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

ader42

I would say a flat in a retirement complex, the type with a warden, would be the best thing as it should most likely allow him to stay in his own home and out of care for longer.

He might even meet a nice lady friend and decide to clear off on a cruise four times a year

barnstar2077

I would purchase a small property in a reasonable area (not a flat or apartment if I could manage it, to avoid maintenance fees.)

It really depends on house prices there, but that would be my priority for sure!

non_cents

Universidad said:

It's half a million pounds, he's been living on under 20K a year his whole life, and he's 63.

It's his money, so he can do what he likes with it, but if he doesn't change his lifestyle and invests it somewhere that just about keeps up with inflation it will last him till he's 115 years old (when you take his other pensions into account).

Without being maudlin, and if you're comfortable discussing this sort of stuff with him, it is worth incorporating into the plan some thought about to protect your inheritance. Because unless he discovers a new found love of vintage wines or sports cars, he's way more than set for the rest of his life.

But there are things you can't plan for that might eat it up.

First of all, a property is a good idea, because there's no more dead money on rent, and if he does start to need care later in life he won't have to sell his own house to pay for it, provided he's able to continue living there. And although your Dad has not tied himself to one place over time, it's still true that most people prefer to stay in their own home when they get older and start to need more help.

Secondly, he can transfer you a small amount of money each year as a gift without tax implications - I think that's in the region of 3000 per year. If he is happy to do that, you can put 3000 per year of your salary into your pension, either a work pension or a SIPP of your own, and in that way help set yourself up for your old age. Or if you're under 40 a LISA, that might help you get on the property ladder if you haven't managed that.

The other thing you said is that you'd like your Dad to have some fun with the money. I agree, but the one thing I would advise is that someone in their 60s who has not owned a home and lived a fairly simple life might have a very different idea of fun to you, so I don't think you can necessarily plan this out for him! 

I think the best thing you can do is encourage him to try a few new things - stuff he wouldn't have splashed out on, but nothing extravagent - and see if anything sticks.

@universidad - perfectly written

enthusiasticsaver

Personally I would not want to live in rough shared houses but it depends whether he wants to move out of the area or stay in London as to whether he buys a property.  £500k may well buy a property in London but his pension does not sound high enough to pay bills on a full house when he is used to shared costs.  If he is prepared to move to a cheaper area then maybe a small flat would be appropriate either rented or ideally bought. 

He can gift whatever to you or anyone else but if he dies within 7 years it will need to be taken into account for IHT.  He can gift £3k a year with no tax implications.  

He may decide he is not bothered about owning a property and want to travel or buy a car or whatever and maybe you could help him set up a budget with wishlists and ideas and cost them up rather than him just spend willy nilly until it is all gone. 

Keep_pedalling

enthusiasticsaver said:

Personally I would not want to live in rough shared houses but it depends whether he wants to move out of the area or stay in London as to whether he buys a property.  £500k may well buy a property in London but his pension does not sound high enough to pay bills on a full house when he is used to shared costs.  If he is prepared to move to a cheaper area then maybe a small flat would be appropriate either rented or ideally bought. 

He can gift whatever to you or anyone else but if he dies within 7 years it will need to be taken into account for IHT.  He can gift £3k a year with no tax implications.  

He may decide he is not bothered about owning a property and want to travel or buy a car or whatever and maybe you could help him set up a budget with wishlists and ideas and cost them up rather than him just spend willy nilly until it is all gone. 

There are no negative tax implications to gifting, dying within 7 tears of making a gift never increases the IHT liability on the estate. 

ader42

Keep_pedalling said:

There are no negative tax implications to gifting, dying within 7 tears of making a gift never increases the IHT liability on the estate. 

Are you suggesting that I could give my son £1m and if I die next year the estate will not have to pay IHT on that £1m, I think you are wrong…

or maybe to be pedantic you are correct that it is not the estate that has to pay the tax, but it is my son who would have to shell out £400k in tax.

[Deleted User]

Whilst the OP has absolutely the best intentions and should be commended on looking out for both parents I do feel it is up to the father to decide what to do. 63 is not old, and why advice may be needed, I feel he is able to make some potentially life changing decisions.

I am 64 and would resent, and probably be quite angry with, anyone telling me how to run my financial affairs or family members asking others on my behalf. However that is just my view. At 83 my mother is fully in charge of hers and would also be very wary of being 'told'.

That said what a marvellous gift the parents have left their son as he nears retirement.
 
I can only say what I would do in that situation. I would certainly buy myself my own home and make it comfortable, upgrade my car, put some money into instant savings and invest some in a S&S ISA. Then help out family if needed.

In terms of  pension provision things already don't look too bad for the OPs father. I think that £11000 a year was mentioned. That with a full state pension would give an income of at least £21000 a year.

Likewise some people suggested sheltered housing or a retired community setting. Eek!!! Of course great for some but for others definitely not.

Whatever decisions are made I wish the OP and father all the best making use of this 'windfall'.

MallyGirl

[Deleted User] said:

In terms of  pension provision things already don't look too bad for the OPs father. I think that £11000 a year was mentioned. That with a full state pension would give an income of at least £21000 a year.

The £11k included the state pension if I read the OP right. Not quite so rosy

[Deleted User]

MallyGirl said:

[Deleted User] said:

In terms of  pension provision things already don't look too bad for the OPs father. I think that £11000 a year was mentioned. That with a full state pension would give an income of at least £21000 a year.

The £11k included the state pension if I read the OP right. Not quite so rosy

 Apologies my mistake. So perhaps some retirement provision planning required too. Also makes stronger case to buy to take having to pay rent out of the calculations.

Albermarle

ader42 said:

Keep_pedalling said:

There are no negative tax implications to gifting, dying within 7 tears of making a gift never increases the IHT liability on the estate. 

Are you suggesting that I could give my son £1m and if I die next year the estate will not have to pay IHT on that £1m, I think you are wrong…

or maybe to be pedantic you are correct that it is not the estate that has to pay the tax, but it is my son who would have to shell out £400k in tax.

No, it means that by gifting you can never increase the tax liability, it either stays the same or reduces, depending on how long you live. Using an example.

You die with say £700K in assets. You have no nil rate band passed on from a spouse and no kids to leave your house to.
IHT calculation is £700K minus your nil rate band of £325K = £375K at 40 % = £150K IHT to pay

Second scenario is that you give someone £200K but then die a couple of years later.
You have £500K in assets but as you have died within seven years, the £200K is then added back in the calculation, so you still pay £150K IHT.

If you had lived for seven years then  £500K minus £325K = £175K at 40% = £70K 

So however much you give away, you will never pay more IHT than if you had not given any away. If you last 7 years then less IHT to pay.