House Equity as Pension

lisyloo

and my understanding is that while 'care' only applies to one of them, they can't force a sale anyway.

The issue is not forcing a sale.
The issue is that a "tab" will be run up until the house is eventaully sold.

as its not dead money being spent on interest that we dont see a return on

You may not see a return if a bill is run up against the house for long term care.
That's only a problem if you are expecting/insisting on getting a return.

So are we better buying the house outright at 80% of value

Be aware that is they splash the cash and the local authority thinks they have deliberately depirved themself of asset the the trasnaction can be overturned. There is no 7 year rule or in fact any time limit (the 7 year rule is for inheritance not care).
I'm not saying they shoudl not have a holiday, of course not.
But be aware that they might have actual long term care needs.
Also as someone else said if they do rely on the state for care, they might end up in grim homes OR be in seperate homes. It's not unheard of that married couples are split up because there is no double place available under local authority care.
It does not sound like much thought is being put into their potential long term needs.

So the two issues are the state might not like you relying on them but also if you do rely on them they could get very grim treatment and possibly even live apart.

Why not downsize?

The benefits are
1) releasing some cash
2) leaving most in property for long term care needs
3) no issues with deprivation of assets
4) suitable accomodation for the future
5) low bills, low maintenance, less to clean.
6) No firm making a bit profit on equity release (bar estate agrents fee and removals)

it really does make a lot of sense.

lisyloo

even [gritting teeth] what benefits they can claim

There is absolutely nothing wrong morally with people claiming the benefits they are entitled to.
I think my parents (in law) get far too much, but I have no problem with them claiming.
My MIL worked for over 50 years and in the latter years with arthritis. She retired at 72 with moderate arthritis.
There are some anomalies.
For years they did not have enough to live on until they became disabled and seemed to be able to claim far too much.
This is wrong, but they are doing nothing wrong by claiming what is their after a lifetime of working.

property.advert

As some have alluded to, care costs are the deal breaker here.

If they do nothing, then care costs could eat away all the house value. With 2 in care at £500pw each, it would be gone in 3 years.

What is to stop the kids giving their parents (under a legally drawn up contract), an annuity for the house. If this was say £1000 a month (you can get real figures from the net) for £150,000 and to rent the house on the open market was £500 a month, then the kids would have to pay out a net £500 a month.

Can't that be written up in legalise and water tight to preserve the value of the house ?

Loughton_Monkey

mrcharrington wrote: »

But in your last post you state your wife bought her mothers council house and im assuming made a few bob via the right to buy scheme and released some of the cash for mum.

This sounds like my original idea-ish.

So are we better buying the house outright at 80% of value, give them the cash and allow them to live their as, shall we say, caretakers. Or to reduce our monthly payments put a significant amount of the cash in a healthy returning account to off set some of the mortgage payments?

Sorry about this i need leading by the nose!

A significant difference, I think. In my wife's case, obviously, the 'default' situation was that her parents just continue to pay council rent and live in 'relative' poverty. But with the combined resouces of 4 'richer' children, they could leverage money from the council - as you recognise. A mortgage was involved. Children could otherwise have chipped in a few quid anyway, but this was an 'investment' on top!

In your case, there is really nothing to 'leverage'. The full house value exists, and exists firmly 'within the family'. Hence I]leaving aside any seperate arrangement to do strictly with protecting care costs[/I all my suggestion is doing, is providing your parents with a modicum of the house value - in cash - for the rest of their life. Courtesy of 'Bank of Son & Daughter' as it were. No need, really, to allow mortgage company/bank to make a profit on it, or lock you all into strict financial arrangements with a third party.

Loughton_Monkey

Look at this, OP.

A 'tongue in cheek' but perhaps very relevant post I made last October!

https://forums.moneysavingexpert.com/discussion/2814950

lisyloo

If they do nothing, then care costs could eat away all the house value. With 2 in care at £500pw each, it would be gone in 3 years.

Yes but it might give them a high quality of life together in their final years.
Ultimately whose money is this?
Should it be used for their loving care or for a windfall for the children??
Whilst they are still alive the answer is very obvious to me.
The money should be used for the benefit of the parents and that might mean paying for their care and the children getting nothing.
I don't think the children should be looking at preserving their inheritance if it's at the detriment of the parents whose money it actually is !!

