Need financial advice for an "elderly" friend. Can you help?
Discussion
A family friend is in his 70s and recovering from treatment for cancer. He never married and only distant relatives overseas.
He asked me for some financial advice (which I'm not trained to give, but it was just friend to friend). I wanted to run my thoughts past you guys to ensure I'm not mad. He has been a life-long saver and investor, so I want to ensure I don't lead him astray.
He owns his house outright and does not want to downsize or move. He has a good pension (enhanced annuity set after being diagnosed), around £100k in cash, and a rental property. The rental property was purchased in 1970s and has had the same tenant, only one rental increase and no modernising completed. These investments drive an income of circa £30k i.e. 20% margin income tax.
I am concerned that the rental house may cause him pain in the upcoming years; either with the tenant moving, or renovations being required. It's hard for him to budget spending with this hanging over his head. We don't see the point in investing further and increasing his income and pushing into 40% tax. He hardly spends his current income and doesn't dive into his flexible draw down pension.
My current thought process is that he should sell the rental property (incurring CGT) and put the money in savings/low-risk investments. He should probably also consider doing some small renovation jobs on his home, maybe even adapting it for old-age (toilet downstairs etc). Even though he came to me for advice, it's still hard to have a conversation about death. I've told him that he may live until he's 100, but I really doubt he'll want to travel etc at that age. I feel he should enjoy the next 10 years to the full. He has always been a saver and can't be convinced that a mortgage-free home and circa £400k in cash/cash-investments is comfortable.
Not sure if there's really a question. I guess I'm looking for some confirmation that you would give similar advice. I've done so many spreadsheets to prove the case, I've started to doubt my own formulaes.
Selling the house would still give him £25k net income (against current annual spending around £15k). The rest would be for luxury items. I've explained the IHT impact if he dies with this estate.
Any help/thoughts appreciated.
He asked me for some financial advice (which I'm not trained to give, but it was just friend to friend). I wanted to run my thoughts past you guys to ensure I'm not mad. He has been a life-long saver and investor, so I want to ensure I don't lead him astray.
He owns his house outright and does not want to downsize or move. He has a good pension (enhanced annuity set after being diagnosed), around £100k in cash, and a rental property. The rental property was purchased in 1970s and has had the same tenant, only one rental increase and no modernising completed. These investments drive an income of circa £30k i.e. 20% margin income tax.
I am concerned that the rental house may cause him pain in the upcoming years; either with the tenant moving, or renovations being required. It's hard for him to budget spending with this hanging over his head. We don't see the point in investing further and increasing his income and pushing into 40% tax. He hardly spends his current income and doesn't dive into his flexible draw down pension.
My current thought process is that he should sell the rental property (incurring CGT) and put the money in savings/low-risk investments. He should probably also consider doing some small renovation jobs on his home, maybe even adapting it for old-age (toilet downstairs etc). Even though he came to me for advice, it's still hard to have a conversation about death. I've told him that he may live until he's 100, but I really doubt he'll want to travel etc at that age. I feel he should enjoy the next 10 years to the full. He has always been a saver and can't be convinced that a mortgage-free home and circa £400k in cash/cash-investments is comfortable.
Not sure if there's really a question. I guess I'm looking for some confirmation that you would give similar advice. I've done so many spreadsheets to prove the case, I've started to doubt my own formulaes.
Selling the house would still give him £25k net income (against current annual spending around £15k). The rest would be for luxury items. I've explained the IHT impact if he dies with this estate.
Any help/thoughts appreciated.
Unless its different for retired, he has an extra 10 grand to make until he hits the Higher tax barrier(just under £40k) but also not sure why he would be worried about paying if he is earning more(you only pay the higher tax from the higher limit)
If he has a long standing tenant I would probably be inclined to leave him there. He earns an extra £10k over his required income, and renovations should the tenant decide to leave shouldn't amount to that much.
He could just sell when the tenant moves out.
Capital gains allowance is around 10k tax free, and the rest taxed as if you had earned it, so 28% over the higher threshold, so best to sell at the beginning of a financial year when there will be no further income from the rental(only marginal, but it all counts)
Not having any immediate family, not sure why he would need to worry about IHT. Just let it get paid from the estate.
If he has a long standing tenant I would probably be inclined to leave him there. He earns an extra £10k over his required income, and renovations should the tenant decide to leave shouldn't amount to that much.
He could just sell when the tenant moves out.
Capital gains allowance is around 10k tax free, and the rest taxed as if you had earned it, so 28% over the higher threshold, so best to sell at the beginning of a financial year when there will be no further income from the rental(only marginal, but it all counts)
Not having any immediate family, not sure why he would need to worry about IHT. Just let it get paid from the estate.
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