Consumer Rights: How can I get more for parents-in-law's home?
Sibling rivalry breaks out over dropping the price of a home that is difficult to sell ... What are the financial implications of deferring the state pension?
Sunday 06 December 2009
Q. What are my wife's rights when it comes to setting the sale price for her late parents' home? She has a 25 per cent share and her sister has a 75 per cent share. Her sister has appointed an estate agent to sell the property but the sale price has come down by £15,000 while it's been on the market since last year. What say does my wife have in the price?
A. Setting the sale price for any property is ultimately up to the people who have the right to sell the property – the owners of the property or the executor(s) of an estate. Generally, executors set the sale price after consulting one or more estate agents. Is your wife's sister the executor of the will? If so, are there also other executors? The executors have the responsibility for carrying out the wishes expressed in a will. If the house was to be sold and the proceeds of the sale divided 75/25, the executor(s) have the job of getting the best possible price for the house for the benefit of all the beneficiaries. If the estate has already been taken through probate and the property has been transferred into your wife's and her sister's names and they have agreed to sell it, they can both discuss and agree the sale price with the estate agents.
Although it may be galling to see the asking price of the property fall by so much, it is worth bearing in mind that the supposed recovery in house prices noted in the Nationwide and Halifax indices has been largely based on price growth seen in London and the South-east. There are still large swathes of the country which are seeing either price falls or market stagnation. All in all, your wife's sister is probably taking the advice of the estate agent in reducing the sale price because the house has been on the market for such a long time.
If your wife's name is already on the deeds of the property, no sale can go through without her agreement. If she's worried about the price being asked for the property she should talk to her sister about both of them sitting down with the estate agent to discuss the next move.
If you are worried about you wife's share, your local Citizens Advice Bureau may be able to let you have a free appointment to talk it over with a solicitor.
Q. Can you advise on the best way to manage deferring the state pension to minimise tax to be paid? I was born in April 1948 and plan to retire when I am about 65, either before or after my birthday dependent on which tax year is best. I have deferred the state pension until then, but could leave it a year later if needed.
I have a local authority pension. (I work for the probation service.) My final salary will be about £38,000 a year. I will have about 23 years in the scheme which is estimated to provide a £20,662 lump sum and £10,600 annual pension.
I am trying to decide how to manage these to maximise the amount I have on retirement. I only realised recently that deferring the state pension incurred tax.
A. I am assuming that as you are already 61 and have deferred your state pension until 65, or thereabouts, you are a woman, but you don't say whether you have any other income.
Let's say you're already retired and your occupational pension is £10,600 a year today, your state pension is £100 a week or £5,200 a year, and you have no other income – then your total taxable income is £15,800 a year. The tax allowance for someone who is 65 – taking today's figure – is £9,490 so you'd pay tax on £6,310. If you do have other income the figure will be higher. The only thing that isn't taxable is the lump sum from your occupational pension.
By deferring your state pension for at least five weeks after you become entitled to draw it you get additional pension. For every five weeks you delay taking your pension it increases by 1 per cent, so if you defer for 12 months your annual pension increases by 10.4 per cent.
If you're entitled to £100 a week and you defer for a year, you get £110.40 a week once you start drawing it; if you defer for five years you get £152.00 a week when you start taking it. That £152 is taxable along with your occupational pension in the usual way.
However, as pensions specialist Andrew Wilkins, a senior partner at financial advice firm Philip T English, points out, by deferring for at least 12 months you have the option to take the amount of pension you would have had, had you taken it every week, plus interest, as a lump sum. If you defer for five years you can take five years of pension, all at once, plus interest at 2 per cent above the bank base rate. That lump sum is then taxable at your normal rate of tax. Taking the money in a lump sum won't push you into a higher tax band. Once you've taken the lump sum you start drawing the ordinary amount of state pension you're entitled to.
I can understand that you're thinking ahead and want to pay no more tax that you have to. But as you can see it's a complicated calculation as there are so many variables. We don't know how much the state pension will be over the next few years. We don't know what the basic rate of income tax will be. Mr Wilkins says: "I believe that the only way anyone in your position can manage the tax liability in any way is to actually draw your state pension at a time when perhaps you happen to be paying a lower rate of tax than you are paying now. For example, if your income now puts you into the high rate tax bracket, whereas when you retire (on a lower income with a higher tax allowance) you might be only a basic rate tax payer, then this might be a way to manage the tax liability."
Talk to a pension adviser and get help to do the calculations. Friends and family may be able to recommend someone. However the figures work out, don't forget that you might want a lump sum on the grounds that a bird in the hand is worth two in the bush. If you don't need to use the money you might want to invest it in a high-interest account. Of course, that depends on what interest rates are like by then.
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