy it (let's say I lend him 20% - no mortgage required), can I then claim my 20% of the equity or original loan + interest (if higher) if he goes into full time care?

2. I guess as a loan, there would be no SDLT implications for me as I don't own a share of the property?

Any other advice/comments would be appreciated.

greatcrested

You could loan him the money, draw up a deed saying how much he owes you, and place a Charge on the property just as a mortgage lender does. If/when the property is sold you get your money back. The money would not be his so would not be included in his Estate for Inhertance Tax if he died.

You can specify in the Deed whether the loan is interest free, or interest is charged. If charged, would it be paid monthly,or added to the total loan for repayment at the end? Any interest you charge would be income, subject to income tax.

You could not 'claim 20% of the equity". You are lending a sum of money, not taking a share of the property or benfitting from any increase in value (compare a mortgage - banks don't benefit if the property value doubles, they just charge the stated interest rate on the loan amount).

OR you could buy jointly. That way you would benefit from any increase in value. But then you'd be liable for Capital Gains Tax when you sell as it is not your main residence. Not to mention the 2nd property additional SDLT when you buy it.

How is he going to pay for his care? After buying the property you say he'll have "£20-£25k for repairs/renovations." Does he also have (sufficient) income for living costs or would the 20-25K have to cover that too?

He is not going to be eligible for local authority care I suspect, both because of the £20-£25k and the value of the property. However the LA might provide the care on the basis of reclaiming the cost from the sale of the property later. They too would place a Charge on the property, but as a 2nd Charge, you would get your loan paid back first

yksi

That's the part that stuck out for me - how will he fund a carer coming to stay over? Nothing in your message indicates there will be any pot to realistically cover that.

Honestly if it were me, I wouldn't even entertain the idea of buying him an independent home when you can already see early stages of dementia. I don't want to depress you, but his time of independent living is short and you are setting yourself up for more hassle by moving him into a new house which will later need to be sold to fund his care.

Have you considered trying to find him a "retirement community" flat instead? I know they're less common in the UK than in some countries, but they are dedicated to retirees, they are independent flats (he can come and go as he pleases but have visitors when he likes), they provide meals if needed, have 24h personal care available on call, and visiting services like hairdressers, podiatrists, etc. He's 82, I would imagine he might be very receptive to the idea of having nearby support but living in a nice community dedicated to retirees. I used to work in one and was only half-joking that I wanted to move in there myself. What I saw was lonely elderly people who looked sad on day one and looked like sunshine on day ten, smiling and laughing with their new friends.

And most importantly these places have very good connections to more intensive nursing home care if & when it's needed.

HampshireH

Im not sure where you are based.

But a lot of councils have a completely seperate list for sheltered schemes where the eligibility is different. Have you tried this? He would certainly tick most of the boxes.

Income isnt usually a problem (they normally even accept homeowners) and are often run by councils or housing associations. 

Its worth looking into.

New_Beginnings

greatcrested said:

You could loan him the money, draw up a deed saying how much he owes you, and place a Charge on the property just as a mortgage lender does. If/when the property is sold you get your money back. The money would not be his so would not be included in his Estate for Inhertance Tax if he died.

You can specify in the Deed whether the loan is interest free, or interest is charged. If charged, would it be paid monthly,or added to the total loan for repayment at the end? Any interest you charge would be income, subject to income tax.

You could not 'claim 20% of the equity". You are lending a sum of money, not taking a share of the property or benfitting from any increase in value (compare a mortgage - banks don't benefit if the property value doubles, they just charge the stated interest rate on the loan amount).

OR you could buy jointly. That way you would benefit from any increase in value. But then you'd be liable for Capital Gains Tax when you sell as it is not your main residence. Not to mention the 2nd property additional SDLT when you buy it.

How is he going to pay for his care? After buying the property you say he'll have "£20-£25k for repairs/renovations." Does he also have (sufficient) income for living costs or would the 20-25K have to cover that too?

