Help - uncle with lots of debt & teacher pension

[tiredmum2468]

Dear All
I'll cut to the chase
Partners uncle is very unwell - he's a
Batchelor only family is my DP and he's asked if we'll help him get his affairs in order
Basically - DP has worked out at 71

He has a car on PCP paging approx £450 a month for (within budget but now an issue potentially he's 2 years into the 5 year agreement) it's a very expensive x5 bmw

He has about £10,000 over 2-3 credit cards

Fortunately mortgage free

He lives on state and teachers pension

No savings but he likes to "live" so always had nice food and holidays and a nice car etc...

He owns his house but his wish is that (this has already been willed to my 2 DC ) with the idea it's rented out and the rent is split equally into accounts for them both as savings for university - we'd have to modernise the house to make it rentable realistically

He can't find his teachers pensions paperwork and he said he can't remember (he retired at 65, 6 years ago) whether a lump was payable on death and what happend as he'd only drawn on it for 6 years

Can anyone offer any help or advice?

Just read the bit about the massive garden. Is it worth getting a quality estate agent surveyor round to provide a valuation as a development plot.

When you say he’s unwell, are you saying he’s terminally ill? As that’s what some of your other messages suggest. If that’s the case then the financial advice will be hugely different to if he could live another twenty years.

Also if his assets are worth more than £325k then inheritance tax will come into play if he doesn’t live more than 7 years after he gifts your children ( 40% )
But the deprivation of assets will probs be the real issue as you say he is not in good health....because If there is no money for care...then you will be legally obliged to return the money ( although he may never need care then you will be ok)

[quote tiredmum2468]@Kitkat151
That answers that then I'm guessing he spent it on one of his many cruises - good for him he's had some great times holidaying and I'm pleased he has.

We're going to suggest that maybe he clears the debts
And stuff now and sells the house and then goes Into a rental for a
While and we will bank some money for the children instead

I doubt anyone would want to rent a house that has had
Nothing done in 40 years not even double glazing 🤦🏻‍♀️[/quote]
So you want your children’s inheritance now rather than wait until he dies?
Nice

I’m suspect that you’re actually trying to navigate this man out of his home in order to keep control of his assets for your own gain.
Does he want to leave his home? He’s 71 it’s not so old .

The house needs valuing that's my DPs job this week to help him organise that

Shortly to appear on a hoarders documentary!!!!! 🤦🏻‍♀️

It's just becoming unmanageable he has Parkinson's and it's getting really bad.

It's a Very sad situation and he's very upset about these credit cards and the car PCP - he's wishing he hadn't had flash holidays but he really loves travelling - it's worrying him but he's also unrealistic as to how/why the house can't be rented out as it is as he thinks it's fine!

@RosesAndHellebores

The lumps sum will have been paid. With no married or common law partner the pension is reabsorbed.

Is there any way the car can be handed back?

A full occupational teachers pension based on about 45k should be around £18-20k per annum plus his state pension of about £9k, so about £25k p a. He ought to be clearing about £1700pcm and without a mortgage have £1250pcm. I don't know what his outgoings are but assuming community charge, council tax, insurance, phone, sky, etc, in a modest property I'd estimate £550, leaving £750, allow £300 for food and that's £400pcm off the debts.

What is the house worth?

Under no circumstances should he sell the house.

I think downsizing is an excellent idea! If he’s in a house thats far too big for him to manage, that can add to his inability to function well. My mother did just this and although at first she felt a bit sad about moving, shes now loving her little bungalow that she can clean from top to bottom in a couple of hours, has very cheap heating bills, lower council tax and has everything brand new.

OP, if he downsized now, he can gift lump sums to family each year tax free which will reduce his IHT bill - should he have savings over the threshold. He can leave his smaller house to his nephews - it will still provide them with some income when they go to Uni if thats what they want to do - but equally they may want to sell it and have the cash - its up to them.

