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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

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Original poster

More a WWYD re- Parents and money

120 replies

PyongyangKipperbang · 04/04/2022 23:19

Been at work and thinking about it all evening.

My parents spoke to my sister and I recently about how they want to gift us some money. They are planning on giving me enough to may off my mortgage (2 years to go on a small mortgage) and the same to my sister to cover the house improvements they need or to go towards their mortgage (not long moved so a lot longer to run).

The thing is, my sister and I really dont know whether to take it. It feels wrong but I cant work out why.

The are doing equity release which straight away we didnt like but they are doing it through a specific scheme which is not one of those "back pages of the Daily Mail" jobs, the numbers have been crunched and they will still have a sizable ownership of their house and it isnt as dodgy as sister and I first thought. Their reasoning is that they would rather us have some of our inheritance now when we need it (I lost my job due to covid and need to retrain to earn anything more than NMW and my sister has had to "downsize" her career from management due to covid too).

But.......it just feels wrong! I know that my mother especially would feel a lot happier knowing that we are financially secure. I would own my house outright which would mean that whatever happens I would be housed if nothing else. My sister would have the pressure taken off in terms of finding money for house improvements that are desperately needed and they could afford when they bought the house just a few months pre covid. Security is a massive thing for my mother and knowing we had that would help her sleep at night.

It never occurred to either of us that they would do this so we are both in shock. I think they expected more of an enthusiastic reaction but we were both quite reserved, I explained it wasnt because we are ungrateful but that we have some doubts and feel a bit wobbly about it all.

The irony is that if I could do this for my adult kids I would in a heartbeat so I totally understand where it is coming from. My sister is childless not through choice but I know she would do it for my children who she adores.

I am just so torn!

And yes, I do think pride is a big part of it for both of us.

OP posts:

BasiliskStare · 05/04/2022 17:23

Just on the Equity release thing I agree with @alwayswrighty & @MySecretHistory - I think in the past they have been oversold , my PILs did it. The trouble is for many who have signed up they won't be around or in the frame of mind to complain.

My DS came home from junior school one day & said Mrs Manners (Maths teacher) said "children - there are two kinds of people in the word - those who understand compound interest and those who don't"
I had to go through it with him again ( he wasn't the best mathematician ever ) & even he could see the pitfalls.

DPILs did it and it did mean they could not move house . They borrowed it to pay of a squidge of the rest of the mortgage but were talked into borrowing more to do an extension for the family to stay in - never happened and it was not likely to. DH & siblings tried to persuade them not to do it but they were convinced it was almost like free money. Now - their house their choice but it did compromise their choices down the line.

I think if you have no-one you want to leave your money to and it frees up a modest amount of money to do something you really want to do - it can work - but the interest rates are punitive.

HollowTalk · 05/04/2022 17:28

I always think people shouldn't paint themselves into a corner and this would be my worry with your parents.

If they want to share their equity with you, why wouldn't they downsize and then give you some of the money? That would make a lot more sense than equity release.

To be honest, equity release would terrify me - I wouldn't want to accept any money that way. Your parents currently own their own home - they'd be crazy to make a move which meant they then wouldn't own their own home.

Tryingtokeepgoing · 05/04/2022 17:37

@tkwal

Only going by what my financial advisor told me, I live near Belfast which IS in the 🇬🇧

The tax liability, if any, is simply tapering IHT on gifts within 7 years of death and is a tax on the estate not income tax to the individual. Gifts, unless received in the course of employment, are not subject to income tax. Income Tax is a devolved power in Scotland but not yet in Northern Ireland AFAIK. I’d be questioning the qualification of your FA!

Soontobe60 · 05/04/2022 17:53

@Cloverforever
You’re correct- 6 years.
We wold like to sell the house to pay towards my stepfather’s care - he’s currently in a grotty home because no one can afford to supplement his care costs. If we were able to sell, the money would be used to pay for better care in his final years. We don't give a shiny shit about any inheritance - not everyone expects a hand out when their parents die and I resent your assumption that thats what I’m concerned about.

rugbunch · 05/04/2022 18:04

Rules around equity release have changed, I'm pretty sure you can't end up having to pay back more than your house is worth. For people who are asset rich but cash poor & particularly without dependents it often makes sense.

