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?

To be honest, it doesn’t matter if he’d like the house to be done up and rented out and shared between your kids.

His assets will need to be used first to enable him to live and clear his debts.

If he lives a while and needs a care home and has no money, but debt, his property will need to be sold and the proceeds used to fund his care and debts. After he dies, anything which remains can be inherited. It is not possible to determine that assets are given away whilst alive instead of being used to fund debt and care. There is a sliding scale of up to 7 years for giving away assets and those being required to fund care if needed.

Sounds to be honest, like he or you or both would really like to maximise the states that are passed on. Lots of people feel like that. But people have to realise debt and care of the person whilst alive comes first. Decisions should be made to benefit your relative and accept his financial responsibilities to himself and his debtors first. Assets can only be left later if he has any left and given he has debts and might require care, it could be much less than he would like to leave and you might like to receive.

I’m afraid he simply won’t be able to keep the house as a rental if he needs care which sounds fairly likely with Parkinson’s.
In my experience it could be that he becomes at increasingly high risk of falls abs therefore may need to be in a care home or have a live in carer at home
If he downsizes now, if and when he needs care, if he has over £24K in savings he’ll have to pay for his care himself, and the council will want to know what happened to the proceeds of the house. If he has given away the money eg to your kids he will be treated as still having it.

You cant get an LPA with a diagnosis of Parkinson’s. We looked into this for my FIL.

Sorry but that is utter rubbish!
It’s nothing to do with diagnosis.
It’s to do with whether the person has the capacity to make a decision about power of attorney. If they they have already lost that capacity then yes it’s too late but it will not be because of having a specific diagnosis, so if any solicitor has told you that they are wrong or you have misunderstood

@RuggeryBuggery

*You cant get an LPA with a diagnosis of Parkinson’s. We looked into this for my FIL.*

Sorry but that is utter rubbish!
It’s nothing to do with diagnosis.
It’s to do with whether the person has the capacity to make a decision about power of attorney. If they they have already lost that capacity then yes it’s too late but it will not be because of having a specific diagnosis, so if any solicitor has told you that they are wrong or you have misunderstood

To be fair... They have probably misunderstood....lots of people don’t understand that mental capacity is time and decision specific

@RuggeryBuggery

*You cant get an LPA with a diagnosis of Parkinson’s. We looked into this for my FIL.*

Sorry but that is utter rubbish!
It’s nothing to do with diagnosis.
It’s to do with whether the person has the capacity to make a decision about power of attorney. If they they have already lost that capacity then yes it’s too late but it will not be because of having a specific diagnosis, so if any solicitor has told you that they are wrong or you have misunderstood

Actually it was the Office of the Public Guardian that confirmed this when I phoned them up to clarify this.

@Soontobe60
You were definitely misinformed....Have a look at the Mental Capacity Act 2005 principles ....’ you cannot assume someone cannot make a decision for themselves just because they have a particular condition or disability’
Like I said before.....capacity is time and decision specific

It is likely any death payment is to a spouse or child only 're his teachers pension.
LPoA is specific to that person's health and mental capacity. There is no blanket policy that stops it being granted due to any diagnosis. FIL had Parkinson's but was deemed capable of making decisions at that stage. Leave it too late and and it may be different. A doctor can verify they have capacity or not. Even after a LPoA is granted you should involve the person in any discussion as much as possible.
But remember any debts need settling before anyone can inherit.
He may just need a better budget plan and a sensible conversation.

[quote Kitkat151]@Soontobe60
You were definitely misinformed....Have a look at the Mental Capacity Act 2005 principles ....’ you cannot assume someone cannot make a decision for themselves just because they have a particular condition or disability’
Like I said before.....capacity is time and decision specific[/quote]
In that case the OPG are giving out duff info. I specifically enquired about Parkinson’s and was told that a formal diagnosis of it, or dementia , Alzheimer’s and a couple of other degenerative conditions would bar the issue of a POA as it would be open to being challenged by other interested parties in the case of any dispute.

