With people living longer, more and more families are inviting their elderly relatives to live with them. We look at some of the financial aspects to consider as you plan the move.
Nearly four years ago, we took the decision to invite my mother to live with us. She hadn’t been well, and was living alone in a remote mountain village in South Africa, far from the nearest hospital or even a local doctor. Having her live with us gives us comfort knowing she will be well cared for in her old age. There are practical benefits for us as well – she is a keen gardener and also lends a hand around the house when she is able.
We know it is not a scenario for everyone, but if you are considering bringing an elderly relative to live with you, our experience flags many important things to consider. It may seem to be an obvious one, but it is important you will be able to live together happily. So, agreeing house rules and scheduling regular family meetings to tackle any niggles is a good start. However, there are also financial aspects that are worth thinking about. Finances are an emotive subject for many of us and it is good to set out expectations and agree on the approach early on. Planning ahead makes it much easier when something happens – and it will.
Here are five things to consider and discuss:
1. What happens to their previous home and other assets?
Your relative may need help selling their previous home, or preparing it for rental. They may have favourite pieces of furniture or home accessories they would like to bring with them, or they may need to be donated, gifted or sold. Understanding what is important to them and what they would like to bring means you don’t end up with an overcrowded house or an attic filled with items that will never again see the light of day. Also talk to any siblings. They may be happy not to be sharing their home, but are they as happy with the financial outcome?
2. How should you account for the running costs of your house?
Your relative may wish to contribute to the family finances. If this is the case, you will need to discuss whether they will make a regular contribution to the running costs of your home, or they may prefer to take responsibility for certain things, such as utility bills. The latter can be a good option if your relative is coming to live with you from abroad. Having a few utility bills in their name makes it much easier to set up their financial requirements – such as a new bank account and credit card. It also gives them a sense of permanence which should help them to settle in.
You may also consider setting up a separate bank account that can be used for household expenses, with additional cardholders so that you can all shop for the household without messy calculations and transfers back and forth to cover the costs you each incur. It is also a good idea for set aside any money that may be needed later on down the line for changes such as a stair lift or bathroom modifications.
3. Do you need to revisit your home insurance?
If your relative has personal assets of significant value, your home insurance may no longer be sufficient. There may also be additional items that should be individually valued and insured. Will you each carry your own home contents insurance, which may be suitable if your relative is living in a separate space, such as a granny annex, or will it all be grouped together? These are things that you should decide on before the big move. It would be unfortunate to be underinsured should an unexpected disaster happen.
4. Will your will, and theirs, need reviewing?
It’s a good idea to regularly have a look at your will – and if you don’t have one yet, now is a good time to have one drawn up – but these discussions open up an opportunity. You may wish to make specific provisions in your will for your relative, should they outlive you. It is also a good idea for them to review their will in light of their change in circumstances.
5. Should you set up a lasting power of attorney?
It may be worth considering a lasting power of attorney should your relative’s mental or physical state deteriorate in the future, as well as one for you as it’s not always a foregone conclusion that the elderly relative welcomed is the first to need help. It means you will be able to make some important financial decisions that are in everyone’s best interests later on if needed.
Intergenerational living has many benefits and it can be very rewarding, but it can also have its challenges. Good communication is vital and, if you’re considering this as an option, it is good to start the conversation with your relative and the rest of the family early on. Please do not wait until you’re all under the same roof to consider the details. And bear in mind that once you’ve started down this path, it is not easy to make an about turn!
At Nedbank Private Wealth, multi-generational relationships are really important to us. So we work with you and your family to offer the appropriate support at whatever stage you and your family are in life. To find out more about our wealth planning services, please complete the form below, or contact your private banker or our client services team on +44 (0)1624 645000.
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Cathy joined Nedbank Private Wealth in 2010 and heads up the marketing team. She has 23 years’ experience in financial services marketing and has worked for a number of private banks and wealth managers in the Isle of Man and South Africa. She is a Chartered Member of the Chartered Institute of Marketing.