Asset rich - fun poor!!

sue_balu

We could be in this position and would love some responsible fellow MSE'rs opinions please:

Retired with modest but comfortable pensions and no debts.
Due to inherit c.£100k in due course
House worth roughly £250k at todays prices (but its old and fairly costly to maintain)
No children or close relatives we wish to leave inheritances to.
Need to make wills.

We have some favourite charities and would plan to leave about £50k to them and small inheritances to friends.
Obviously think we've given the taxman more than enough of our hard earned money over the years.
Should we consider a home reversion plan or something to release the equity and "live it up" a bit?

What would you do?

26ltg

We are in almost the same position as you and have spent many a sleepless night wondering what to do about our wills. Hubby and I have one neice (7) but her parents are extremely rich and are tempted to leave it to the local dog shelter. I personally would like to retire to a warmer climate whilst I could enjoy it and blow the bloomin lot.

Debt_Free_Chick

Why not downsize? Sell the house and buy something smaller/cheaper. Spend the capital - plus the inheritance.

EdInvestor

Or sell and buy something cheaper that you could easily rent out, and then move to a warmer country for a few years, using the UK rental income to pay the cost of renting over there.

If you fancy a move overseas, do it while you're younger. If trading down, also bear in mind the type of easy care, well set up, hassle free place you might want to live in in 10 years' time when you are older and maybe decide the time has come to go back to the UK.

sue_balu

Thanks for your opinions so far...
We would not consider moving house as it took us 9 years to get this house in this location and another 9 years to renovate it!!
Unless we really cannot cope with it a long way down the line would we consider that.
As for abroad...no thanks, that's not for us as our interests and social life are definately UK based!

Really having a dilemma about home and assets when we die.

Do you think we should consider a home reversion, or whatever they are called? What are the dangers, pros, cons?

lisyloo

Why do you want to release cash from your house if you are about to receive £100K?
Surely it would make sense to use the £100K first (or am I missing something).
Equity release schemes are pretty expensive and I would only recommend them for people who really have no other option.

It seems that you main concern is not paying tax on death?
Is that right?

If this is the case then you should see a solicitor who speciailises in this sort of thing.

One first death then it would seem that the estate would be IHT free because only 1/2 the house would pass to the survivor (I'm assuming you own it jointly 50/50).
The problem you have is on 2nd death where the estate will be more than the IHT threshold.
I am not an expert (and you need one) but I think your best best is to put the house in "trust" on the first death.
This means it never totally belongs to the survivor so it's not part of their estate (and hence saves on IHT) but is still fully available to them during their lifetime.

I think I'm right in what I'm saying but you really need specialist advice to do this correctly.

clairehi

sue_balu wrote:

We would not consider moving house as it took us 9 years to get this house in this location and another 9 years to renovate it!!
Unless we really cannot cope with it a long way down the line would we consider that.
QUOTE]

I hate to be the voice of doom here, but the OP and her other half may have a hard time maintaining a large, old property in their old age especially with no children or close relatives to help out.

Its preferable to move to somewhere manageable while you are still fit and able to deal with the physical and emotional upheaval of a house move. You cant just pack up a lifetimes possessions and sell a house overnight if someone suddenly gets ill or breaks a hip.

sue_balu

clairehi wrote:

sue_balu wrote:

We would not consider moving house as it took us 9 years to get this house in this location and another 9 years to renovate it!!
Unless we really cannot cope with it a long way down the line would we consider that.
QUOTE]

I hate to be the voice of doom here, but the OP and her other half may have a hard time maintaining a large, old property in their old age especially with no children or close relatives to help out.

Its preferable to move to somewhere manageable while you are still fit and able to deal with the physical and emotional upheaval of a house move. You cant just pack up a lifetimes possessions and sell a house overnight if someone suddenly gets ill or breaks a hip.

Yes I agree, however our house isnt that large, its just old with a fairly large garden. I would estimate we could maintain it physically for another 15-20 years without having to pay for help.

"Why do you want to release cash from your house if you are about to receive £100K?
Surely it would make sense to use the £100K first (or am I missing something).
Equity release schemes are pretty expensive and I would only recommend them for people who really have no other option.

It seems that you main concern is not paying tax on death?
Is that right?

If this is the case then you should see a solicitor who speciailises in this sort of thing."

I would prefer to release equity and spend it on enjoying life plus concerned about who to leave it to bearing in mind we dont want the treasury or tax man to get anything!

Distant relatives (and their spouses who we havent even met) - might want to bump us off if they think they would inherit!!

exil

I don't see anything wrong with equity release for someone in your position - I'd certainly be considering it in your shoes. However the longer you wait the higher income you will get from any annuity you might buy with the cash. But conversely the shorter time you'll have to enjoy it.



Drawback - once you've signed the forms for the equity release the house is no longer really yours. So if you changed your mind in a few years and decided to move to a sheltered flat you might have problems.

Seek independent expert advice of course ie not here!

Jake'sGran

sue_balu wrote:

Thanks for your opinions so far...
We would not consider moving house as it took us 9 years to get this house in this location and another 9 years to renovate it!!
Unless we really cannot cope with it a long way down the line would we consider that.
As for abroad...no thanks, that's not for us as our interests and social life are definately UK based!

Really having a dilemma about home and assets when we die.

Do you think we should consider a home reversion, or whatever they are called? What are the dangers, pros, cons?

I would not go for home reversion as I am an avid reader of the financial pages and over the years there have been some scare stories and, you don't seem to need the money as mentioned already. We would never live abroad either or leave our house but the latter is because I am in poor health and the upheaval would be unthinkable. Bottom line is, you need to make wills using both Nil Rate Bands. We are about to do this. If you take this step you will prevent the estate having to pay 40% of anything over a single nil rate band on the death of the second one to die. None of our assets are held jointly, including the house. We both own half the house and when the first person dies (probably me) £285,000..this is the current nil rate.. will be put in a trust. The trustees will have the authority to make a payment out of this to my husband should he need it. On his death there is another £285 thousand, hopefully less, as the bequests on the first death will have reduced it. The first step is to draw up a simple statement (both of you, each in duplicate) to add to your deeds, thus making you "tenants in common". If you do not have anyone to leave property/monies to then leave it to your favourite charities. Most couples leave everything to the spouse on the first death and it is on the second death when Inheritance will become due unless the steps mentioned above are taken. Hope it is clear. If not, there is a lot of information on the subject on line. Try The Times or Bestinvest.

moonrakerz

EdInvestor wrote:

If you fancy a move overseas, do it while you're younger.

Very disturbing programme on Television a couple of nights back about the pitfalls of moving abroad when you are under pension age. Make sure you have adequate health insurance or a "bolt hole" in the UK if you need treatment.