Financial contribution-mum living in annexe

[soontobecarer]

My mum is soon to move into the garage conversion we have had done and largely paid for, which will be a small but well equipped one bed flat. We are happy for her to come, after my dad died earlier in the year. She will need some things doing and required more care from my dad than she really admits to-she thinks she was pretty independent but she has very poor eyesight, mobility issues (blue badge holder) and lots of appointments to attend.

This might be a really awful question but, given that she will have a really large inheritance, has a flat that she can either sell for close to half a million and a healthy pension (occupational and state close to 30k), is it reasonable to broach the subject of financial contribution? We have taken out extra mortgage and a couple of loans to do the conversion. We were going to do it anyway, but expected it to pay its way as air B and B or student rental and so are going to be out of pocket. That said, we will probably inherit just enough to cover it.

Does it sound wrong even to broach the subject? We are not struggling to put food on the table, but neither are we living luxuriously and the flat has also been fitted out to be a proper home with kitchen etc rather than an extra room with living space and bathroom as we had planned.

Just don't know where to begin with it all and know that it's going to take a toll on me emotionally to live so close to my mum, just because it's such a huge change for us all, and I don't want financial issues to come into it too.

There may not be an inheritance, so don't count on that. It is entirely possible that she lives to be 102 with increasingly expensive care needs, and that all of her capital will eventually be used up. It's also not impossible she outlive you - I worked briefly in a care home when my children were little and we had ladies in their 90s move in because the "child" they lived with had died, on three seperate occassions, as well as having a significant number of other residents who had outlived one or more of their adult children...

So whatever you decide, put the inheritance out of your mind.

Whatever you do, remember that your mother's needs are likely to increase and she may have twenty years to live if she's in her early 80s, and plan accordingly.

You'd be well advised to help her organise a cleaner and carers who she will pay herself, and who will not overlap in any way with your household (the cleaner won't clean your house too, or if she does it's a completely separate arrangement as it would be if she cleaned for both your unrelated next door neighbor and yourself).

Obviously you'll do some unpaid help like taking her to appointments and helping her with admin - this should be kept separate from housework and personal care, and separate from whatever she payys towards the household.

Be very clear she pays her share of bills and food if you cook for her, but doesn't own part of the property and isn't paying towards the mortgage or loan secured on the house, as this could mean your house is taken into account if she has to pay care home fees eventually.

Age concern advise taking legal advice and drawing a contact up.

www.ageuk.org.uk/information-advice/care/housing-options/moving-in-with-family/

Thanks, AllImissnow-I've just ring the helpline and got the number to ring for help tomorrow. I think it'll be good to speak to someone who's experienced in this kind of thing.
And thanks to the other posters-yes, I think it's wise to put any thoughts of inheritance out of the equation. Not least because, although it wouldn't be like mum, she's perfectly entitled to leave anything she has to charity-she doesn't owe us an inheritance whatever we do for her.
Although I don't think we would have done this anyway, it's a good point about her not owning part of the house. As things stand, she would be paying for her care anyway if she had to go into a home.

Funnily enough, mum raised the subject of finances yesterday. Not to do with living costs/rent etc, more to do with making sure she paid for equipment/furniture etc and checking we didn't need anything now, but at least it shows she's absolutely on the track of being fair with finances.
I think part of my panic about finances is displaced anxiety about mum coming to live here, but I have moved from being panicky about it to actually quite looking forward to it. I'm sure we all will teeter between anxiety and excitement as moving day grows closer-mum will be making a huge change too as we live in different parts of the country at the moment. But she's lovely, although very stubborn and fixed in some ways, and I'm sure we can make it work.

Honestly I'd insist she still gets carers and a cleaner.

This. You will be very glad you did, things otherwise tend to get harder and harder and only change where there is a crisis.

Ask her she was thinking in terms of her board and lodging. I don't think you should be out of pocket compared to having a student paying go rent. Contribution to the increased cost and rent sounds fair to me.

Pay her way essentially.

If the annexe has a separate kitchen then it will be counted as a second property for council tax purposes. It certainly wouldn’t be unreasonable to expect her to cover that cost, and pay a contribution towards bills too. You will be heating her living accommodation all day, which can be a significant cost if you’re used to being at work all day and only having the heating on briefly in the morning and evening.

Have you planned meal times and food shopping?

Completely agree with getting in carers now rather than taking on the caring role yourself. It has been extremely hard to get my relative to accept carers once they were really needed. I wish we’d put it in place before they were strictly necessary, so relative could adjust while they still had enough capacity to understand.

Ah, thanks. That's made me look up the council tax implications and whilst it's occupied by a dependent relative (mum counts as over 80 but also is disabled so that counts too) I think we'd be able to be exempted from council tax but will definitely check.