Cloverforever · 05/04/2022 18:46

[quote Soontobe60]@Cloverforever
You’re correct- 6 years.
We wold like to sell the house to pay towards my stepfather’s care - he’s currently in a grotty home because no one can afford to supplement his care costs. If we were able to sell, the money would be used to pay for better care in his final years. We don't give a shiny shit about any inheritance - not everyone expects a hand out when their parents die and I resent your assumption that thats what I’m concerned about.[/quote]
Why can't you apply to the court of protection for the house to be sold?

Soontobe60 · 05/04/2022 18:51

@Cloverforever we can. However, the timescale is huge. His prognosis isn’t great and he needs the money now.

Soontobe60 · 05/04/2022 18:56

@Cloverforever

How long does it take for the Court of Protection to appoint a deputy?
The process of being appointed as Deputy can take four to six months. Four forms must be completed, including a capacity assessment by a relevant professional. Once the application is submitted to the Court of Protection, the applicant has a duty to notify certain categories of people, including relatives of the person lacking capacity. After this notification there is usually a two to three month wait for the Deputyship Order to be authorised. If any of the people who have been notified object to the Deputyship application, then the proceedings become contested and can take many more months to resolve

housemaus · 05/04/2022 19:00

[quote sunshineforest]I imagine the financial adviser is talking about retirement interest only mortgages, which are just like normal mortgages. So obviously you no longer own the chunk of equity you release but the interest rates you pay are same as normal afaik. It is different to equity release. (Disclaimer, I am not a financial advisor by any stretch).

I would imagine that these products will become quite popular with lots of ppl given recent housing booms and the late age of state pension kicks in in the UK

www.which.co.uk/money/mortgages-and-property/mortgages/types-of-mortgage/retirement-interest-only-mortgages-explained-a9z9k0h9lbfy[/quote]
This!

Although ER absolutely has its place, is far more regulated these days and is a genuinely useful tool for lots of people. Some products also have an inheritance protection element to ringfence some of the money

(Also not an adviser though so don't take my advice)

BasiliskStare · 05/04/2022 19:06

@rugbunch I am pretty sure DPILs were mis sold but I agree with you - they would never had to pay back ( nor dependants ) more than the house was worth .
& it can make sense as I said above - my problem with these things is that ( maybe not so much nowadays ) but I do think there was some overselling & if the terms were when you sell your house you have to pay it back - that can seriously curtail some peoples' options.

People must make their own judgment but I think this is one to look at very carefully before choosing

housemaus · 05/04/2022 19:17

@SeasonFinale

Equity release has absolutely stuffed by friends parents. When their Dad died there simply was not enough equity to allow their mum to sell up and downsize to a property near the grown up kids which is what she wanted to do and she was left in an area she no longer wanted to be in.

This isn't that the ER has stuffed them, though - it's either that they didn't pay attention to how their specific ER product works or a bad adviser not explaining how it works, not the product itself.

Did they assume they'd have enough left to downsize after? And if so, why? Did they feel pressured into getting the product and if so, why didn't they make sure they fully understood it beforehand - once they'd realised that it meant there may not be much money left, why did they take it? Did they not consider the possibility one of them may want to downsize after the others' death?

Either they didn't pay enough attention and just wanted to release cash quickly, or they should report their adviser. Given that ER sales are highly regulated by the FCA now and advisers need to be able to evidence that they assessed the suitability of the product, including any future plans for downsizing etc, and fully understood what product they're taking out, they could have a case.

But I doubt that's what happened - no offence to your friend's parents here: it's really common. But people need to be smarter about reading what they sign when they take out high-cost financial products and think about the potential consequences!

guessmyusername · 05/04/2022 19:37

My parents did an equity release to allow my dad to buy his dream car. A few years later and they were struggling with the stairs in the house and wanted to move to a bungalow. The equity they had taken out took a huge chunk of the sale proceeds and they couldn't afford the bungalow. A family member generously helped them out but my dad was very embarrassed at the amount that it took to repay the debt.

Original poster

PyongyangKipperbang · 05/04/2022 19:38

Some interesting information, thank you.

Bit of a spanner in the works as it looks like my sister is swaying towards accepting (it would make a much bigger difference to her than me) and my parents will put a lot of pressure on me to accept too.