He is not going to be eligible for local authority care I suspect, both because of the £20-£25k and the value of the property. However the LA might provide the care on the basis of reclaiming the cost from the sale of the property later. They too would place a Charge on the property, but as a 2nd Charge, you would get your loan paid back first

He has a reasonable income to meet his normal costs with enough left over for part-time care (if needed) ~£1200 per month plus we are looking at claiming attendance allowance which would be another £200 per month when eligible.

New_Beginnings

HampshireH said:

Im not sure where you are based.

But a lot of councils have a completely seperate list for sheltered schemes where the eligibility is different. Have you tried this? He would certainly tick most of the boxes.

Income isnt usually a problem (they normally even accept homeowners) and are often run by councils or housing associations. 

Its worth looking into.

I have thought of this, but there are no council/HA places in the county at the moment according to their website. The private schemes are also over-subscribed, but I shall keep looking.

bouicca21

As dementia worsens, a part time or live in carer is unlikely to be enough - if you can even find one.  You can get so far with a carer who visits, meals on wheels, day centres, but eventually it will be a nursing home.

yksi

His income won't cover the level of care you'll eventually want for him. Eventually, you will want to sell his home so that he can get better care. Public care is not good and will not be adequate to a standard that you're happy with. Think about the distress it will cause if that sale is held up and he needs more attention and there's no money to fund that. Look to the future and plan for it now

greatcrested

My mother had dementia as did her partner. Partner dies and mum deteriorated.

We arranged a live-in carer and were extremely lucky with the choice. We reseached local agencies and selected one, who sent round 3 carers to interview. The Estonian lady who moved in effectively was on duty 24 hours 7 days a week, though the contract with the care company was rigourous in the limits she was meant to work. She loved gardening so looked after mum's garden as well as shopping,cooking all the meals etc. She also took mum out in her car for trips or pub lunches. We arranged a separate cleaner. She had a baby monitor in her room and if mum got up in the night, so did the carer.

Cost? Around £2820 per month (to the company)

It wasn't till she took two weeks off that we realised how lucky we were. Her replacement insisted on going out for a set period during the day (off time) so we had to arrange a rota to go over. She charged extra for every disturbed night, and if she had to get up more than once in the night she threatened to insist on a 2nd carer for night duty.

In retrospect, all perfectly reasonable.

I simply post this to show how expensive live in carers can be. Had we needed the 2nd carer (and dementia can mean 24 hour cover), we'd have been looking at close to £6,000 per month. Oh! plus food bill as mum was paying for shopping for the two of them - well, I paid but mum's account (and before anyone asks, yes I had POA)

Chilli6

Sorry to hear your dad has early stage dementia. 
I agree with most people who have already commented. 
My grandad had dementia and we initially hoped we could manage with carers in the home. Having been through it I now realise how quickly people can deteriorate and just how much experienced care they need. Just one carer often isn't enough to manage them. He ended up in a good care home where he was safe. This cost £4000 a month. Full time care in the home worked out at £8,000 a month.
Before this experience I would have been thinking similar to yourself however I now know the realisation and will go in with eyes wide open if the same happens to my parents 

NameUnavailable

I would consider sheltered accommodation either purchased or rented. Speak to the council to see what help they can provide - as most are short of housing they may be keen to help him move on to vacate their property. Apart from dementia depending on his overall health he may need other help going forward. I would also try to speak to his Dr to see what they think about his likely longer term needs.

It's a difficult call but you should act sooner rather than later whilst he is better able to cope with the upheaval and stress of moving as well as settling into a new place.

There is also the option of doing nothing. If he's a council tenant there will be an obligation on their part to get him the right care or accommodation when the time comes that he is unable to carry on living in his current flat.

Sorry but I think the idea of him buying his own bungalow at this stage is probably the worst option, especially one requiring work etc.

Hopefully you get some help/advice to make the best decision for his circumstances.