| Non-motoring > Equity Release Schemes | Miscellaneous |
| Thread Author: Skip | Replies: 23 |
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New Mon 16 Aug 10 20:41
Equity Release Schemes - Skip
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I apologise if this goes on a bit, but i need some advice on behalf of my parents. My 74 year old mother phoned me today and was clearly upset, she and my 64 year old stepfather have been struggling to make ends meet for a couple of years now and this month they have actually gone overdrawn for the first time. The main problem has come from my stepfather having to retire at 60 due to stress which had pushed him close to having a breakdown, and although he received a resonable settlement, they still had a small mortgage and a few other debts to pay off which pretty much took up all the lump sum. Because he had to take his pension early he obviously isn't receiving as much as he was expecting to had he been able to work till he was 65. He had planned to get a part time job when he had recovered, which he did, but was then diagnosed with Parkinsons disease & this has progressed to the stage where he cannot go on working. The only way they can see to raise any money is to take out one of these equity release schemes against their house, and have asked me to look into them. Their house is probably worth £225,000 and is now in need of some updating and decoration, plus they need a stair lift put in and a downstairs cloakroom added as mum has mobility problems. The trouble is that having looked at some of these deals, they really seem to offer terrible returns, probablly as he is only 64. Have any of you had any experience of these schemes or do you know of any other options that they could look at ? I am really sorry to have gone on for so long, but this has been worrying me all day and writing this has helped a bit Andy |
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New Mon 16 Aug 10 20:50
Equity Release Schemes - Zero
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| Can they move and downsize? Bungalow perhaps? |
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New Mon 16 Aug 10 20:58
Equity Release Schemes - Skip
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| That was one of my first thoughts Zero, but they really would like to stay there, they have lived there for 30 years & are surrounded by really good neighbours. |
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New Mon 16 Aug 10 21:02
Equity Release Schemes - -
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Sounds like sheltered accommodation could be an idea for them as your stepfathers health isn't likely to improve. Some are in pleasant surrounds too, if not then as Z suggests a smaller bungalow might be an option. Getting old isn't much fun is it, chin up AndyP your mum needs you strong to bat for them against the wall of bureaucracy that awaits. One other thought, we didn't put this into practice as my late mother and father were extremely independent. Obviously depending on your family circumstances, could you pool finances with them to enable the purchase of a slightly larger home big enough to house you and your parents in companionable privacy if that makes sense. Your parents have our best wishes. Edit, scotch that thought, they want to stay and stay they should if they wish. Last edited by: gordonbennet on Mon 16 Aug 10 at 21:03
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New Mon 16 Aug 10 21:15
Equity Release Schemes - Skip
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| Its hard to believe how much they have deterioated in the last 5 years, my mum is still mentally 100%, and has always been very healthy, in fact the last time she saw a doctor for herself was when she had me - in 1962 ! but she is very unsteady walking now. |
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New Mon 16 Aug 10 21:28
Equity Release Schemes - Ted
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You've probably gone into this, but do make sure they're getting all their entitlements. Some folk think they're claiming charity, but they've worked for it. My MIL was like that. I took over her affairs under a Power of Attorney and , with the help of the City's welfare benefits dept, found she was entitled to about £9 a week Pension Credit. Not a lot in itself, but it meant she no longer had £110 a month to find for Council Tax, and if she had had a mortgage, the council would have paid a considerable chunk of that. Non means-tested attendance allowence bumped her income up quite a bit. At 94 yrs old, we found she had well over £200 a week coming in, with no major outgoings. We paid off her TV rental and bought the set off them, cheap. She had no car, of course and no entertaining or holiday bills. We hired a chalet in Devon for her last holiday, it was the same cost however many stayed in it. Small economies, but they all add up. A downsize seems sensible, if they can be persuaded. MIL went into Equity Release a few years before I took over. She had a very good and straight financial advisor. He said ' Look, you've got £6K in the bank which you can access at any time if you need it, what on earth do you want with any more, for the time being ? ' He was dead against it ! She never went down that route. Ted |
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New Mon 16 Aug 10 22:19
Equity Release Schemes - Kevin
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Ted is absolutely spot-on. First of all, make sure that they are receiving all the allowances that they are entitled to. Things like Attendance Allowance and Disability Living Allowance can add a couple of hundred quid to their weekly bottom-line. Their local Citizens Advice should be able to put them in contact with an advisor (free) who will explain exactly what they should be entitled to. Obviously, it depends on individual circumstances and the rules can be complicated so they really need to sit down with someone who knows those rules inside-out. My cousin's wife gives a few hours a month helping folks with similar problems in Cheshire. Kevin... |
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New Mon 16 Aug 10 23:12
Equity Release Schemes - Stuartli
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It's worth reading up on the subject at sites such as: www.equityrelease-site.co.uk/pros-and-cons.htm tinyurl.com/29tq2z4 tinyurl.com/2a3os7g But as mentioned earlier, it is very worthwhile checking out what government benefits to which they may be entitled (and have contributed to, no doubt, over many years). It would certainly seem that Attendance/Carer's Allowance is a definite benefit at the full rate which may be claimed by your mother. Last edited by: Stuartli on Mon 16 Aug 10 at 23:15