What is to stop the kids giving their parents (under a legally drawn up contract), an annuity for the house. If this was say £1000 a month (you can get real figures from the net) for £150,000 and to rent the house on the open market was £500 a month, then the kids would have to pay out a net £500 a month.

There are danger in terms of deprivation of assets, death (of the children), divocrce, sickness, inability to pay etc.
Not making any provision for long term care and them ending up apart and grim.

Can't that be written up in legalise and water tight to preserve the value of the house ?

No there is no easy watertight way round it.

jamesd

lisyloo wrote: »

You need to be careful to avoid "deliberate deprivation".
If the lcoal authority believe this was done to avoid paying for long term care then they can roll back the transaction.
You would need to take proper legal advice on that.
The reply from jamesd implies it could be done, although how you would judge that neither of them will need care, I don't know.

You don't need to know that none of them will never need care. All you need to know is that neither of them today has a condition that in the immediately predictable future, a few years at most, will make such care necessary. Diagnosed with progressive dementia already? Probably too late. Not diagnosed? No problem.

You're not required to predict the future or play games with odds. It's done on current medical condition and for prudence that should be documented. Councils have tried to argue this in court and have lost.

mrcharrington

Just to be clear - We are not bothered about our inheritance, like most families (normal families I might add) its our parents who are.

Considering that according to the Tax Payers Alliance we shell out 76p of every £1 we earn in tax, that is if you pay tax, have a car, buy your own home, exist! I dont feel that at the end of your 45-50 years of keeping politicians, senior civil servants, bankers, hedge fund managers etc in the lap of luxury - spending what little you have acquired before your taxed again for daring to be old and infirm is in anyway wrong and then living off the state. My list is a whose who of the real state spongers whose entire working life is one big tax payer/home owner claim.

I seem to recall this was the reason you paid national insurance to ensure quality of life in your remaining years.

All I want is to give my parents a sniff of what others have enjoyed since birth before they are not able to. Im sure most ordinairy people would agree.

lisyloo

There is absolutely nothing wrong with wanting the best for your parents.
Of course that is laudable.
I do the same.

There is nothing wrong with getting state care.
But they won't be guaranteed a lovely care home and there is no guarantee they will be housed together.
The quality of care, choice of place, choice of location etc. will be much greater if you go private.
No-one has said it's wrong to use the state, in fact I have encouraged getting all the benefits he is entitled to at this point in time.

The problem is (as for all elderly people) that they have a limited amount of money, don't know when they are going to die and hence how long it's got to last and don't know what care they will need.

We looked at all this when my parents folks were 74.
At that point they did not have enough to live on and could not continue to maintain the house (either practically or financially).
We looked at equity release. I believe they would have got around £250 per month for giving up 75% of their home.
There were onerous restrictions on keeping the property in tip-top condition (decorating interanlly every 5 years) and also restrictions if they need to move.
In the end they moved from a 3 bed family home to a 2 bed flat and freed up £35K to have some holidays with.
A few years ago they qualified for a lot more benefits on the basis of disability and now have plenty of income.
They can't now do any cleaning/ironing/DIY and have to pay for it all, so having a small place is definitely an advantage as there isn't a lot to clean or maintain.
We are definitely happy with their decision.

These days people are kept out of care homes for as long as possible.
They can have visits to get them up in the morning, get lunch and be put to bed.
But if you have money then you need to contribute towards it.

You have to find the right decision for you.
If the children help with income then bear in mind that one of you could die, get sick or be unable to pay for another reason (divorce?).
Unfortuantely you have to think about all these scenarios.
I'm sure you will find the right scenario for your circumstances but we are happy that the downsizing worked in our case.

mrcharrington

Ha Ha sorry for the rant Lisyloo not meant as a slight at you.

As i said neither have any problems that would require fulltime care or are likely to in the near future. I believe that as long as you do not require LA funding for care homes within 6 months of a disposing of an asset then in all reality they cannot recover it.

I love some of the terms they use to describe Deliberate Deprivation such as funding an extravagant lifestyle by going on holiday.

So its not really your property/ possession is it - all you are doing by being a home owner or having more than £22k in the bank/combined assest is holding it for the state till they need it. Id be interested to hear what Human Rights lawyers have to say on the issue given the the European Charter clearly states we have the right to own posessions. I understand that would mean the right to do with it what you like?