Think through how your new arrangement will work financially and legally. The smaller day-to-day bills are just as important as any more significant costs, such as adaptations to your home.
Money has the potential to be a source of disagreement and tension. This can be especially difficult when the person you are disagreeing with is a family member. This doesn't mean you shouldn't consider a shared financial arrangement with your relative, only that you should do so very carefully.
On this page you can find examples of the kinds of considerations you should bear in mind:
1. Joint-ownership of a home
2. Legal arrangements
3. Contributions to household costs
4. Government benefits
Joint-ownership of a home
Rather than your relative moving into your existing home, you may be considering buying a new home to have more space. In this case, pooling resources with your relative might allow you to buy a larger property. Or perhaps your relative has offered to invest in your existing home, to allow for an extension to be built, or to have adaptations carried out. Seek advice from a solicitor to discuss the following:
It is essential that you and your relative discuss all financial and legal matters with a qualified independent financial adviser (IFA) and a solicitor so that all paperwork is drawn up properly and professionally. For more advice on finding an IFA, see this page on the Which? website.
- What are the implications regarding inheritance tax?
- Will the arrangements affect your or your relative’s will? Do decisions need to be made regarding how you and your relative bequeath your estates?
- What would happen if your relative needs to go into a care home? How will your their assets be taken into account?
- What would happen if you needed to sell your share of the house, but your relative did not wish to leave? For example, you might need to move for employment reasons, or choose to relocate when you yourself retire.
If you or your relative are considering taking out a new mortgage, the Which? Money Compare mortgage comparison table can help you find the most suitable mortgage for your needs.
Joint tenants or tenants in common?
When two people own a property as joint tenants and one of them dies, it automatically passes to the other, irrespective of the will. Tenants in common own agreed shares in a property, and when they die their share forms part of their estate. Which of the two options would work best for you, given your particular circumstances?
Should you decide to go ahead with your plans, you and your relative should draw up an agreement in collaboration with a solicitor describing how you would deal with any disputes, should they arise, and, if necessary, how you would terminate the arrangement.
If your relative invests in your home, ask your solicitor about adding your relative’s name to the house deeds as owning whatever proportion of the property he or she has paid for (rather than specifying the amount of money that has been contributed) and/or drawing up a Deed of Trust if restrictions on the title prevent this.
You and your relative should also update your wills, in regard to any changes in your financial circumstances. See Which? Wills for more help and information.
Contributions to household costs
Sit down with your relative – ideally before they move in – and discuss how you see things working financially. For example, do you think it’s best for them to make a regular payment of a fixed amount to go towards bills, food, monthly mortgage payments or all of these? Or could they take responsibility for paying certain bills? It may be that you don't expect any financial contribution from your relative, but bear in mind that they will probably want to feel as if they are paying their way.
It’s quite possible that your relative has already given this a good deal of forethought and will have their own suggestions, so try not to enter the conversation with fixed ideas.
If your relative is currently receiving any benefits, such as pension credit, they should check to see whether these would be affected as a result of moving in with you.
- Benefits and allowances for the elderly: find out if your relative's elderly benefits are affected by changes in circumstances.
- Financing home alterations: details on your options for local authority funding if you are making necessary adaptations to the home.
- John’s story: find out how he and his wife adapted their home to enable her mother to move in.
Page last reviewed: January 2016
Next review due: February 2018
Which Ltd is an Introducer Appointed Representative of Which? Financial Services Ltd, which is authorised and regulated by the Financial Conduct Authority. Which? Mortgage Advisers, Which? Insurance Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.