Widow's State Pension

margaretclare

mickflynn39 wrote: »

Things are a lot clearer now. I've now worked out that she will get a full single person's state pension and not the 60% she is currently getting. She won't get the 60% pension as well. This is where her husband has got it wrong. She will get 80% of his SERPS because of when he was born. I need to re-jig my calculations now to find out how much she will actually have.

So he was born late 1939/early 1940?

Between 6 October 1939 and 5 October 1941 80 per cent

Terrible to die so young. My first husband didn't even see his 60th birthday and I was left with a £45K mortgage coincidental with redundancy. He had only enough life assurance to pay for his funeral. Reason: he 'didn't believe in' life assurance when he was young enough to do it cheaply, when it mattered, when he was a young dad! By the time he did his health was so badly impaired - progressive heart disease - that he was almost uninsurable.

Someone mentioned McCarthy & Stone. Oh goodness sakes, don't do that. A local authority/local housing association sheltered housing would be better than that. McC and S have acquired a terrible reputation.

It might be worth her considering equity release to pay off the £30K mortgage. This is what we did in 2003 to pay off £45K and we haven't regretted it. But this is not a time for any serious decisions to be made. Let the dust settle first, let her deal with immediate grief, it all takes time. Definitely not the time to be considering moving, remortgaging, anything at all. She'll probably want to cling on to what is familiar, her own home and surroundings. I sympathise. Or, conversely, she may decided that the memories are too painful and one day she may want to up and move. No telling at the moment.

Yes, I remember Barbara Castle. She was one of the best of Harold Wilson's Cabinet. She was Transport Minister at one time.

mickflynn39

So he was born late 1939/early 1940?

Yes that's right. She misses out on the 100% by 3 weeks! I've now worked out that she will get about £900 per month and no benefits. She should be ok on this amount if interest rates don't go up by too much in the future but this is a big if and will be a constant worry for her.

To put her mind at rest I will offer to take on the mortgage for her if it ever becomes an unmanageable problem and get my money back when the house is sold. I'll have to get her to put the house in my wife's name so it doesn't get used up for care costs if she ever has to go into a home.Thank you for your kind words and advice.

anguk

mickflynn39 wrote: »

Yes that's right. She misses out on the 100% by 3 weeks! I've now worked out that she will get about £900 per month and no benefits. She should be ok on this amount if interest rates don't go up by too much in the future but this is a big if and will be a constant worry for her.

To put her mind at rest I will offer to take on the mortgage for her if it ever becomes an unmanageable problem and get my money back when the house is sold. I'll have to get her to put the house in my wife's name so it doesn't get used up for care costs if she ever has to go into a home.Thank you for your kind words and advice.

£900 should be okay but as you say it will depend on interest rates. If it does become too much to pay the mortgage you could do as margaretclare did and equity release.

If you're thinking of taking over the mortgage and getting the house put in your wife's name to avoid care costs you need to look at this very carefully and get some good legal advice. I don't know the ins and outs but I do know there are rules about this, it's to stop elderly folk putting the house in their kids name for the sole purpose of avoiding care fees. Also depending on the value of the house there may be tax implications:

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm
http://www.turbervilles.co.uk/Think-twice-before-giving-your-house-to-your-child/
https://forums.moneysavingexpert.com/discussion/2694653

mickflynn39

£900 should be okay but as you say it will depend on interest rates. If it does become too much to pay the mortgage you could do as margaretclare did and equity release.

I would want her to avoid the equity release option if at all possible as when I've looked into it in the past the odds are stacked very heavily in the favour of the scheme provider. In effect by taking on the mortgage I would be doing a type of equity release scheme but on far more favourable terms for her.

I've had a word with a solicitor and been advised that as long as she doesn't go into care soon after 'gifting' the house to her daughter then there shouldn't be a problem. If we have taken over the mortgage this strengthens our case that the house has been 'gifted' for good reasons and not to avoid care costs. How long 'soon' is though is a grey area.

The value of the house is £90k so there won't be any tax issues.

xylophone

Are you in a position to lend your MIL £30000 (interest free but index linked) to pay off the mortgage and then to take a first charge against the house, such that if it has to be sold to fund her care, you must be repaid first? Clearly you would see a solicitor so that a binding legal agreement could be drawn up.

mickflynn39

Are you in a position to lend your MIL £30000 (interest free but index linked) to pay off the mortgage and then to take a first charge against the house, such that if it has to be sold to fund her care, you must be repaid first? Clearly you would see a solicitor so that a binding legal agreement could be drawn up.

Yes I could lend it to her. I'd have to take out a re-mortgage to do it though. So it wouldn't be interest free. Obviously I would need to make sure that what I got back covered my interest costs and inflation. I would definitely get a good solicitor to sort things out.

She would be granted the right to live there rent free by way of a declaration of trust. This is a simple process and because she would retain the right to live there indefinitely, relief from Capital Gains Tax would still be available on any gain in value between the date of the gift and the date of her ceasing occupation.

margaretclare

mickflynn39 wrote: »

Yes that's right. She misses out on the 100% by 3 weeks! I've now worked out that she will get about £900 per month and no benefits. She should be ok on this amount if interest rates don't go up by too much in the future but this is a big if and will be a constant worry for her.

To put her mind at rest I will offer to take on the mortgage for her if it ever becomes an unmanageable problem and get my money back when the house is sold. I'll have to get her to put the house in my wife's name so it doesn't get used up for care costs if she ever has to go into a home.Thank you for your kind words and advice.

That might be a good idea, probably better than equity release. The reason we did it was: after my younger daughter's death in late 2002 there no longer seemed any point in going on paying a mortgage to finish when DH and I were 83. We could see a better use for the £260 or so that was going every month on mortgage payments. Our equity release hasn't rolled-up at anything like the rates we've heard of from other people because the rate was pegged to the Bank Rate which has been so low for so long. If it had been pegged to the original rate in 2003 that would have been a different matter.

xylophone

If you lent her the money she would definitely have the right to live there because it would be her house - do you see what I mean?
Your MIL gets the £30,000 from you as a loan. She repays the Building Society. The house is hers absolutely. You want to be sure the loan is repaid. Therefore you take a first charge against the house such that if it has to be sold, you are repaid the amount you have lent plus either rolled up interest at whatever rate you chose (but remember this would have to be declared as income in the year of receipt) or index linking at a rate set according to RPI or CPI or RPI plus X% or whatever you might choose.

As I said in my earlier post, expert professional advice would be required.