How can I help my mother free up some of the capital in her home?

Q My 76-year-old mother owns her own home (worth about £170,000) but has very little income other than from her state pension, although she still has savings of about £30,000 from which she is currently getting very little interest. She is unable to claim any benefits over and above her state pension. She was divorced about 14 years ago and her will is made out to my sister and myself in equal shares. At some stage soon she has asked us to take over power of attorney for her, although she is currently in very good health, enjoying living in her own home, coping well and is running a small car. She would like to have some more income (particularly to refurbish the house which is now in need of some work) and I am wondering if you have any ideas about how to free up some of the capital in her home. She is reluctant to move yet but would like to at some point over the next five years. My sister suggested lending her some cash/funding a regular income for her against reimbursement of the amount when her house is sold. Her other suggestion was that she and her husband buy a flat which they rent to my mother while she is still able to care well for herself. This is complicated by the fact that my husband walked out six months ago and I am uncertain as to my own future in terms of income and house ownership. I currently have a reasonable income and my house is jointly owned by myself and my husband. We have not got divorced yet and are managing to sort out maintenance for our children between ourselves. I prefer my sister's first suggestion as I would be able to spare some income but am not sure how this would be affected if I get divorced. Her second suggestion seems like she would make a lot of money (possibly up to £5,000 a year in market rents) and that I would probably lose out to a significant extent. If mum continues in good health (and she comes from a very long lived and relatively healthy family) potentially £50,000 could have been paid to my sister in rent which would then not be part of a will settlement. AH A I can see several flaws in your sister's second suggestion that she buy a property and rents it out to your mother. First, you say that your mother doesn't want to move at the moment; and second, I fail to see why your mother would want to sell her home (which presumably doesn't cost her anything in terms of monthly rent or mortgage) and move into a flat that she pays rent for. The most straightforward option for your mother would be for her to forget trying to raise income to pay for work on her current house and raise capital by moving to a smaller home that she would own herself. If she's not willing to move at the moment, rather than trying to raise capital from her home, would it be possible for her to use some of her savings to pay for the work on her house? Given that she's not getting much interest on her savings, this might make more sense. This option would also be simpler than your sister's first suggestion as well. If you and your sister are going to lend your mother money against the eventual sale proceeds from her home, you need to get expert legal advice to avoid any possible misunderstandings later. At the same time, you might want to consider arranging a power of attorney for your mother now – while she is in good health – rather than later when it could get complicated. Again, you'll need expert legal advice on this.