Help elderly relative house & equity release

[leemanning]

Hi all

Hopefully somebody on here can help me with this.

My nan is 84, lives in a large house with no mortgage and one of her daughters. Her health is getting worse and probably has 2-3 years left.

She claims that she doesn't have much money to do what she wants to do, so I wanted to speak to somebody about releasing equity on her home and how that impacts what happens to the property upon death.

If anyone is involved with this please PM me your details

[Ginge R]

Lee,

I'm an IFA but don't consider myself suitable to deal with this particular niche so I won't message you because I'm sure you'll get other responses. But I am aware of a few specialists I would trust so if you don't get any feedback, let me know and I'll gladly arrange an introduction.

[leemanning]

HI Ginge

Thanks for this. In light of nobody else coming forwards as yet, would you be able to send across any details you have please? Thanks

[Simpo Two]

My thought, FWIW, is that whilst your nan claims not to have much money, has anyone checked? She may have accounts tucked away that she's forgotten, or income arriving in an account she doesn't know about. Equity release is a big thing so make sure you've explored all other avenues first and done a proper tally of income, savings and expenditure.

In addition, taking over someone's finances is a major step and you need to consider how sound her mind is before doing anything. Is she capable of making rational decisions about money? Is there an EPA in place which will allow someone to legally take over if not?

[leemanning]

Thanks for your reply Simpo. Her mind is pretty good still to be honest, just she is easily flustered over money. She has a private & state pension, which doesn't net that much. Other than that no other sources of income.

She had some decent money in shares and investments, but over time these have come out to help pay for everyday life.

I feel the main problem is she has X in savings that she is using to live on, but doesn't know how long she will live for. She may last another 10 years, so doesn't want to take out £5k to re-decorate, or £10k for a new car etc in case she does live another 10-15 years.

I just worry that she is holding everything back in case she lives longer and doesn't want to be a financial burden to anyone later on, should she spend some money now.

I thought of equity release as she has a substantial property and could release a good amount to enjoy the rest of her life with. Problem is I don't really understand the implications of doing this. As far as I'm concerned, it's her house and if she wants to release equity and it all goes to a finance company upon death then so be it, she's earned it. However being prudent, I felt I needed to understand this on her behalf so we are sure of the implications and if there are any better ways to achieve the same goal.

[Leedssurveyor]

why not down-size to release equity? or alternatively sell and rent in sheltered accommodation or rent a private home in a nice area etc.?

[leemanning]

Ideally she really wants to stay where she is. It's certainly an option we may have to look at, but ideally we would like to avoid moving her out of her home

[Simpo Two]

I think first you/she need to add up all her basic living costs, then add up her two pensions, and see if the pensions cover her outgoings. If they do, great, and she can use her savings (as distinct from income) voluntarily to pay for niceties if she wishes.

I agree her house is hers to do what she wishes with, but if it's worth £200K and she dies a month after signing the form, her beneficiaries lose £199K (I think). Which is a rather high price to pay for a few hundred quid.

Either way, you should get an LPA* (Lasting Power of Attorney) drawn up so if/when she does one day lose her grasp of things, one of you can take over her affairs.


(*LPA replaced EPA, sorry for the confusion)

[Ginge R]

leemanning said:

HI Ginge

Thanks for this. In light of nobody else coming forwards as yet, would you be able to send across any details you have please? Thanks

Lee,

I'd be happy to. It's my first week back 'proper' from tomorrow and I'll arrange something.

[Ginge R]

Simpo Two said:

Either way, you should get an LPA* (Lasting Power of Attorney) drawn up so if/when she does one day lose her grasp of things, one of you can take over her affairs.


(*LPA replaced EPA, sorry for the confusion)

Wise words.

Sadly, new pension legislation, the detail of which was released a week or two back, is possibly going to make decision making harder for some retirees and pensioners, especially those more vulnerable and those with exploitative relatives (not the case here). Simpo is absolutely right, if your nan is happy to discuss things, if she has a lucid and clear head on her shoulders, chat with her pragmatically. All too often, succession planning isn't discussed because the younger generation wants to but feels it would offend, and the elder generation wants to, but feels it might cause upset.

Although the new regulation will offer a valuable range of new planning options, I am a little concerned that some (more vulnerable?) pensioners might be placed in a quandary about whether to simply use their hard earned pensions as enhanced tax efficient inheritance tools or for what they were originally intended – the means to secure a comfortable and secure retirement. The new guidance offers a lot, and a discussion with a credible specialist in this field will at least offer you options. Once it's done, there might be more peace of mind and a weight released off shoulders.

Lee, very broadly, what part of the country are you in?

(eta - assuming you and your nan are co-located of course)

Edited by Ginge R on Sunday 12th October 07:27

[sidicks]

Simpo Two said:

I agree her house is hers to do what she wishes with, but if it's worth £200K and she dies a month after signing the form, her beneficiaries lose £199K (I think). Which is a rather high price to pay for a few hundred quid.

???

If she borrows £x then, on death, she will owe £x plus interest plus fees (depending on the exact type of equity release that she took out).

[Simpo Two]

Happy to admit I may be wrong, so feel free to explain to the OP how equity release works and its benefits and pitfalls.

Surprised there are no 'equity release experts' here actually!

[sidicks]

Simpo Two said:

Happy to admit I may be wrong, so feel free to explain to the OP how equity release works and its benefits and pitfalls.

Surprised there are no 'equity release experts' here actually!

I'm surprised that people who aren't 'equity release experts' bother to respond to questions like this.

It's been a long time since I had any connection with equity release products (so I certainly don't consider myself to be an expert), but the basic concept is that a proportion of the house is 'mortgaged' in exchange for an annuity or a lump sum.

The proportion could be a fixed amount or a proportion of the house value. The annuity would typically habe a guarantee period, given the age of the borrower.

On death of the owner, the loan is repaid from the sale of the house, along with associated interest and costs.

[Simpo Two]

sidicks said:

I'm surprised that people who aren't 'equity release experts' bother to respond to questions like this.

Well you should have turned up earlier then! I only had a go because no other fker did!

But I did/do regard them as 'mortgages in reverse' so I am pleased when you say:

sidicks said:

the basic concept is that a proportion of the house is 'mortgaged' in exchange for an annuity or a lump sum.

At least my puny attempt winkled someone out from the woodwork, if only to have a pop.