Property: Why inheritance is a family affair

Ageing parents, children, property and money can elicit duty and devotion. The combination can also lead to bitter conflict. At stake are assets which, if they don't go to the family, might well go to the tax collector or local authority. Robert Liebman suggests that families which encourage overall collective planning may find an avenue where devotion, obligation and self-interest converge.

Geographical and emotional dispersion and upheaval needn't mean familial disharmony. No sooner had Lily's strong-willed parents reached old age than they promptly divorced. Her father and sister remained in the north of England, settling in different nearby cities. Lily's brother moved overseas, and she put down roots in one part of London, her mother in another.

But the entire family pulls together when it matters. "My sister has been looking after our father, and I am taking care of our mother," says Lily. A few years ago, Lily's sister helped their now-90-year-old father move to a property in her city. This winter, Lily found and helped move her 82-year-old mother into a flat that is comfortable, convenient, and near Lily's own home.

For her mother's sale and purchase, a local solicitor's fee was pounds 800. Instead, Lily instructed a bargain-basement solicitor, saved hundreds of pounds, and got the service she paid for: minimal, frustrating, and incomplete. But it did the job, even if an option to extend the lease is still pending.

"We don't mind paying taxes," says Lily, "but care might eat up everything". Their father has joint ownership of his property with his two daughters, and their mother and all three children own her flat.

Neither parent's property remotely approaches pounds 215,000 in value, the current threshold for inheritance tax. But many people of seemingly modest means own immodestly valued properties. Additionally, with healthcare thresholds at pounds 10,000 and pounds 16,000, almost all property owners must contribute to the costs of their own care.

Money is not the only or necessarily even the top priority, says Mark Spash, a Private Client and Estate Planning Partner at Piper Smith & Basham, a London firm of solicitors. "The first two priorities are to ensure that the parent gets a decent roof over his or her head, and has sufficient funds to run it." Beyond that, specialist financial planning works its own miracles.

Elderly people tend to underestimate their worth, and it is essential to accurately identify surplus assets, says Mr Spash. "A life or pension policy, for instance, may be assignable to a third party in the event of death. The elderly person can still receive income from the policy but in the event of death the capital sum can be assigned to a child or grandchild, which takes the policy out of the estate." If an elderly couple own a property jointly, "they should consider equalising their estates and gifting out their respective interests to their heirs, but do so in a manner that doesn't adversely affect the surviving spouse's requirements," says Mr Spash.

A healthy elderly person today might start hobbling tomorrow, and Age Concern highlights practical questions. Does the new property have level thresholds or ramps for easy or wheelchair access? Are corridors and doors wide enough for a walking frame or wheelchair? Does the bathroom contain a walk-in shower?

Rental properties are available from many local authorities and housing associations that are purpose-built or have been converted expressly for the elderly. "Very Sheltered" and "Extra Care" housing schemes cater for elderly who are less independent than those for whom a part-time scheme manager would suffice.

Age Concern also advises elderly people to "not let your friends and relatives pressurise you into a decision with which you are not comfortable. Where necessary, seek independent advice." The charity publishes a set of brochures which clearly cover all of the main legal and financial issues.

In addition to protecting assets, timely financial planning can help to ward off or soften other harsh blows. Julie, a freelance editor in London, plunged into a vicious cycle when age suddenly caught up first with her aunt and soon after with her mother. The sisters, both in their mid-seventies, took care of one another in Northamptonshire.

When her aunt developed Alzheimer's disease, Julie helped to arrange residential care and the sale of her bungalow. Several trips to Northamptonshire were required. But when Julie's mother had a stroke, the occasional trip was insufficient. Julie had to move into her mother's house to act as part-time carer, handle a mountain of paperwork, and maintain her own career.

"I always have work on, but I have no time to do it except in the middle of the night, so my income has suffered."

This blow to her earning power occurred at the worst possible time. "I did not have a power of attorney over my mother's affairs, so I had to use my own savings. A good solicitor would have arranged a power of attorney in a matter of days, but our solicitor took five months."

Ironically, Julie and her mother, acting on the recommendation of the local carers' support group, had obtained a power of attorney for her aunt. "But when you are in the midst of one crisis, you tend not to prepare for another. It must be a defence mechanism," says Julie, who had been too overwhelmed to arrange a power of attorney over her mother's affairs.

Legal advice combined with financial planning needn't involve vast estates or complicated legal or tax issues. "A son or daughter can pay for and arrange a parent's lease extension and then, via a Declaration of Trust or mortgage, establish their respective interests in the property," notes Mr Spash. "The heir can receive the benefit of part or all of the flat's increasing capital value, and such increases can serve to reduce the size of the parent's estate and protect the financial commitment that the child has made in assisting the parent."

Age Concern England, 0181 679 8000; Cymru, 01222 371566; Northern Ireland, 01232 245729; Scotland, 0131 220 3345; Piper Smith & Basham, 31 Warwick Square, London SW1V 2AF, 0171 828 8685.