Financial advice needed for my parents

[busyknee]

My parents are both mid 70s and retired. They own a house worth around £400. And they've paid off their mortgage.

They both have pensions that cover their day to day expenses, bills and food, but no extras such as holidays or christmas etc. They used to pay for these things out of their savings.

It has recently transpired that they've spent all their savings helping my brother out.

I don't want to get into this here, but my brother has had a lot of MH problems, legal problems and debt.

My parents have got into £150k of debt helping him. I had no idea about this.

They now need to pay this off. Plus if they want to enjoy holidays etc in retirement they need some extra to put back in their savings pot.

They are thinking of using their house to raise the money, but having looked into it, they've found that if they do this the company will collect double the original amount when they die/sell. So they'd lose £300k, leaving about £100k in equity in the house as their legacy.

They're devastated by this as they wanted to leave money to grandchildren and they're concerned about the costs they'll force on us if they need to go into a home when they're older. They think nice homes are £2k a month. They'd assumed the house would pay for this.

Any advice at all about what they could do?

They're getting really depressed about the situation.

I appreciate that they're actually very well off compared to a lot of people, but this isn't the retirement they had envisaged for themselves.

What about looking at flats in the area they live.
Dmil and dfil moved from a house to a 2 bed flat just down the road from where their house was.

They loved it as it had all the security when they went away and when dfil died dmil felt safe on her own as there was that extra door to get through before anyone got to her front door plus they were friends were still nearby.
Once they had made the move a few of their friends followed suit

Avoid equity release completely, so not consider it for a second.

I wouldn't recommend an IFA either not for a second, they make money by either recommending products or charging for their advice. I would recommend the following charities, Christian's against poverty, Age UK or Stepchange

In reality at their age they will probably never pay it all back unless they downsize or can negotaiate a much smaller debt. That would point to possibly an IVA. I know two people who have gone down this route to clear debts but not debts that are so large. This is a link explaining what it is on Stepchange the charities website,www.stepchange.org/debt-info/what-is-an-iva.aspx they do not need to go to a company offering help to arrange an IVA. They will charge a fee.

What you need to do is stop your parents assisting your brother financially anymore.

They need to be realistic that £££ may be spent on care home fees and this should be a top priority for them.

FIL is in a care home now and it's £1100 a week. Before he went in, they asked if MIL had the funds for 3 years. As it turns out, there's no chance he'll be in there for 3 years but he spent his life scrimping 'for the children to inherit' and his financial plan is currently going up in smoke.

If you aren't self-funding, you don't get as much choice - you will go where Social Services will pay for. This isn't necessarily going to be somewhere as nice - not as nice a room, care not as good etc.

I would get them to stop thinking about helping out your brother, possible inheritances for grandchildren etc and focus on what they may need in the future.

It's understandable that they don't want to downsize, but given the level of debt they've got themselves into, they have to be realistic.

However, given that they've evidently been such a soft touch with your brother, I think I'd worry that even if they did downsize and he knew they had cash available, they'd be a soft touch again. TBH they do sound pretty financially naive - would it be an idea for you or someone else trustworthy to have financial power of attorney?

I'm passing all this advice on to them. Thanks for the step change link peanutbutter.

They're planning to call them and AgeUK tomorrow. As shall I. I've found a good local financial adviser and I'm trying to find a solicitor.

Power of attorney isn't really possible. They don't consider themselves to be old despite being in their mid 70s. They're both very fit and able, my mum even runs a local lunch club for the elderly! But as a few of you point out, they have been very financially naive.

They've buried their heads in the ground I think for a very long time. They've been so desperate to help my brother. The reality is that without their help he would probably have been on the streets years ago.

It must stop now though. And I think them telling us is really a cry for help to get us to stop them helping out whenever my brother is in trouble. He's out of work again at the moment with no way to pay his mortgage so I think it'll come to a head shortly. So hard. But if we don't stop it now it'll just continue as it has been and it'll be us going into debt as well. I'll look into to what help we can get him.

Thank you everyone for the advice and kind words. It's going to be a tough few months sorting this all out, but at least we have a plan of sorts coming together.

It's still worth getting power of attorney set up for when they are older and may need it. You can't do it if they later lose mental capacity- you need to be sure that your brother cannot make financial decisions with their money should they become incapable.

You can sort it relatively cheaply via office of public guardian without gong to a solicitor and being charged loads.
https://www.gov.uk/government/organisations/office-of-the-public-guardian

Good luck

Definitely sort out POA now. It has to be done before they lose any mental capacity. My mother sorted this out when my father died. She was in her early 60’s.

OP, how have two retired people managed to borrow so much money? Are you sure that they haven't already used equity release?

So your brother lives in a mortgaged property? Frankly. He should see that and pay them back. He could rent or something.

*sell

Would they consider moving into a lodge or luxury static caravan on an all year round site?

My MIL and GPIL have both sold their houses and moved into them and tbh, they're nicer than my house! Obviously it's a huge downsize but massive equity release (the lodge was about 90k and caravan about 45k) there are obviously site fees to pay each year, they're often around 3k a year.

It's a lovely retirement for them all though and what DH and I will be doing when we're older too.

)))))))))) Park Homes ((((((((((((
Impossible to sell for a reasonable price
DO NOT go down that method, please, please, please

Are you in a position to get a loan against their property so they can repay the debt and put a charge against their house (so you own a share).