If he ends in a home it doesnt matter what he wants for his house it will end up being used for his care. You can't expect inheritance.

I’m not sure whether you mean to sound so mercenary OP.....but that’s how it’s coming across...but I think you will end up coming unstuck with inheritance tax and deprivation of assets .....Because you can’t just sell an unwell relatives home and expect to keep some of the money for your children....no matter what your relatives wishes are......you have to work within the law

If/when he dies, whether or not he left a will, all his debts will be paid from his estate. Family members are NOT liable for his debts.

If his debts exceed his assets then your DC will inherit nothing at all.

Regarding the credit cards, just set up standing orders to pay them off. He’s possibly only paying the minimum. Or if he has enough in savings, pay off as much as possible. Interest on CCs is high, on savings is almost non existent. He may also be able to get an interest free CC to consolidate and do a transfer balance - but make sure a DD is set up to cover the amount before the interest free period ends. Once he’s done that, get him to cut up the cards so he can’t use them!

@Hoppinggreen

No you've got this wrong, I don't care about the money neither does DP
It's majorly stressing him out tho which is upsetting us and him

It's his wish that my children have something but he's just specific in the desire to keep the house as a rental forgetting we haven't got thousands to renovate it - it's also nowhere near where we live

He has Parkinson's and he's very ill and struggling to cope in that house;

Nobody is trying to do anything awful and we'd even have him live with us if he wanted but he doesn't want to "put us out"
I'm just trying to get some thoughts/ideas

As others have said the lump sum would have been paid out when he retired.

If he was married there is a surviving spouse pension payable to them on his death but if he is unmarried then there will be nothing else.
That’s the thing about pensions you could die at 65 or 95.
Can he afford to run his home and service the debts? If he can then there is no need to do anything urgently. It may just be that he needs a bit of a sort out. How “unwell” is he and what is his long term prognosis ?
The issue is if he is unable to do this any longer and needs to start to pay off the debt or manage his money better.
Does he have any savings or assets other than the house that could be sold to pay off the credit card debt? Or can he start to pay off the balance over the minimum ?

Is he still driving ? Can he afford the pcp payments? If he is unwell and unlikely to be able to drive and / or afford the car there may be a way to terminate the agreement. In general early termination costs £££ as a lump sum has to be paid. Thus might reduce once the car is over a certain age. It may be specified in the paperwork. There may be some insurance in the scheme to cover issues such as illness or death but the fine detail will need to be checked over. But it may be better in the short term to keep paying at least until there is a better picture of his finances.
I think your dh needs to remember that any money will only come to your children once uncle has passed on and his comfort and security financial or otherwise is the priority here.
It makes no sense at all to sell the house and rent to give money to your children. He will have to finance the rent from his pension or deplete his capital. He wouldn’t get benefits as they would expect him to use the capital from the house.
Also depending on his health if he needs residential care his house /capital will be taken into account.
He could consider downsizing if that’s feasible and using some of the capital to pay off the debts.
If he is very unwell /terminal then there is the option to do nothing and continue to pay mimimum payments and sort it all out from the estate when he passes - the house would be sold, the car returned etc and and debts would be paid from the proceeds of the house.

Ok I have just seen your update.
I would definitely say he needs to down size to a bungalow or flat or adapted small house with a stair lift etc. The leftover capital can be used to pay off the card debt.
If he doesn’t want to move it is possible to rent stair lifts and put some adaptations in to the bathroom like grab rails etc and he can sign up for the community alarm system.
If he has serious Parkinson’s then I doubt he will be able to drive so the car situation needs to be resolved. If it’s only 2 years since the agreement and given his age it may not have been right for him at the start - there may be some misselling so it may be possible to persuade the dealers to take it back without paying the termination fees.

