I heard the woman tell Joe Duffy about her dismay that her (now deceased) parents had taken out a Bank of Ireland product called LifeLoan.
LifeLoan was designed to release equity from your home. People typically take equity release loans such as this out in their later years if they need cash to pay for residential care or medical care, or to help offspring with property or a business venture for example.
The loan is not repaid during the lifetime of the borrowers (unless the house is sold or the property is vacated), which means that the debt is often passed on to their estate.
The interest rate can be high on such loans – in the case of the Life Loan I believe it was somewhere between 6 and 8%.
For the woman talking to Joe, this meant that her inheritance was wiped out, as the loan plus compound interest, was greater than the value of the house. Was this a case of misselling by Bank of Ireland or a daughter frustrated because an anticipated windfall was wiped out?
So here’s my question.
Do you talk to your parents about money?
I wrote before about how attached or otherwise we are to the family home, but whether you demand or expect to be left it by your parents, I suspect you would hate to think they felt obliged to gamble it in their old age because they are too proud to ask for your help.
From my perspective, my mother might ask for help but my father probably wouldn’t.
Chances are you have an inkling of what disposable income they have in their retirement but it could be worth asking the question.
Need to Grow your Pension Fund?
Get top tips, best practices and advice on how to avoid the pitfalls
If you are in a position to help them out, even if it’s simply to talk through the options including all the implications for the next generation, wouldn’t it be worth the potential awkwardness of a conversation about money?
Remember that you can gift them up to €3,000 each per year. That might be all they need to avoid having to take out an equity release loan.
If they do need to take one out, you could assist them in making an informed decision, maybe help them to pay the interest while they are still alive, reducing the potential bill on their death.
A second pair of eyes on the terms and conditions – and the risks – involved in any major financial decision is always useful.
Powerful as he is, even Joe Duffy couldn’t help that woman. It’s too late when they’re gone.
Let me know if I can help you discuss these matters within your own family.