Renting parents house instead of selling to pay for care, to keep house in family

[falstaff1980]

My mother has MCI and will probably need to go into a care home at some point, she has expressed a preference for this rather than staying at home with a carer until the end, and also for when she passes away, she suggested I move in and buy-out my sister's share and bring up her granddaughter in the house.

I'm wondering if her care could be paid for by the combination of her pension, a care annuity from her savings (200K), and me selling my house and moving to her house (the house I grew up in) with my wife and daughter and paying her rent.

I have one sister and I think she would support this idea too, as we all grew up in that house and we'd like to keep it in the family. It's a late 1940s three bed detached, most of its value is the large garden, and any buyer would likely tear it down and build three houses on the plot (this has happened to other houses in the lane) - which would horrify all of us.

Wondering what pitfalls there might be with this idea?

Inheritance tax for a start
your wife view on liv8ng in the house
your sister being bought out - what happens of prices change, how will tax be paid in this bit (see above inheritance tax)
trying to relive something that no longer exists

any decision needs to be one that has had proper legal advice regarding tax and inheritance issues and without nostalgic rose tinted glasses on

Better off speaking with a solicitor expert in this field who can advise on the benefits and pitfalls.

Very likely the income won’t cover the fees. In the south east, care homes are £7k a month upwards. Plus all the stuff PP said about the dodgy financial aspects.

You sell your house and buy hers from her then that's fine. Otherwise rent and pension unlikely to be enough.

My aunt unfortunately became senile towards the end of her life, was going out in her nightie, not knowing what she was doing and she needed 24 hour supervision. Her daughter, my cousin, let her house which paid for aunt's residential care in a really nice nursing home. I visited and it was a really caring environment quite near to the family. It wasn't for too long, she was 90, but nobody knew how long she would go on when she was admitted. It was the right decision.

I think letting your parents' house is a good idea, op. My cousin let my aunt's three bed terraced house with parking, furnished, to three young nurses and it worked well.

It's unlikely to cover the costs of the care though. An annuity won't produce that much money monthly. Rent for a house that size will vary by area but could be anything between £800 and £2000 per month. That's taxed.

Care fees can easily be £6-7k per month so massive shortfall.

As well as all the legal stuff around ownership and inheritance don't forget that rent also needs to cover house maintenance and legal liabilities. You'll need a gas safety certificate.

And you'd need to pay tax on any rent charged too.

If your mum can fund about £9000 a month in fees from that, it's a great idea.

As a self funding payer with nursing needs, she is likely to be eligible for Funded Nursing Care and Attendance Allowance. That will cover something like £500 a month (look up the exact rates).

Bear in mind that this is fees as they are today (my mum's very specialist NH is £1950 a week, the 'normal' full nursing home near me is £1750 a week). And of course there's normal smaller but not insignificant costs like clothes, toiletries, haircuts, magazines, whatever she likes. Do think about increases in those costs and how your mum would deal with it.

She could commission a more sympathetic development of the site herself and have a purpose built flat/house of her own and fund live in care there from the proceeds? But she'd need somewhere to live in the meantime.

Has she been to visit any homes?

Thanks all, what I'm getting is that there are quite a lot of holes in this plan. No way could we stretch to 9k a month, I was hoping it would be closer to 5k a month.

I'll need to broach the subject of homes with my mother again. It was about a year ago she expressed these preferences during an idle conversation - when she was in better condition and my dad was alive and well. Perhaps I can suggest it as somewhere she could stay to try it out, maybe when I go away on holiday.

I would say whatever you do don't sell your house - unless it is to buy and take full legal ownership of your mother's house. Obviously with her full consent. This would have to be by paying the full market rate (to your mother) and you would want to get an independent valuation documented by a qualified person to prove you have paid the going rate. Otherwise as your mum has already begun to go into cognitive decline and is likely to need a care home you are likely to be accused of deprivation of assets if the money is needed for care fees and the local authority will try to recover the money.

If you sell your house and chuck the money in the care pot (without buying your mums house) if/when all the money is gone and your mother's house needs to be sold you could be left without a home or even without the equity you put in unless you are very careful to get it legally protected.

If your mum loses capacity her power of attorney (which may be you?) will need to act in her best interests. It will be in her best interests to make sure she takes care of her money and can pay her care fees for as long as possible. If her house is rented out the power of attorney should make sure she is receiving the going rate in rent as this is in her best financial interests. As rent is so expensive surely you would be better to keep your house rather than rent at the going rate?

I rent a house from my mum and dad - cheap rent and it's not their main home. My house, from when I had to move a long distance is rented out. I won't sell it unless it is to buy a house again as the house I rent from my parents might have to be sold for care fees one day and that would leave me struggling to house myself if I haven't kept my house to use the equity to help me.

I have seen relatives burn through hundreds of thousands of pounds in savings to pay for care fees and then build up a debt against their house, and that was despite having a good income in pensions.

Don't make your home dependent on your mum's finances. If you think she has plenty of money to cover her fees for a couple of years you could rent her house out at the full market rate (to other people?) to add to the pot but if all the money is used up and a debt is being run up against the house you will need to start to think about selling.

Im.also questioning what a 'care annuity' is - I think they may not exist any more? Since nursing home fees went up so much I think most firms stopped doing them. Look into that?

To be fair she probably has almost 2 years' of fees at current prices in savings, if she has 200k cash. Some nursing jones require proof of that much in cash before they will accept you. What interest is that currently earning? And if you move in and pay rent, you'll be able to maintain the house so it won't lose value.

Try the Age UK helpline and get recommendations for a financial adviser. And I hope you and your sister have Power of attorney for your mum,.probably jointly and severally.

As a self funding payer with nursing needs, she is likely to be eligible for Funded Nursing Care and Attendance Allowance. That will cover something like £500 a month (look up the exact rates). FNC is not necessarily helpful - some nursing homes quote fees on the basis that FNC is being paid.

Thanks again everyone, this has all really dissuaded me from my original idea. Seems like one really does not want to mix up ones own home and finances with an elderly parent.

It seems that keeping a house in the family is harder than it sounds :-(

Looking at the fees of a local care home, I calculate my mother could get three years of care there with her pension and the 200k savings, and her house could be left empty. If more care is needed after the three years, then we'd just have to bite the bullet and sell the house to pay for it.

Leaving a house empty for three years is not necessarily a great plan - houses deteriorate when unoccupied, you have to get special insurance policies and have people check on them regularly. Is it in a rentable condition on the open market (ie boiler, electrics, insulation etc all up to standard)?

I think once your mother reaches the stage of needing full-time care, you need to make the hard decisions sooner rather than later and probably sell the house straight away.

If your DM has three years of fees 'in the bank', why not rent out her home for these years? Maybe the rent cumulatively, after tax, will help pay another six months?

It might not be a good idea to leave it empty. Empty houses deteriorate and are vulnerable to being broken into. Empty house insurance is expensive and you have to guarantee someone checking the house regularly (often weekly) and leaving heating on or turning the water off. And extra council tax is charged on empty properties.

Rent it out to someone else at the going rate - she will have to pay tax but still worth doing to offset the care home fees.

I did a care annuity for my Mum in early 2020.
It was £250k & covered about 50% of her care fees - paid direct to the care home so no tax payable. The amount each year went up by 5%.
If you died within 6 months, you got 50% of your money back, 1 year it was 25%.
It was topped up by attendance allowance, state & work pensions.
We worked out that if she lived to 83, from then on we'd be quids in (!) but sadly she died in late 2022 so we lost about £100k but the knowledge that I would not need need to worry about future fees was a great comfort to me.