It's all a balancing act between not unfairly profiting, but also it being fair to us. And genuinely, if mum were not as well off as she is, it wouldn't be a consideration.

Another, often unvoiced consideration is what truly is going to happen to her money.

IHT over the allowances is 40%.

Best way to avoid that tax is to spend the money in her lifetime. Is she making use of annual exemptions on gifts £250 to anyone and a total of £3k per annum (and you can carry forward one year) so £6k? All things we now wish we had considered in plenty of time.

Yes, I think she's aware of the inheritance tax thing, but possibly less aware of/keen to gift in this way-partly because she's worried about anyone having to pay tax on gifts. Haven't liked to say it's probably worth the risk-even if the recipient keeps aside 40 percent just in case.

Does she really understand the situation around gifts, if she says she is worried about having to pay tax on gifts. ?

It's a very awkward conversation to have, but really really worthwhile to be clear.

Good luck

I speak with feeling as we are facing an IHT Bill now and it seems like such a waste.

She has a solicitor who did her will who was clearly very much on the ball-she did my dad's will and there are several things he had in it that made me think he'd been well advised.
I don't think she's as aware of it on a day to day basis. In fairness, neither am I particularly, but I am working on the fact that, as long as you spend 60 per cent of any gift rather than 100 per cent, it's not going to come back in a horrible way to bite us. We will suggest she speak to a financial adviser-she has one but I don't think they've discussed fully how the gifting thing works-I feel she thinks you have to pay back the whole gift rather than pay the tax on it. But will need to broach it when we have "the chat". Mum has demonstrated over the last week or so that she wants to help in the ways that she already understands so I think she will take the news that there are other ways she needs to contribute reasonably well. Fingers crossed!

Ach it doesn't need to be a big conversation

"Mum
We took out loans to do the annexe and originally were planning to rent it out to pay loans back until it was paid off. Lovely that you're planning to use it instead, What we can do is help you set up your share of bills and housing costs which will obviously be far cheaper than renting your own place. Would you like us to buy your food separately or together with us? I'll do a spreadsheet so you don't have to worry but you can see it any time to discuss and work things out. Shall we go ahead and do that and arrange a standing order? Are there any separate bills you'd like in your own name? "

Get your spreadsheet out and work it out.

Also claim attendance allowance AA for her. She can give that to you toward costs of hospital appmt driving and running around after her etc, £60-90/week would help as it's meant to be used to pay for care support

Most people charge a rent for annexe and share of bills otherwise you have another expensive adult at home to fund for free!

Your heating bill will go up, electricity for extra washing tv on all the time etc , CT, insurance, you've got to work it out.
She can't take inheritance with her.
Also if she went into residential care most of that would go anyway.
Rent /living expenses/ paying family for live in care doesn't count in IHT gifting.

Even some whose parents paid for the actual conversion charge rent and bills.

Live in carer costs £800-1000 a week. A shared lives model (where you live into someone's house) for 4x daily care support would cost £300-400/week plus rent!
So if she paid £500-650 a month for rent, food etc bills all in, you'd be still subbing her.

This is an area hat needs specialist advice in order to minimise total tax liability.

I would certainly charge, but whether market rate for the flat or top market rate for a nursing home annex with round the clock assistance available would depend on tax liability. What will be the most tax efficient way to shift wealth down the generations? Are you looking at a big inheritance tax bill or can money be moved via contributions more efficiently?

Thanks again for more helpful thoughts. Much appreciated. Asdf, what kind of specialist do we need? Is it a kind of financial adviser, or a solicitor specialising in this kind of thing?
And I think I almost have the script now, for our conversation!

You can rent out one room in your home up to £7500/year without affecting tax unless you are self employed and complete SE tax returns - but see below

But PP is right check and get some financial and tax advice.

I don't think OP was asking about IHT and reducing IHT liability for inheritance.

Think she was just asking what would be fair, it is fair for adults living in a house to pay towards living and housing costs as part of a family so that shouldn't really come under rent a room, it's merging households.

A financial advisor, not a solicitor Is needed. Ask around for recommendations

Also ask DM if you can get LOA finances set up whilst you're at it, ready in car she needs it in future. It cane be done cheaply printing off online forms from HMGOV lasting power of attorney Office of Public Guardians to fill out yourself, whilst she has capacity (£300 court fee only)

Sorry mistype LPA Lasting Power of Attorney

The LPA thing is essential-not for now because mum is physically frail but entirely mentally competent, but it needs to be ready. My dad set one up when he got ill, but it wasn't completed before he died. Luckily he never really lost capacity and we were all as one as a family in the very last days, but it could have been trickier, especially as he was adamant about not being resuscitated. If he hadn't been able to tell staff, and my sister had disagreed, I don't know where we'd have been.