Life is hectic! It is hard to fit working, all the jobs, family visits, shopping trips and walking the dog into twenty four hours, so what better way to streamline life than have the family living together. Homes made up of retired parents, adult children and grandchildren are becoming more common but with these multi-generational families there are advantages and disadvantages.
Baby sitting, the school run, someone to cook the dinner and mow the lawn are all significant advantages. And the benefits a grandchild will receive as a result of the daily interaction with their grandparents cannot be underestimated.
The disadvantages are the practical things which cause all involved a headache. Multi generational living can be both financially and legally complex. Consideration should be given before jumping into such an arrangement and advice should be sought to ensure that all parties know where they stand.
Attention needs to paid as to whether the financial contributions should be structured as ownership of a share of the property, a loan or a lifetime gift. When things are going well there is never usually a problem but what happens if an elderly parent needs nursing care or dies, or one of the children is made bankrupt or divorce? What happens to the share of the home owned by the grandparent?
Whilst retired parents may have sufficient funds to contribute towards the purchase costs often some of the costs need to be obtained by a mortgage. Mortgages taken out by working age individuals are not usually troublesome but if one of the parties to the mortgage is approaching or just over retirement age a mortgage company may refuse to lend.
The safest way for contributions to be protected is for all parties to appear as a legal owner at H M Land Registry on the title deeds. Without legal ownership the rights and interests of the each party are at risk. Sometimes it is not possible to record each party's interest at H M Land Registry.
This is why declarations of trust are so important. This document will record in writing the contribution made by all parties together with the terms of ongoing occupancy. It can also detail what happens to shares in the property if one of the parties dies and document the contribution of each party to the daily running costs.
Having provision in a will for what happens to a share in a property is also important. If a child dies before their parent the parent will wish to remain living in the home. This can be secured by way of a trust to ensure a stable home for the future.
If, at any point, one of the family needs to claim benefits or needs care the share of the home could be considered a capital asset for means testing purposes if paperwork has not been properly completed to record ownership. Declarations of trust provide evidence to the local authority of the intention of an arrangement.
Many clients decide to seek advice after the purchase has completed, money has changed hands and bricks laid. Would it not be easier to sort the sensible stuff before you all live together, just in case you change your mind or choose to proceed in a different way?
If you need help with preparing a declaration of trust please get in contact.