What to do with divorce settlement

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  • JF1
    JF1 Posts: 5 Forumite
    I appreciate all replies. I will try to give more detail, as a few of you asked for it:

    She no longer works, and she lives in rented council accomodation. I can't tell you what her monthly pension is because i don't know at the moment - it's not a lot though. She was a stay at home mum most of her life.

    A few of you have pointed out the extra requirements of being a landlord. I dont think the situation would work that way but I may be wrong; she would simply purchase the flat and give it to my brother. Rent would be agreed and paid monthly. In essence, she wouldnt actually be a lanlord. I'm not worried in the slightest about relationship breakdowns. My mum is the type of person who would gladly say goodbye to the money if she knew her son was happy. So that's that side of it. She would obviously go through the proper legal routes of declaring additional income etc.

    Investing: it does sound like a good option, but can I do this without an IFA? I mean, what's the initial investment time and learning curve? I will definitely review the articles/books you have posted. Thanks for that.

    A house may also be a possible purchase. Someone mentioned that flats do not appreciate in value the same as houses, but I have seen plenty flats that have, albeit slightly higher end ones. I also appreciate the post that pointed out the initial outlays of actually purchasing the flat, although surely that is far outweighed long-term by having money secured in bricks and mortar, plus receiving monthly payments to live from?

    Just thinking out loud. Thanks again guys, it has been great being able to turn here for advice.
  • justme111
    justme111 Posts: 3,508
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    edited 17 April 2018 at 8:18AM
    is her rented council accommodation subsidised in any way - ie any means tested benefits? If so they would go.
    I am sure every parent would gladly say good bye to any money if it meant that their child would be happy- I certainly would. The issue is not so much losing her money. The issue is having to face that one is losing money because of the attitude of one's child that care about themselves at one's expense - that or a suspicion of it can be very hurtful .
    So if she would obviously go through proper legal routes then there would be extra requirements due to being a landlord - what do you mean by "I don't think it would work like that"?
    I can not tell you whether the benefit of having money secured in brick and mortar outweighs the costs of transaction and I doubt anybody could - have you actually calculated the costs to be sure it does ?
    A question unanswered - so your brother will be happily renting and not buying for lifetime of your mother ? He will not want to move anywhere ever either? And he will be happy to rent that particular apartment for years on end? What is the likelyhood that he will not?
    The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
    Often people seem to use this word mistakenly where "quandary" would fit better.
  • JF1
    JF1 Posts: 5 Forumite
    No, the rented council accommodation isn't subsidised.

    "I don't think it would be like that". I would like to rephrase what I said before: let's assume she will give him the money to buy the flat. They can agree on monthly payments that she will receive without actually being a landlord - is this possible?

    I haven't calculated the costs as this is very preliminary. However, let's just say for the sake of conversation that a flat will not depreciate in value. Surely it is better to purchase a 75K flat and live from the monthly payments as opposed to eating directly into the funds over 20-30 years?

    The unanswered questions will need to remain that way. I have no idea how things will play out long term. I am only trying to gather info at this stage. I agree that this wouldn't be an ideal scenario if planned on moving a few years after the flat was purchased, but we are looking at this from a more long term point of view.
  • coyrls
    coyrls Posts: 2,423
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    JF1 wrote: »
    A house may also be a possible purchase. Someone mentioned that flats do not appreciate in value the same as houses, but I have seen plenty flats that have, albeit slightly higher end ones.

    As I posted above, there is no evidence for the blanket assertion that flats do not appreciate in value the same as houses, so when you make a decision you can rule out this consideration. As others have pointed out there are plenty of other relevant considerations that you do need to take into account.
  • Voyager2002
    Voyager2002 Posts: 15,245
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    JF1 wrote: »
    "I don't think it would be like that". I would like to rephrase what I said before: let's assume she will give him the money to buy the flat. They can agree on monthly payments that she will receive without actually being a landlord - is this possible?

    In the short term yes, so long as all involved are trustworthy.

    Over the longer term, there are many things that could go wrong with devastating consequences. For example, suppose that he gets married and then later divorces. So far as a divorce court is concerned, the money for the flat was a gift from her and so can be split equally between the divorcing couple: or the flat would belong to him (rather than his mother) and so might become the home of the ex-wife and any children, with no obligation to pay rent (since the monthly payments that he would have been making to his mother would have been seen as gifts).
  • Voyager2002
    Voyager2002 Posts: 15,245
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    JF1 wrote: »
    Investing: it does sound like a good option, but can I do this without an IFA? I mean, what's the initial investment time and learning curve? I will definitely review the articles/books you have posted. Thanks for that.

    Most certainly you can invest without an IFA (I do); it may or may not be wise to do so. If you were to follow the route I suggested (Vanguard global tracker, probably taking the form they describe as Life Strategy) you would need a couple of hours on this forum and somewhere like the Monevator blog to find out what it is and why many people think it is a good idea. If you wanted to find options that might be a better idea... there is more or less no limit to the amount of time that you could spend looking and learning how things work. For instance, there is a short Open University course on investing that is available free over the 'net that would take a couple of days...
  • JF1
    JF1 Posts: 5 Forumite
    Voyager, thanks for that. Your replies have been helpful. I will look into the investing options and also have a deeper think about the long term possibilty of a flat/house.
  • kidmugsy
    kidmugsy Posts: 12,709
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    JF1 wrote: »
    No, the rented council accommodation isn't subsidised.

    I don't think I've ever heard of council accommodation that isn't subsidised. That's surely the whole point: to use taxpayer Peter's money to buy tenant Paul's vote.

    Anyway, subsidised or not: does she like the house, the neighbours, the neighbourhood? If so, could she buy the house from the council? The benefit is that she then wouldn't have any rent to pay and she'll pay no tax on rent avoided. The disadvantage is that she'll then be responsible for repairs and so on.
    Free the dunston one next time too.
  • grey_gym_sock
    grey_gym_sock Posts: 4,508 Forumite
    kidmugsy wrote: »
    I don't think I've ever heard of council accommodation that isn't subsidised. That's surely the whole point: to use taxpayer Peter's money to buy tenant Paul's vote.

    irrelevant to the OP's question.

    also, wrong. council accommodation usually has a lower rent than the private rented sector. but the rent is more than enough to pay for the State's cost for building the council housing in the first place, plus the very low interest on the State's borrowing to finance that building. so there's no cost to taxpayer peter. though there may be an opportunity cost to BTL landlord percy.
    Anyway, subsidised or not: does she like the house, the neighbours, the neighbourhood? If so, could she buy the house from the council? The benefit is that she then wouldn't have any rent to pay and she'll pay no tax on rent avoided. The disadvantage is that she'll then be responsible for repairs and so on.

    very good point. buying her own home is a much more obvious use for (some of) this money than buying a home which she then lets to a son.

    that could be either her current home, or a different one. would she be entitled to a "right to buy" discount for the current one? is it where she wants to stay? is that likely to change (e.g. if she becomes less mobile)?
  • JF1
    JF1 Posts: 5 Forumite
    Yes, there are plenty council houses that aren't subsidised.

    The 'right to buy' discount is a good point. I'm not sure if she qualifies for this but I will look into it. She will also have to decide where she wants to stay long term. She does like the current house, but I can see it being a definite problem as she gets older; excess bedrooms, stairs etc. Listening to what everyone has said, ideally she would purchase an appropriate house for herself, which is a more obvious investment, and also takes care of some of the money.

    I'll have a deeper chat with her, and continue to research.
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