If it is the interest only retirement mortgage then that doesnt seem to be as scary as ER, I have only heard bad things about ER and really dont want them to go down that route. Of course it is entirely their decision and I am sure that they are getting good independent advice, also it is by no means certain that they will go ahead at this stage, but hopefully it isnt as risky as it first sounded.

They have another appointment tomorrow so we'll see whats said after that.

OP posts:

MayMorris · 05/04/2022 19:44

@ComeSailAway

They want to see you enjoying the money while you are young enough to need it. Let them do this for you.

Another point is that you may find your inheritance is sold to pay for care home fees if needed in future. Your parents would rather help you out.

But they could still be persued for fees if it could be shown parents did this to avoid paying for care

Original poster

PyongyangKipperbang · 05/04/2022 19:47

How could it be shown they did that though? What would be considered avoidance of fees as opposed to simply spending money that is theirs?

Not being snippy, I genuinely want to know!

OP posts:

Original poster

PyongyangKipperbang · 05/04/2022 19:48

Also, should add that they are very early 70's no major health issues and no anticipation of care needed in the short to medium term (obviously this can change in a heart beat but thats the situation right now).

OP posts:

Obelisk · 05/04/2022 19:50

A retirement mortgage certainly seems a better option in this scenario.

One thing your family might consider is whether your sis could increase her own mortgage to cover the works and your parents could give her money every month towards the increased payment (the money they would otherwise be spending on the retirement mortgage). Obviously this only works if she can get such a mortgage based on her income (not including your parents' contribution). Benefit of this is that she's likely to be able to get a slightly better rate and it also puts the risk on your sister not your parents, so if for some reason they can't keep giving her the money, she'll need to find it herself, but there won't be any risk of your parents defaulting on their own mortgage or issues if they want to downsize etc.

MayMorris · 05/04/2022 19:51

@PyongyangKipperbang

Some interesting information, thank you.

They have another appointment tomorrow so we'll see whats said after that.

I don’t understand this…I’m basically reading this as that are going to take out a long term loan, in their retirement to pay off your mortgage and part of your sisters? They’ll be paying higher interest rates I’d have thought…it is just throwing money away and putting their financial security of having a roof over their heads at risk, vs yours being at risk It’s completely bonkers. Seems to me that they are buying your affection for their own gratification and feelings of being benefactors m rather than just accepting kids will benefit after their death but they won’t see that or control that? They are controlling and dictating what you spend it on now

LIZS · 05/04/2022 19:52

Effectively they are borrowing on your behalf. It is likely your mortgage rate is lower than the interest on the equity.

Obelisk · 05/04/2022 19:53

Also the risk for your parents will vary a lot depending on their pension arrangements- if they have gold-plated, inflation-linked final salary pensions they're in a lot less of a precarious position than if they have defined contribution pensions- taking on a commitment to pay the interest on a retirement mortgage is a much less risky idea in the former scenario.

Original poster

PyongyangKipperbang · 05/04/2022 19:56

That have absolutely no need to buy affection and they are not controlling.

The way my father put it was that we could be drawing our own pensions before we see any kind of inheritance from them (not something my sister and I care about but it means a lot to them to be able to leave us with something), and they would rather we had it now when we need it. Their own parents both did similar for them (although on a smaller scale) so they want to do it for us.

They are absolutely not controlling, they have gifted us smaller amounts before and not commented or passed an opinion on what it was spent on.
They just want us to have security in our homes so that they know that whatever happens to them, we will always have roofs over our heads.

OP posts:

MayMorris · 05/04/2022 19:58

@PyongyangKipperbang

Depravation of assets ukcareguide.co.uk/avoiding-care-home-fees/

MayMorris · 05/04/2022 19:59

@PyongyangKipperbang

How could it be shown they did that though? What would be considered avoidance of fees as opposed to simply spending money that is theirs?

Not being snippy, I genuinely want to know!

Depravation of assets ukcareguide.co.uk/avoiding-care-home-fees/

Original poster

PyongyangKipperbang · 05/04/2022 20:00

Oh their pensions are very very safe. Both are final salary and very well looked after. As I said, they are both very cautious normally which is why this had knocked me sideways!

OP posts:

MayMorris · 05/04/2022 20:02

@PyongyangKipperbang

That have absolutely no need to buy affection and they are not controlling.

Sorry, I didn’t mean they are controlling you…they are controlling and dictating what you use this money for….

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