When two adults, each with children, decide to move in together the first issue that often comes up is how do we fit everyone in? Some of the children may be living with the couple full time and some may be living with them only part of the time, perhaps every other weekend and in the school holidays.
At the other end of the scale, we are seeing more elderly parents and their adult children deciding to share their living space in some form or another. This can be to ensure that the parents have someone close by in case of emergency or to provide help to the younger family with childcare.
In both circumstances issues can arise around what happens to the properties either if the arrangements don’t work or if one or more of the parties dies.
The following case study, involving the Vine family, illustrates some of the issues which typically arise in a blended family.
Case Study
Albert & Vera and John & Kate
Background
Albert and Vera are in their 70’s and Albert has been diagnosed with dementia. He and Vera are coping ok in their own home at the moment, but their son John is concerned about what will happen in the future if his father needs more care.
John talks to his wife Kate about the situation and she points out that they have enough room on the side of their home to build a granny annexe. Whilst John and Kate are comfortable financially, they don’t have enough money themselves to fund the building of the annexe. John suggests to his parents that they could sell their home and that the money from the sale could be used to fund the building works.
Vera and Albert agree that it only seems fair that they use their funds towards the building costs as they will have the benefit of living in the annexe.
The family go ahead with their plans and after Albert’s death 3 years later, Vera is even more pleased to be sharing a home with her son and his family.
Issues
However, it is after Vera’s death that problems arise. Under the terms of her Will Vera had left her estate to be divided between John and his sister Alice. She had left 60% of the estate to Alice and 40% to John under a Will prepared before Albert and Vera moved in with John and his family. Vera had some savings left on her death, but Alice asks John about the money from the sale of their parent’s property.
She is shocked to find that while her parents invested the money into John’s home that there is no documentary evidence to show the value of the investment nor any arrangements to deal with the current situation.
John proposes to Alice that he pays her a sum equivalent to half the sale proceeds of their parents’ home but Alice is not happy with this. She points out that house prices have increased substantially since her parents sold their home and therefore the value that their parents put into the house has also increased.
John argues that as his family spent more time caring for both Albert and Vera in their last years their parents would have wanted him to benefit from any increase in the property value. Alice points out that if this was the case then surely her mother would have changed her Will.
Unfortunately, the situation deteriorates, and John and Alice end up never speaking to each other again. Alice only receives 60% of the money held in Alice’s savings account and does not receive any money from her parent’s property.
Solutions
It is vitally important when making plans about different generations living together that advice is taken about how the contribution to the property is to be recorded and protected and what should happen on the death of any of the parties.
A well drafted Declaration of Trust could have averted the problems by showing the extent of Albert and Vera’s interest if the property was to remain just in John and Kate’s names. This would have been useful not only in the relation to Albert and Vera’s deaths but also if John and Kate had divorced as it would have protected Albert and Vera’s investment in the property.
It would also have been useful to have reviewed Albert and Vera’s Wills when their property was sold. They could have set out in their Will how their interest in the property was to be dealt with ensuring that Alice did not lose out on the inheritance they intended her to have.
Where possible it is always best to talk to the whole family when the decisions are being made so that everyone is clear about what is to happen both now and in the future.
