One big, happy family: The three-generation household is making a comeback

After Chris Lovell's wife Arlene died, very suddenly, in 2008, grief stopped him in his tracks. He had been a successful model-maker for adverts and films, working with the likes of Nick Roeg and Tony and Ridley Scott, but could not go on. Nor could he manage to paint – an early passion he had always intended to take up again. He gestures at his many portraits of Arlene hanging on the walls of his home: "It was a nightmare."

Not any more. Chris's daughter Annalies, 42, and her writer-director husband Dominic Lees, 46, knew something must be done. They moved from London to join Chris in the family home in Surrey, with their son Theo, 8, but there was too little privacy. Annalies admits: "I would feel cross finding Dad in the kitchen first thing when I got up in my unsociable morning state. Then I felt guilty." She and Dominic had planned to buy a house close by, but decided: "We wanted Dad with us."

They searched for a house that would allow Chris his autonomy and a good studio to work in. "With us around he was coping much better with Mum's death," says Annalies. They saw several houses with "granny annexes" but no space for Lovell to work. The house they eventually bought for £675,000 – of which Chris contributed just under a quarter – had more than half an acre of land and permission to build a small house with a sizeable studio.

They knew it must be organised on a formal basis and had several discussions to ascertain what each wanted from the arrangement. "Thinking you can just let it evolve organically because you are family is a mistake. It enables you to be informal when things are properly in place," says Annalies. Her father would pay for his new house, and have his own title deeds so that he could sell, if he wished to in future, without forcing the others to move.

Chris worked with the architect designing the home to make sure there was space for the important pieces of furniture – a huge dresser in the kitchen, and the family dining table – from his life with Arlene. He designed a double-height sitting room where his pictures, sculptures and models fill the walls and shelf spaces. The kitchen has cornflower blue walls. "It was important to make the place mine in a new way, but I needed familiar objects to remind me who I am," he says.

All agree, with unguarded enthusiasm, that the arrangement is a happy one and Dominic reflects: "We are all capable of saying if something is not right. That is important because too often parents living with children feel they have no right to speak out."

Chris nods: "I have an independence I value, but it's wonderful having my family next door. We don't have fixed times to be together, but they invite me over for the odd off-cut and Theo bounces over to see me, or I go and babysit when needed. And I find myself wanting to paint again. That is the gift my family has given me with this happy arrangement."

There is a steadily growing trend for elderly parents to share a home with their children and grandchildren in what are known as 3G families – three generations under one roof. Research from Homewise, a retirement housing and finance specialist, shows 850,000 adults aged between 35 and 64 now have one or both parents living in their home. Financial difficulties, loneliness, failing health and reluctance for parents to go into residential care are all reasons. And there are clear practical advantages – shared expenses, smaller carbon footprint, no need for the "Sunday run" to see parents, or the distress of knowing they are lonely. Plus there's the added bonus of built-in help with children.

However, a recent study from the Policy Studies Institute found that parents going to live with grown-up children were often anxious about "being a burden", and this is clearly more of an issue if they live as family within the same house. Yet the study found that these parents were clear that they wanted to pay their way, contributing pension money to the household budget, paying a share of bills and helping with chores when possible.

Although most of the adult children interviewed found that caring for parents was manageable, all agreed it was also stressful. In plenty of cases respite help or other support would have minimised the risk of "sheer exhaustion undermining the relationship with the parent", says the report.

Lucy Darwall-Smith's mother Anne sold her cottage to help Lucy and her husband buy their family home in Ringmer, near Lewes, in Sussex. She had been delighted at the idea of moving in with them and the top floor was converted into an autonomous granny flat at a cost of £6,000. If you are planning something similar, Age UK recommends considering whether it will need special facilities and adaptation, and who will pay for the work. "We had a no-holds-barred discussion about how it would work, what ground rules we needed to safeguard privacy and so that nobody felt exploited. For example, my mother paid one-third of all house and utility bills. As she grew older and needed care she paid for that with money put aside. She was a wonderful gardener and loved being able to contribute that way. She was also a great friend to my daughter, Daisy," says Lucy.

But as Anne, who died last year, became more frail, Lucy, by now divorced and running her own business in London, admits it became harder: "She needed quite a lot of help. I had to help her to the lavatory, bath her and I took her a lot of meals, but she was mentally all there and very rewarding as a person. I was absolutely determined she would not go into a home. I suppose if she had become senile and I couldn't cope, I would have had to. It makes me very happy to remember her saying the years we were living together were the best in her life."

Tina Riley, an only child, had a particularly close relationship with her parents Milos and Mimi Jiranek. They had fled to England from Czechoslavakia in 1953 and when Tina married Paul, they lived close by in London. Her father, who worked for the Foreign Office, was retired when the couple decided to move to Devon. Milos and Mimi were delighted at the suggestion that they come too. They sold their house and paid to have the stone wreck attached to Tina and Paul's house restored as a small home. They also gave the couple money to help them set up the residential art courses that Paul teaches, and the art gallery, Coombe Farm Studios, which has been Tina's project. And now the extended family is growing again as Tina and Paul will now have a home with Lara, their own daughter. Lara, her husband Martin and baby Sasha are moving into the family home and, with money from the sale of their house, Tina and Paul are creating a glass and wood retirement home, built around a green oak frame made by Roderick James's Carpenter's Oak company, with stunning views over the South Hams.

The plan is that Lara will take over running Coombe Farm Studio, and Tina reflects: "Having my parents so close meant our three children really got to know them and Mimi, who refers to herself as 'the Background Noise', assisted with the art students, took an interest in the gallery and helped in many other ways. Now my plan is to help a small amount with the studio and have time to enjoy being a grandmother to Sasha."

These are just a few of the ways children living with adult parents can be a success, and although not everyone will have the space to replicate what has been done here, there are often creative ways even a room or two can be created as a separate unit with privacy.

Making sure that everyone is clear how the arrangement will work, talking to others who have done it and consulting an organisation such as Age UK, can all help to make it a real success.

House rules

1. Moving in together can seem an attractive option but, urges Age UK, be very clear what you all want and need.

2. Get the largest place you can afford. Too much intimacy can be oppressive. Assume there will be a period of adjustment.

3. Discuss how the arrangement will work, with everyone's needs given equal weight.

4. Get a solicitor to draw up an agreement safeguarding the investment of both sides. Think how it will work if one side wants to sell.

5. Work out who will pay household bills, be responsible for maintenance etc. Be sure it feels fair to all.

6. Be very clear about how much privacy you all want. Is eating together part of the arrangement, or are separate kitchens and sitting rooms a good idea?