@Soontobe60 like I said....You been misinformed....the mental capacity act 2005 is the law....not what some odd bod at the OPG said to you.....mind you if it had of been my FIL with Parkinson’s and he still had capacity I would have got a solicitor to draft the papers with my FIL so that it was the solicitor who deemed him to have capacity ( it doesn’t have to be a doctor).....just so there was no come back down the line....
Have a look at the principles of the MCA .....it’s really quite interesting.....everyone has the right to make their own decisions and everyone is assumed to have capacity unless it is proved otherwise

In that case the OPG are giving out duff info. I specifically enquired about Parkinson’s and was told that a formal diagnosis of it, or dementia , Alzheimer’s and a couple of other degenerative conditions would bar the issue of a POA as it would be open to being challenged by other interested parties in the case of any dispute.

Unless things have changed dramatically then they are certainly giving out duff info. My uncle died of Parkinsons about a decade after being diagnosed and he organised LPAs three years before he died, enabling my cousins to sell his house for him and get him into a good care home.

I had meant to add, for reference, that my SIL retired at the age of 61 from teaching. She'd taught full-time for 38 years and she retired on a pension of £21,000 and took a big lump sum. She was a bit coy about how much the lump sum was, but we know it was at least £80,000 and suspect it was £100,000+ So the OP's uncle is likely to have an income of at least £25,000 and probably more like £30,000 (teacher's pension and state pension combined). In which case a debt of £10,000 should be manageable, even with the BMW payments — particularly because, over the last year, he won't have been able to spend money on holidays, cruises and other pleasures. And as he appears to be severely ill, he's unlikely to be going on holidays for a while at least. So if he's not spending the money on maintaining his house and he's not blowing it on cruises he should be able to pay back £2-3,000 pa on the credit cards. He needs to transfer the balances to interest-free cards if possible. Perhaps that's something the OP's husband can help with.

@Shedbuilder

In that case the OPG are giving out duff info. I specifically enquired about Parkinson’s and was told that a formal diagnosis of it, or dementia , Alzheimer’s and a couple of other degenerative conditions would bar the issue of a POA as it would be open to being challenged by other interested parties in the case of any dispute.

Unless things have changed dramatically then they are certainly giving out duff info. My uncle died of Parkinsons about a decade after being diagnosed and he organised LPAs three years before he died, enabling my cousins to sell his house for him and get him into a good care home.

No nothings changed.....the PP would have been wise to have contacted the Parkinson UK charity....they would have put her straight

It maybe worth taking legal advice from the Solicitor who holds the original copy of his will. Once he passes away, his bank accounts and assets become frozen, and you or his Executor will need to apply for probate before any of his wishes can be acted upon, a process that takes around a year to complete.
If the House and any other assets exceed the personal inheritance tax allowance then a lump sum will need to be paid to the inland revenue, any debts paid out of the proceeds, and only then can any residue be divided between the named beneficiaries. If there is insufficient cash to cover the taxes in the Estate, then there will be no other option but to sell the property and use the assets to pay these.
If you sell the house before his death, and bank the cash for your children, and your uncle fails to survive for 7 years afterwards, then your children would become liable to pay the taxes instead.

The whole process is a complicated nightmare, especially on a large estate involving debts and property. I would strongly advise you to get a solicitors help, they also have a good knowledge of the tax system and what allowances may be claimed and the whole probate system.

I am just at the end of my Probate year from my Late Father, it’s been very stressful, I’m am so glad though that he named and appointed a Solicitor to work alongside me as an executor, and the costs and fees for doing so have been covered by the estate and the tax allowances.

@RosesAndHellebores

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.

I was going to suggest that. Someone I know got PP on half their garden, and sold it as a building plot for £300k+.

Not saying he'd get anything like that, but it could easily be enough to clear all the debts, cover funeral expenses and renovate the house.

If the house goes to your children, it could be rented out and the income invested in a trust fund for when they are older and, possibly in conjunction with selling the house, could be used to fund university or set them up with a home.

My DSS had a share of a trust along these lines which he was able to access at 21. He used the money as a 50% deposit on a house in a fairly expensive part of the country and now, at 30, his mortgage is tiny compared to the equity.

Ignore all that, I assumed that there was a terminal diagnosis and that any care home charges would be for a relatively short period.