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New Tue 17 Aug 10 05:53
Equity Release Schemes - Pat
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www.turn2us.org.uk/benefits_search.aspx This is a good site to make some checks about what benefits you are entitled to. As a charity we use it a lot to advise claimants. They do need proper help to fill in the forms and make sense of them though if they are to get all the help they should have. Pat |
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New Tue 17 Aug 10 08:49
Equity Release Schemes - Clk Sec
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| Age UK, formerly known as Age Concern, may be able to help you with this. |
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New Tue 17 Aug 10 09:01
Equity Release Schemes - Falkirk Bairn
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Equity release is the wrong way to go at this stage - there are various allowances that can be claimed on top of basic pensions and only after you have exhausted these routes should you consider downsizing / equity release etc. Are they claiming Council tax rebates, are they on a social tariff for electricity, gas............... |
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New Tue 17 Aug 10 11:19
Equity Release Schemes - Skip
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Thanks to everyone who has taken the time to reply. As far as i know they are not claiming any benefits at all. I think that they have presumed that because they both have (smallish) private pensions and own their own home they would not be entitled to anything (as did i). I will look into this and see what they may be able to claim. Next year when my stepfather is 65 he will obviously be able to claim his state pension which will probably ease things quite a lot. Andy |
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New Tue 17 Aug 10 11:49
Equity Release Schemes - Mapmaker
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>> Next year when my stepfather is 65 he will obviously be able to claim his >> state pension which will probably ease things quite a lot. >> Andy Equity release would be NUTS. It's like taking out a mortgage again, only worse. I am guessing at the numbers, but guess that they might manage to release 50k against a 225k property, meaning there would be nothing for you to inherit? If you ignore the stairlift and cloakroom this is a one-off problem, until the state pension arrives next year. As that's not going to be more than - what? - 5k p.a.? it seems like a huge sacrifice for what is a small cash problem. Once you've investigated the benefits situation I think there are three routes. Most sensible solution is for you to lend them some money, being a loan against eventual inheritance. Make sure you have this properly documented so that if the house has to be sold to pay for care home fees that you get the cash back. They may well not want to move, but the property sounds unsuited to their distinctly fragile state, and they could move into somewhere far more suitable - with a lift, cloakroom on the level, without maintenance worries etc. etc. Moreover it would cure their problems. Other solution: ebay - what is the house full of that they have no longer any need for. And sorry, "updating" houses is for people with too much money. Finally, send your mother to the doctor if she really has not been for 50 years. Has she had her blood pressure tested? Diabetes? Sorting out something really simple like that may be a miracle cure for her increasing infirmity. Last edited by: Mapmaker on Tue 17 Aug 10 at 11:53
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New Tue 17 Aug 10 12:00
Equity Release Schemes - Mapmaker
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Out of time to edit to: And sorry, "updating" houses is for bankers with too much money, not for pensioners who have to *borrow* to do it. Finally, I hope you don't think this is unsymapthetic, it's not - I feel real sympathy for them and you, it's obviously very difficult for all of you. But your parents, I'm afraid, do have some hard choices to make as they are clearly in a financial hole in a house that does not suit their needs. Borrowing money at that age, with no hope of ever paying it back, is nuts. It really sounds as though the house isn't practical for them - they must really struggle e.g. with the garden. Sell it and move into some sort of sheltered accommodation. They are young enough to be able to adapt and enjoy the benefits of the move. You will no longer worry about them so much as there will be an on-site warden. At some point you will be left with only one (step) parent. It will be much harder for him or her to move at that stage, not least as they will be older by then. |
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New Tue 17 Aug 10 14:34
Equity Release Schemes - helicopter
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Andy, lots of good advice above. I would not recommend equity release at all frankly and would echo the others here who recommend you check out with Citizens Advice , Age Concern and / or social services all the benefits to which they may be entitled. Carers allowance springs to mind but I am no expert. I do know from my own experience with my now departed Father in Law just how stubborn old people can be about accepting what they see as charity. He was asset rich in that he had a house of around £200 K value but no cash other than a small pension and some small income from a trust which was his wifes money to go to the grandchildren when he died.. I went to his house when he was in his eighties and it was freezing cold so I asked why he did not have central heating on and it transpired that he had boiler problems and could not afford the cash for the bit required to fix it which was only £100 or so. I sorted it out with the plumber straight away and then we all sat down and had a family chat with him . With grandchildrens agreement we managed to help him get a better return on his small trust income and then drew up a proper written agreement which was signed by the family members involved on a loan against the house equity. He was then able to borrow money from us ( at zero interest ) when required against the house value . This made life much easier for him. When he died all the money we had loaned was paid back to SWMBO and I from his assets before probate was sorted with the full agreement of her sister. Anyway I hope everything goes well for you and your parents and hopefully at 65 the old age pension will ease things a bit for them. Last edited by: retpocileh on Tue 17 Aug 10 at 14:37
