Financial Advice for divorce settlement.

wbingo

My mother is receiving a divorce settlement in excess of €500k. She is almost 60 years old and as she previously was a housewife has no income or pension available. She would like to purchase her own house buy given the price of houses now a days maybe investing her money elsewhere so she can live off it will be more wise. If anyone can point us in the way of a financial advisor or general advice that would be great.

Mrs OBumble

If she does not buy a house, then where would she live? (ie is she a social-housing tenant now?)

wbingo

Rental is a possibility. She is currently staying with a family member. It won’t be long term but no immediate rush to move.

Jim2007

https://www.boards.ie/discussion/comment/122074101#Comment_122074101

At 60 that would be a very bad move…. better to rent.

XsApollo

why would it be better rent? Could be 12k a year rent? She lives for the next 30 years? 360k?
Can 500k be invested with minimal risk and get a return to live on?

If she bought a house for 250k, live on the other 250k she would have her own home and an asset that can’t be taken away.

3DataModem

"Can 500k be invested with minimal risk and get a return to live on?"

• You can invest in fairly ow-risk dividend stocks and get about 15000 per year (3%). The upside is that the capital is available at zero notice if needed urgently
• You could invest about 300k in an apartment (for example) and get about 18000 per year (6% yield) after management and agent fees. There would be costs that would cut the yield down to about 5% perhaps. The upside is you are not spending the whole 500k. The downside is that having just one apartment like that has risks of it's own if you get a bad tenant = no income.

Both of the above are pre-tax. Not an issue now as she has no other income, and not much of an issue when she gets the non-contributory pension at age 65 or whatever.

Mrs OBumble

https://www.boards.ie/discussion/comment/122074621#Comment_122074621

Imagine being 80, though, and getting evicted 'cos the landlord is selling. And having it happen again less than a year later.

And needing to get the landlord's permission to install grab-handles for the shower and toilet - which the landlord does not want to give because it will devalue the property.

And needing long term care, which Fair Deal says you have to fund 100% of yourself because you are too rich with assets that aren't your home.

In her situation - I'd buy.

Jim2007

https://www.boards.ie/discussion/comment/122074645#Comment_122074645

So you think investing in an illiquid asset in a high risk asset class with a low return, failing to diversify and doing it late in life is a good idea?

XsApollo

https://www.boards.ie/discussion/comment/122075705#Comment_122075705

You didn’t give an alternative option.

If she has to pay for somewhere to live, ie rent a place, then where can she invest the 500k that would pay her rent and give her something to live on?

She won’t be working again by the sounds of it?

I’m not a financial expert , I’m asking.

XsApollo

She might get an income from an apartment, but doesn’t she have to use that income to rent her own place then which would be possibly more than what she is making off the apartment?

At the end she would still end up with an apartment?
if she bought her own house she would still end up with a house?

Is the non contributory means tested?

https://www.boards.ie/discussion/comment/122075663#Comment_122075663

Avatar in the Post

Wouldn’t fancy renting at any age, never mind in my 60s. She could buy a house/Apt and avail of the rent a room scheme.

She’ll need some funds to tie her over to 66 unless she qualifies for SW, or there’s plenty of work out there. Would probably do her a power of good.

Mrs OBumble

https://www.boards.ie/discussion/comment/122075867#Comment_122075867

Yes. Non-conttibutory pension is means tested, but assets you are personally using, eg your own house and car, are exempt.

The same applies to JSA.

When the social-welfare issues are added in, buying is a no-brainer.

AndrewJRenko

https://www.boards.ie/discussion/comment/122075705#Comment_122075705

It's not an investment. Liquidity, return, diversification are irrelevant. She's buying a home, somewhere to live.

Mrs OBumble

Thinking about this some more: has she been working since separating?

If not what's she doing for income?

If she's on welfare then a visit to Citizen Information to understand her Welfare entitlements and obligations and how the settlement affects these would be good.

3DataModem

https://www.boards.ie/discussion/comment/122075867#Comment_122075867

I was answering the specific question ""Can 500k be invested with minimal risk and get a return to live on?".

Obviously the question of how much she will need to live on is the most important question here. The next most important question is whether she will be eligible for the contributory state pension (which not means tested, but requires some qualifying years PRSI to be paid).

If we assume she is eligible for 1000 per month from age 66 and this will be just enough to live on other than accomodation then she needs to do two things;

1. Fund her lifestyle for next 6 years (which will cost 1000 x 12 x 6 = 70k approx)
2. Fund her accommodation from now till the end of her life.

It seems to me that putting a chunk of the money into her home makes sense, especially as this means that she might be eligible for part of the non-contributory state pension in the future (the home is excluded from "means" in the means test).

So if she can find a place she wants to live for 300k (say a 1-bed apartment in Dublin, or a larger place elsewhere) this leaves here with 70k to fund her lifestyle until the pension kicks in in six years, and another 100k or so "buffer" for emergencies / medical costs / whatever.

TBH, as you suggested in OP, she really should talk to a financial advisor. The askaboutmoney "money make over" forum might be a help here, as those guys know the tax / pension stuff very well.

The J Stands for Jay

Fixing her costs in an area where they are rising fast while also giving her security of tenure is a better move than diversifying into assets that she hopes will continue to offer investment returns that will pay for her accommodation but not grant security tenure or allow modifications to her living space.

Hmmm.

Jim2007

https://www.boards.ie/discussion/2058349289/financial-advice-for-divorce-settlement

OP, before your mother makes any financial commitment she needs to do two things. First she needs to have a think about what kind of life she wants to live as she enters the third phase of life. Does she want to live full time or only part time in Ireland? What kind of living space does she actually need and how much effort is she willing to commit to maintaining it, how does she want to spend her time - volunteer work, visiting family, travel and so on and so on. Once she has some idea of how she would like to life out her life she should sit down with a financial planner and together they should come up with a financial plan for her.