Selling mine and mother's house and pooling the proceeds to buy a big house for all?

You need to seek advice on this, there's all sorts of potential pitfalls. Future care needs and funding them. Your sisters share of any inheritance, IHT planning and so on. It would probably be sensible not to use the entire sale proceeds of her house to buy a bigger one for you all to live in if that uses up the vast majority of her money and there's nothing left to pay for a nursing home/carers or to pat your sister her share when she dies...

Think of this. Your mother,right now is the best she is going to be cognitive wise.
Everything from this day forward will be decline.
Her memory, mobility and her ability to do things for herself.
The decline can be gradual or very quick.
He needs will increase along with doctor and hospital appointments.
If you love your wife and child you need to seriously reconsider moving in with your mother.

If you buy together and she requires full time care then your home will have to be sold. Don't do this.
First step is have a conversation with your wife, mumber 1 priority.
Have you and your sister discussed your mothers care?
Can you get carers in, meals on wheels, get a care needs assessment an cognitive test.
What support is available in her area for.the elderly?

OP, as your dm is ‘in cognitive decline’, does she actually have capacity to make such a huge decision? Also, are you absolutely sure your DM would be happy living in a house full of kids and other adults? I know I wouldnt!
If she did need to go into care, she would have to be self funding - it’s around £1k a week currently. Would she have the money to pay this without taking her house into consideration? The Local authority would complete a financial assessment, and as soon as they see that she sold her home to combine her assets with you they would know it has been done to avoid care home fees. They may be prepared to put a charge against her share of the property to be repaid when she died, but that would gather interest.

You’ve got this the wrong way round. Joint tenants means that both people own the whole house so when one person dies the house becomes the property of the other sole owner.

Another vote for “who is going to wash her/dress her when she’s wet/soiled herself?” Better for your mother but what about your wife?

As well as everything mentioned above about your DM's care needs - what would happen if you pre-deceased your DM? Would your DW be able or willing to take on your DM's care?

Also, what would happen if you and your DW were to divorce? You would be making your DM's home into a marital asset that your wife would have a financial interest in, and this could get incredibly difficult if your marriage were to end.

Yes, if it is too much for your marriage how are you going to release the equity in your half to allow your wife and child to be housed?

There are so many pitfalls as you've said in the OP. What if she needs a care home? And you'll have to sell when she passes away.

The who would do the care is big as well. Do you and your wife work? What will happen if she needs increased care? Who will reduce hours etc?

My friend did this with her family and then get divorced which has caused a lot of issues too.

Are you going to do the caring?

Does mum have the capacity to sell her home and buy with you. Does she want to live with you, would she need a ground floor bedroom and bathroom. Be careful about deprivation of assets if you're only doing this to save on future care costs. Would it be more practical for her to move into some sort of assisted living near you instead where she can live independently but with carers on hand.

A relative of mine did this with her father. 2 years later his dementia had really progressed, he was doubly incontinent and had to go into a care home.
How would you fund the care home if this happened?

You need to think very carefully about what would happen if it turned out to be a massive mistake.

For example, it's not predictable how a person with dementia will develop - lovely, lovely, people can become demanding, agressive and abusive. Would you expose your 3 year old to that?

A person can become dangerous to themselves and others, leaving the gas on, wandering, leaving substances dangerous to a child in easy reach. It can be a 24/7 job to supervise them - how are you going to do that and keep the rest of your family happy and safe?

You're tying your nuclear family's future to the health of one person and I do think it's a massive risk. You'd probably be ok if she went into care, but you can't just "put" someone in care - they have to agree to go if they still have capacity, and "my wife will leave me if my mum doesn't move out" won't cut it.

So, inheritance and care fees aside, please do think about the worst case as well as the best case scenarios.

Editing to say, I'm of the generation who knows a LOT of single women (and some families) who ended up living and caring for their elderly parent(s) for the bulk of their adult lives. It can work, but a hell of a lot of them were empty husks when it was all over.

That's not what he's asking. And I would give him the benefit of the doubt and assume he has discussed this with his wife.

Leaving your wife and child homeless is a massive pitfall. I'm surprised you'd continue with the plan if you know this could happen.
You need to speak to a solicitor, not Mumsnet

Don’t be tempted into making her share less than what she’s put in, eg she pays for a third of the house but you set it up that she owns a quarter. She would then be making a gift to you of the difference. It would probably be regarded as deprivation of assets, and the financial calculation for care made as if she still had the extra share. And the extra share would be included in her estate for IHT as it would be a grob - gift with reservation of benefits, so the seven year rule wouldn’t come into play.

Is there any way the sale price of my current house could be registered as my 'share' of the new bigger house, and so be excluded from inheritance and care cost calculations? You could own the new house as “joint tenants” rather than “tenants in common”, in which case you’d both own a defined share of the house, and only her share would come into care calculations and IHT calculations. You might still need to sell to release her share if required and your share might not be enough to buy a house as big as you’d like.

you need professional advice before doing this, use MN only to help you in thinking of questions to ask.

How old is she? How's her physical health? How fast is her cognitive decline? Is she a widow or divorced from your father (affects IHT). Plus all the questions everyone else has asked.

How much load would this plan place on your wife? Will you be your mums sole carer?

Who will care for your mother if you share a house?