You inherit £500k, you're 63 and you're renting. What do you do?

MallyGirl

If it was me I would be looking for a small, well insulated and easy to heat, low maintenance property to buy. I wouldn't want to be exposed to the vagaries of being given notice by a landlord and having to find new accommodation as I got older.
But that is me. Maybe he enjoys the company that comes with shared houses?
It is certainly enough money to improve his quality of life but it needs to be his life in the way he wants to live it.
I would certainly get his pension forecast checked as that £11k figure sounds low - for state plus work pension - and he might get very good use out of a small part of the money making voluntary NI contributions if there are gaps in his record that bring his state pension amount down below the max.

Keep_pedalling

One consideration is IHT. As a non home owning divorced person his estate will only have the NRB exemption of £325k so his inheritance takes him into IHT territory. Buying himself a nice wee pad will add the residential NRB which will take the exemption up to £500k if his purchase is £175k.

non_cents

MallyGirl said:

If it was me I would be looking for a small, well insulated and easy to heat, low maintenance property to buy. I wouldn't want to be exposed to the vagaries of being given notice by a landlord and having to find new accommodation as I got older.
But that is me. Maybe he enjoys the company that comes with shared houses?
It is certainly enough money to improve his quality of life but it needs to be his life in the way he wants to live it.
I would certainly get his pension forecast checked as that £11k figure sounds low - for state plus work pension - and he might get very good use out of a small part of the money making voluntary NI contributions if there are gaps in his record that bring his state pension amount down below the max.

Thanks @MallyGirl - good point - It does sound like a very low pension doesn't it. We'll check that.

non_cents

Keep_pedalling said:

One consideration is IHT. As a non home owning divorced person his estate will only have the NRB exemption of £325k so his inheritance takes him into IHT territory. Buying himself a nice wee pad will add the residential NRB which will take the exemption up to £500k if his purchase is £175k.

Thanks @Keep_pedalling @Keep_pedalling . Can I try to understand you a little better on this, as he did ask me a question along these lines... Yes he is a non home owning perrson. He was never married to my mum. He has already paid the full 40% inheritance tax on the inheritance from the sale of my grandparents' place. I'm confused beyond that point - why does the exemption go up to 500? Thanks so much 🙏🏻

Keep_pedalling

Anyone who owns their own home and who leaved their estate to a direct descendant has an additional allowance (residential nil rate band) that can be claimed. It can even be claimed if the no longer own the home at the time of death, because they may have moved into care, sheltered housing or with family because they could no longer cope at home. 

non_cents

Keep_pedalling said:

Anyone who owns their own home and who leaved their estate to a direct descendant has an additional allowance (residential nil rate band) that can be claimed. It can even be claimed if the no longer own the home at the time of death, because they may have moved into care, sheltered housing or with family because they could no longer cope at home. 

I see! So owning a home worth the full £500k makes sense from a purely IHT perspective, if not from a liquidity perspective. That's helpful, thank you. Perhaps owning a property worth the full amount, and having a nice lodger to top up his pension a little could be a balance of both. 

Pat38493

non_cents said:

Keep_pedalling said:

Anyone who owns their own home and who leaved their estate to a direct descendant has an additional allowance (residential nil rate band) that can be claimed. It can even be claimed if the no longer own the home at the time of death, because they may have moved into care, sheltered housing or with family because they could no longer cope at home. 

I see! So owning a home worth the full £500k makes sense from a purely IHT perspective, if not from a liquidity perspective. That's helpful, thank you. Perhaps owning a property worth the full amount, and having a nice lodger to top up his pension a little could be a balance of both. 

No I don't think that's what they meant - the home they own doesn't have to be worth the full amount - it could only be worth say £175K for a small flat or whatever, but this qualifies you for 500K of IHT relief.  As it stands, if your father died tomorrow, some of his 500K cash would be subject to IHT so this is another reason to buy a property, but it doesn't have to be a 500K property.

non_cents

I see @Pat38493 - thank you for explaining! So you're saying it makes more sense from my perspective / IHT wise, for him to own are home rather than rent. Even if it's just a small place under £175k. Great. He'd like to buy, so sorts that question  

Pat38493

non_cents said:

I see @Pat38493 - thank you for explaining! So you're saying it makes more sense from my perspective / IHT wise, for him to own are home rather than rent. Even if it's just a small place under £175k. Great. He'd like to buy, so sorts that question  

Yes.  I should probably point out that I am not an IHT expert and I am mainly going by what @Keep_pedalling said in the posts above, but yes that is my understanding.

Stubod

..I would be looking to buy a small, well insulated property to live in...and start investing / pension with some of the money that was "wasted" on paying the rent.....but that's just me.