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New Tue 17 Aug 10 15:09
Equity Release Schemes - Zero
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My mother is not in financial straights, indeed reasonably comfortable, but getting very doddery on her pins. Can i get he to consider moving out of the three bed semi with upstairs toilet into a bungalow, nearer the shops and services? Not a hope. We have many a row over it. |
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New Tue 17 Aug 10 15:32
Equity Release Schemes - Mapmaker
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>> Not a hope. We have many a row over it. If she's happy there, then leave her until she says she's not happy. (Rule no. 1 for dealing with women when the outcome of her irrational behaviour doesn't affect YOU. Saves lots of fuss...) Quite different from OP's situation where they are now borrowing money from the bank at what, 25% APR? |
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New Tue 17 Aug 10 15:37
Equity Release Schemes - wilco
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More online resources, assuming they're living in England www.adviceguide.org.uk/index/your_money/benefits.htm |
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New Tue 17 Aug 10 15:37
Equity Release Schemes - Dulwich Estate
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AndyP - please don't think I'm not sympathetic to the situation but I'm a little confused. It seems that all debts have now been paid off with the lump sum. When your step dad is 65 the joint income should be at least £12000 pa from state pensions plus any small private pension. There will be no or virtually no income tax to pay and the resulting £1000+ per month should be enough for a couple to live modestly. I know a widow in receipt of £6000 pa state pension plus £2400 pa private pension living in her own home and her savings are increasing as she doesn't spend it all ! Is some money being spent inefficiently ? And I agree that equity release is madness. Last edited by: Dulwich Estate on Tue 17 Aug 10 at 15:39
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New Tue 17 Aug 10 15:48
Equity Release Schemes - Ted
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Another point Andy may consider is the provision of free amenities to help them in the house. Once benefits are sorted, then have a look at what the local council offers. All seem to be different but in Manchester we have an excellent welfare dept. In the last years of life, MIL had a downstairs toilet, with a little basin, fitted under the stairs. They provided a bath lift, the rising belt type and an entryphone system. She never figured that one out, Often trying to open the front door from her armchair with the TV remote or cordless phone. A series of handrails were fitted in and out of the house and an emergency bleep alarm with a pendant was given to her. The number of times we had to get up and see if she was ok has to be believed. She would insist in wearing it bed and often rolled over, setting it off. Luckily, she lived next door. Finally, Warm Front fitted her a new boiler and flushed the entire system out. She didn't have to pay a penny for all this ! I made a private arrangement with Steve, our postman, to deliver all her mail through our door. She was a sucker for charities and catalogues. Ted |
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New Tue 17 Aug 10 15:46
Equity Release Schemes - sherlock47
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>>>and then drew up a proper written agreement which was signed by the family members involved on a loan against the house equity.<<<< Is this arrangement strictly ok regarding IR with CGT and IHT? I would have thought that in the long term there were issues over him living (rent free?) in a a property that had been effectively transferred to you. |
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New Tue 17 Aug 10 16:02
Equity Release Schemes - Falkirk Bairn
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Small loan arranged, repayable from sale of house. Money from sale of house is usedvto pay a debt. Probate based on assets (house, shares, cash etc) less any debts = net value of estate Tax problems can occur if family buy house today for £200K, sell on death of parents, value £300K- CGT comes into play but not with small loans against the surety of the house. |
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New Tue 17 Aug 10 16:14
Equity Release Schemes - helicopter
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pmh - The wording of my post was perhaps a bit misleading and my memory of it is fading as its getting on 10 years ago since he died. This was a purely family agreement and only put in writing as a sop to make him feel better about accepting the money which I would happily have given him, as a loan ( rather than 'charity'.) The 'loan' lasted a year or so and only amounted to somewhere between £ 1 and 2000. We did not even specifically mention the house equity in the agreement but he wanted something in writing that ensured what we lent him would be repaid from his assets when he died .... As SWMBO and her sister inherited the whole of his estate and were the executors they sorted the matter of the ' loaned ' money out between themselves while sorting out the assets and then filed probate . The estate was not enough to warrant CGT or IHT. |
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New Tue 17 Aug 10 16:40
Equity Release Schemes - Mapmaker
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>> Is this arrangement strictly ok regarding IR with CGT and IHT? >> >> I would have thought that in the long term there were issues over him living >> (rent free?) in a a property that had been effectively transferred to you. There is no transfer of the property, effective or otherwise. (Any more than there is a transfer to the bank if you borrow money against your house.) Father continues to have both legal and beneficial ownership of the property. All he had was a loan - whether or not secured on the property the money was lent in certain knowledge that it would be repaid on death. (And there is no CGT on death, either.) |
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