Lending cash to MIL for flat purchase

[whattodo2626]

I will simplify the figures.

MIL has been losing her memory for ages but has no diagnosis despite some medical tests. For example she cannot remember plans at all - if you say we are leaving for lunch in half an hour she will almost never remember. Her long term memory is fine.

We live 2 hours away from her and in the last few weeks she has decided she can no longer drive to us. Public transport not an option. She is utterly miserable and scared. We have 2 very young children and can't visit that often.

She finds even very small tasks incredibly stressful. For example sending an email can get her so stressed that she is brought to tears.

We all think it is time she moved to a retirement village near us. In fact we have all been in agreement of this for some time BUT the stress of her selling her current home is too much for her. She simply cannot engage in the process without falling apart (not emotionally but she gets so stressed).

The apartment costs £400k. She has £200k in cash, I have £200k in cash. I am considering loaning her the money (formalised in a document, no interest). DH has total POA (medical and financial) and will then deal with the sale of her house to pay me back. We know she needs to sell within a certain amount of time to avoid CGT.

For the sake of completeness: Mine and DH's finances are joint but this money comes from the recent sale of my flat which was purely in my name as I bought it before meeting him and so we see it as 'mine'. I also earn less than him and like having this nest egg.

Please evaluate this plan as harshly as you like. The £200k we would both use up leaves neither of us destitute!

I'll also add that she got quite close to moving 2 years ago with an offer accepted on her property and on one she planned to move to. When it came down to it she became so stressed and overwhelmed that she had to seek medical help. She then backed out.

I did similar for my Dad recently. Lower amount but he was desperate to move and his sale was lagging behind. I had a legal charge on his new property until his old one sold and the charge was then discharged. There was a small amount of interest charged.
Your MIL will have to pay higher rate of stamp duty, but can recover the difference if her current home sells within 3 years (think it's 3 years)

Don't do it - so many pitfalls here. Whether or not she has capacity in the future could be a huge issue and complicate matters - it does sound like she has early signs of dementia. Harsh I know, but basically she needs to get on and sell her house first, it's good that your husband can support her in that.

Lovely of you to want to help her, but in your situation I wouldn't do it.

My only worry is that she may refuse to move even if you make it that easy. Whatever agreement you make, it has to leave you back in the same financial position as you were before, even if it disadvantages her.

Just check that everyone is totally comfortable with that.

Talk to a solicitor. It should all be doable safely with the right contracts in place but watch out for maintenance charges at the retirement village.

Just wondering if her memory is so poor and she gets so stressed easily, whether she would cope for long in a retirement flat, especially after the stress of moving and being in unfamiliar surroundings.
Second hand retirement flats are often difficult to sell aswell.....
Just a couple of things to consider

Thanks all so far. She really does seem desperate to move - it feels like she wants this taken out of her hands and the move just dealt with.

If it’s McArthy and Stone just don’t. I would suggest if she has dementia she rents a flat on a retirement village. You can then sell her house and invest the proceeds. If her dementia worsens and she needs a care home she can then move on easily. Buying in a retirement village can be the equivalent to setting fire to £20 notes.

@Redburnett it is so difficult. My friend is a GP who regularly visits the place we have in mind and does think it will be suitable for a good few years. Of course the service charge and selling on will mean a lot of money down the drain but right now it seems the best option. She won't consider somewhere more extreme. She is 78.

It is not mcarthy and stone it is Audley @Flamez . I think they are all similar money pits though

Can you do it the other way around - she loans you £200k to buy a property and she pays rent until it’s paid off. At which point she lives there rent free. Less risk to you that way around, plus possible future IHT planning.

Do NOT buy a retirement flat in a retirement village. They are nigh on impossible to sell. I've just completed on the sale of my late relative's apartment and sold it for far less than was paid for it. It has taken nearly 3 years to sell and the estate has accrued maintenance charges and ground rent all this time. Plus council tax and utility bill charges - gas, electricity and water.

I'd advise renting such an apartment as that will be much easier for you and your husband to deal with should your MIL need to move into a care home or when she dies. Some of these retirement homes don't allow you to remain living in them should you become incapable of independent living.

Please research them carefully.

Sorry, just seen that it’s a retirement flat. Do not buy! Poor investment. Why not just rent?

Retirement flats are absolutely terrible investments for sure. Especially if you are buying new. But this is about an elderly woman's health, safety and peace of mind, not about her family's inheritance.

What other alternatives have you considered OP?

I was also going to say to rent- if she’s got 200k then she could hopefully move pretty much immediately. No need to worry about cgt, no need to worry about additional stamp duty.

Compare the retirement home to a small flat closer to you that is not in a retirement village. Could your MIL receive in home care with someone visiting her every day?

Consider renting out her home and renting another which is much better situated.

I would recommend that your MIL rents a flat in a housing with care/retirement setting. I think it could work out most cost effective long term.

It would also mean that she can move using her own savings before her house sale and will need no financial commitment from you.

You’ll lose a lot of money doing this. Those flats are a nightmare.

Look up the retirement flats scandal online. Leases have been plummeting in value. Far better to rent using her £200 than risk catastrophic losses on your own £400k. Especially if you think she has dementia and may potentially need higher levels of care sooner.

Leaving aside any question of any future inheritance being lost by the drop in value of these properties (and I agree with a previous poster that this lady's security and peace of mind is paramount here) you will not be able to sell the retirement property quickly or at all should your MIL need to move into a care home which incurs fees. Those fees will have to be paid out of your MIL's capital which could run out. At the same time the fees at the retirement home - maintenance, ground rent etc will continue to accrue.

I know of one such situation at the development where I have just sold an apartment. It's a nightmare for all concerned.

It sounds like a good idea but I would echo the warnings re assisted living properties. They usually don't allow rental either so very unlikely you'll find one to rent. You may also have problems with a charge for your £200k as some won't allow it.

A better option may be to buy a non retirement property. Either a small bungalow or ground floor flat and use care line or a similar service and have carers going in.

Surely there must be small 1 bed properties nearer you that don't cost almost half a million pounds plus all the charges?!

Don’t buy! Rent. You could even sell this idea to her as a ‘try before you buy’ for 6 months or a year. That way the psychological investment/anxiety is much less and you could sell the house once she’s settled in her new place.

Rent a one bed flat and pay for carers 3 times a day. We opted for this, the carers cost about two grand a month and we live in a cheap area so got the one bed flat for under 1000 a month so all in all it’s about 3 grand a month before utility bills etc. Way preferable to buying somewhere in a retirement village - especially when with my experience, being surrounded by people with similarly failing memories just accelerates your own memory loss!

DO NOT DO THIS!

Go on the local council website and apply for rental over 65 flats!