Buying a property with parents and building them an annexe?

[NameChangedForTheUmpteenthTime]

Has anyone done this?

We are considering pooling our money to buy a house with land, and building an annexe that DPs would love in. The deposit would come from the sale of DPs current house, with me and DH raising a mortgage for the rest.

There are a lot of what-ifs to think about. Eg what if you and DH divorce, what if your DP hate it and want to move somewhere else, what if you have just one remaining parent and they need residential care. Many more to come.

How old are you all? Have you discussed how this will work?

Adding to the list:

• what if you die. Would DH be expected to continue to host your DP?
• do you have siblings? Wouldn't they be expecting a share of DP's current house / a share of the shared house/annex when DP pass on?
• can you find a plot of land near GP surgeries, local grocery shops, leisure centres etc so DP can retain their independence?

Thanks for your reply. Yes, have gone through the ‘what-ifs’ you mention (us separating, them needing care down the line, any of us wanting to move, etc) and DPs will be getting independent financial advice to see how best for them to approach this.

DPs are in their 80s and have money set aside for paying for care if needed, but they want to move to be closer to us, which has coincided with us looking at moving (within our current area, so we are confident about location).

I’d suggest legal advice. There’s a lot to untangle with this sort of thing, deprivation of assets, IHT etc.

what if they die within 7 years for example, would you need to sell your home to pay IHT? If they need care and you can’t cope?

would you own the house or would they own a share? Who would they will it to?

if you don’t have siblings it’s a bit easier. If you do, make sure everything is agreed, preferably in writing.

Thanks mouldycandy

no siblings so no concerns around that side of things.

RE DPs staying in the house if I died, our broker suggested we could have a solicitor write a deed of trust (I think it was called?!?!) that would legally give them the right to remain in the property for the rest of their lives.

yes we are looking in semi-rural areas, but ones that have access to GP, shop, etc.

DB did this. It hasn't worked out exactly as planned for a variety of reasons (ill health of MIL, death of FIL, DB redundancy) but they are all really happy together and glad they did it.

I can't offer any knowledge or advice, but thought a positive note might be appreciated!

Thanks - I don’t think IHT would be applicable as their estate would be 650, and they are married and passing to a direct descendent.

me and DP would own the house, I believe we would struggle to get them on the deeds due to me and DP needing a mortgage. Our broker said we would have to get a specialist mortgage if they wanted to be on it and the rates would be really high.

re needing care, they have money put aside to go towards that if needed, although I’m not sure how much so we probably need to u sweats d how realistic that budget is.

thanks for sharing, and yes it’s good to hear from someone who’s done it and it’s been positive!

Do they really have enough put by for care though?
This could easily be £100k+ a year for years if unlucky enough to have something like dementia.

My friends parents did exactly as you are suggesting and our local authority still saw it as depravation of assets despite the transaction saving far more in care fees over the years.

If they are selling their home and using the proceeds towards a shared house with you, but they’re not on the deeds, then surely that would be deprivation of assets when it comes to care costs?

(Because if not on the deeds then they are effectively gifting you £XXXk whatever the value of their contribution is)

Cross post. Yes I agree it would be DoA

Yes - in the process of doing this right now (I can hear the builders)! I am an only child and DM has moved in - proceeds of her house paid the deposit and DH and I raised the mortgage.

Won't lie to you - it's been hard. At times I want to strangle my mother and she has, in her (not so) old age started to become a whiny hypochondriac which is infuriating.

That said, DH and I would have had no hope of getting on the ladder before an inheritance without doing this and now that we can see the light at the end of the tunnel it's worth it.

DM has one side of downstairs as an annexe (bedroom with en-suite, kitchen and living room). We can easily change this set up once the house is just ours - morbid I know - but worth considering.

It's handy having built-in dog/child care, which we've never had help with before. It means DH and I can both work full time and build our careers.

DC have been very good with it. DS1 is 17 so already looking at moving out in the next few years.

In terms of the financials - offically, DM gifted us/me the entirety of the deposit and we are the sole owners of the property. She has no legal entitlement to anything, which is a huge trust on her part. DH and I are solid though, and as an only child there are no other parties to consider. You will need solid legal advice to make it work for your individual circumstances. DM is only in her 60s, so no care required yet, thankfully. As mentioned, it would fall to me anyway.

If I die, they can sort it out amongst themselves - I won't care. I'll be dead. If she hates it, tough shit tbh. It was her idea and we're the ones who gave up independence at her behest, not the other way round.

Thanks - That’s definitely food for thought. There isn’t a family history of dementia but DMs health and mobility isn’t great, and neither is DFs really. Will need to look more into deprivation of assets i think.

Will definitely need to get advice on this - the broker suggested the funds from the sale would need to be gifted to us to avoid needing a specialist mortgage, and this is something lots of families do when they decide to live multigenerationaly, appreciate he isnt a solicitor/financial advisor though!

Yes there shouldn't be an issue with them gifting you the money in terms of the actual purchase or mortgage. But if they ever need care, and they haven't got enough put by to pay for it all, then it would be DoA and care can be so so expensive (especially if it's specialist care - it can easily be over £10k a month) so unless they literally have millions tucked away in the bank, you have no way of ever knowing whether or not you'd need to request support from the state. Therefore if they did need care and they couldn't afford it, in theory you would potentially have to sell your house to pay for it.

Thanks for sharing this, it sounds very similar to our circumstances, and how we were thinking the legal set up would be for us.

did you all move into the house as it is, or have you had to extend/build? Our main concern is buying a property with the intention of extending/building and then it not getting through planning or dragging on for years.

How currently independent are they? Do they have specific expectations of you regarding care etc? Extended family did this and it turned out parents had a lot of unspoken expectations. Plus their health has vastly deteriorated the past couple of years. The couple are now collecting prescriptions, doing food and clothing shopping, lifts to appointments, providing company and entertainment, feeding them every night and doing their laundry on top of working full time. Definitely gain clarity on what, if anything, they may be expecting in that regard and be very clear about what your boundaries and limitations are. The couple are mortgage free as a result of the arrangement but have said the cost has been too high!

Thanks reno thats a useful pointer for me to take away.

Thanks for sharing, yes we probably do need a much franker discussion about expectations later down the line, it’s a sensitive topic but would need to go into it with everything clearly laid out.

I wouldn’t consider it.

I have known some nightmare scenarios with people that have done this with parents/in-laws.

It’s always been about control and pecking order with huge fall outs and bad feeling.

Er... why are your parents in 'the annexe' and not you?

I know someone who did this and when they needed to go in a home they had to pay the money back as it was classed a financial deprivation of assets. They used DP money to build an annex.

Because we are a family of 4 and there are 2 of them. Because their mobility limits them from using stairs so they want a custom built ground floor annexe. Because they are in there 80s so are down sizing. Because we are looking at older properties which tend to be colder/less well insulated, whereas a newer annexe will be warmer. Lots of reasons, but they are the main ones.

Ours is half done - we bought the house with a rear extension which will function as kitchen & living room, and the garage is being converted to create the bedroom and en-suite. It's not taking too long, and the existing back room is useable throughout so DM still has her place to sleep throughout. We all moved in earlier this year.

As we are only converting the garage we don't need planning permission - it comes under permitted development.

Having a house that worked for us 'as is' for a short amount of time was a must. DM actually moved in with us in our old rental (relationship breakdown) for a few weeks/months as the sale went through and it was hard, hard work. We all needed the separation.

Don't buy something that isn't at least liveable from the off/throughout any work.

I know people will still caution DoA, but DM will refuse a home unless on death's door. No family history of dementia, I may have acted differently if there was.