Has he got power of attorney set up for health and finances so your husband can act on his behalf? Does he have a solicitor/accountant (you mentioned land and a will)? They may be able to advise on a course of action that will give him what he needs for the remainder of his life and the best way to arrange the inheritance. It sounds from what you said about hoarding that maybe he can’t bear for the house to be sold if he’s still trying to ensure it’s rented and not sold?

I don’t suppose the car pcp people have a clause about returning the car in the event if terminal illness, if that’s what he is?

You could enquire? That would save him so much money it would probably solve his problems?

In addition to the above, contact StepChange as they will have seen these PCP contracts before and may be able to give him advice about the credit cards. If he can live within his current income, it may be worth consolidating them into a low-cost loan.

However....given that he does have Parkinson's, downsizing the house makes a lot of sense as it will future proof his lifestyle and care needs as the illness progresses. It does not make difference to the inheritance outcome as the estate will take care of the debts first, before paying out.

Good luck.

Forget the situation after his death. Think about what HE needs now. Very ill with Parkinson's, or something else as well? Only if he's very ill with Parkinson's he could have many years left.

Which suggests that selling and downsizing to somewhere on one level, possibly in a retirement community, would suit him better. And using the proceeds of the sale to pay for help and clear debts. If his tremors are bad surely he can't be capable of driving still, so the car would need to go. And make sure he's claiming everything possible. Attendance allowance for example isn't means tested.

I'm really confused about all this pensions advice. Why is this an issue? So he is unwell and has a house that he can't manage. Sounds like he could sell it and get enough for a nice flat in a sheltered accommodation block and pay off the credit cards. You can see if he will give your DP power of attorney if that helps but even if not you can get a financial adviser in so that things like long term care and assets are considered.

I can see that he might be resistant to this particularly if he is a hoarder, but he's not destitute he has an asset and relatively few liabilities. I'd make enquiries with car lease people about the car, and then take their response to the CAB - they might release him from the contract for a lump sum.

It sounds like a stressful situation of course, but many people face this situation with no money for accommodation at all so I reckon its not as complicated as you think OP.

I would be careful because you could get done for financial abuse. You are potentially going to profit from his situation. He needs to downsize and pay off his debts first. If he requires care at £850 a week you won't see any inheritance!

Check his car contract, there may be a voluntary termination clause which after paying half the repayments you can return the car. He wouldn’t get any money for it but would at least be free of the debt. I’d look at downsizing to a more manageable bungalow or flat, maybe nearer to you, definitely apply for attendance allowance and maybe look at contacting social services and getting assessed for any potential help with care.

Have you spoken to the leasing company re the PCP car? This sort of thing must happen fairly often and given that he's presumably stopping driving altogether I can't imagine that they'll be expect another three years of fees.

Is the plan that he lives with you? If so, there is a s
“Spare” house - albeit in a bit of a state.

Could you get a BTL mortgage on it, that would clear his debts and bring the house up to a good standard. Then let it out to clear the mortgage.

DU gets his debts cleared (peace of mind) and looked after and gets his wish of passing something on to blood relatives - this is often important to older people.
DC will get a house, which may be mortgage free, but will have considerable equity by the time they are adult.

The credit card debt when he dies only his estate will be liable. The bank may force sale of property to repay the debt especially if 1 card. But if over several cards the appetite for that might be low.

I think right now you have to help him put thoughts of inheritance aside and work out what is his best bet for his own happiness in coming years. He'll likely get his money's worth from speaking to a financial advisor, both to give you some direction and because he might listen more to them than to you.

First you need to get hold of all the details to make it worth their time - pension details, house valuation (and cost to clear and make it acceptable for a building survey, if it's been a hoarder home - my granddad's took about £40k in house clearance, rodent control, wall fixing etc just to make it legally habitable) some estimates on a smaller place, and any ongoing health issues that would affect care needs / life expectancy. Also he HAS to be honest with you about all debts, because it feels like he should still have cash left, if he's been contributing to a teacher's pension for so long.

Then you can have a much better idea of what to do.