My home is where my heart is

Anita finds herself in a difficult situation:

'I am 58 years old, separated for eight years from my husband and recently divorced (without financial settlement, since my husband hinted we may settle our finances between ourselves). I did not take legal advice at the time as I was worried about the costs involved. My children and I have remained in the matri monial home since separation. Now my husband is claiming his share of the property.

I took early retirement in 1999 due to ill health and would find a move immensely stressful, especially since I rely on support from neighbours and friends nearby. Also my daughter, who is 21, may want to return here after university and my son, aged 23, comes to stay regularly.

The house is worth £340,000, is in a fair state of repair and with only a small mortgage of £3,000, which I am paying off by arrangement with my lender at £55 a month. The property is in a good area and house prices have risen throughout the time we have lived here.

I have no savings or income, apart from incapacity benefit and a tiny amount each month from an occupational pension, which altogether amounts to around £103 a week. My ex-husband used to give me money from time to time but does not any more.

I don't expect to be any better off when I get to retirement as my incapacity benefit will be withdrawn once I qualify for a state pension.

I would very much like to stay in the house and pay my husband his share of the property. Would it be possible to raise this money through an equity release scheme, and what would that mean financially in the long term? I would also release some money to do some essential repairs.

Would it mean that I would be practically giving up my share of the house and that if I died there would be no equity left for the children? Also if I decide to move to a smaller property, what would happen?'

You shouldn't take anything on trust

You really should have sought legal advice and a
proper financial arrangement incorporated in a court
order at the time of your divorce, rather than accepting
your husband's hints about an agreement. But it is not
too late. Philip Rutter, matrimonial partner at solicitor
Collyer Bristow, points out that without a court order
your claim against your former husband remains open.
He says: 'There have been cases of claims being made
20 years after divorce.'

Since your marriage was a long one, Rutter says it
would be usual for there to be an equal split of the total
value of all your capital assets, including pensions.
However, he says, there are reasons to depart from an
equal division. 'One of the reasons may be the extent
to which the other (Anita's husband) had been able to
accumulate assets post-separation, bearing in mind
that they have been separated for eight years.' Other
factors would include one of your children still being at
university and your ill health if you could obtain medical
evidence that a move would have severe effect on your
health.

However, Rutter believes that owing to the age of your
daughter and the nature of your ill health, these factors
would probably not have a significant effect on the
outcome. But he does point out that you also have a
potential maintenance claim against your former
husband, depending on his income.

Therefore, it would be a good idea for you to take legal
advice now. The snag is that you will not be eligible for
Legal Aid because your half share of the equity in your
property is over ?100,000 and most solicitors require
some payments during the course of the claim.

However, there are a few organisations offering loans
specifically to fund matrimonial cases. They know
there are some people like you who cannot meet
monthly repayments and will defer interest and capital
repayments until the conclusion of a matter. A good
family lawyer should be able to put you in touch with
these lenders.

Do discuss these matters with your children. If your
son is working, it may be worth finding out if he could
get a mortgage on your property to buy out your
husband's share. Using an equity release scheme is
not really an option at your age. Most equity release
schemes do not start until age 60. The only one which
currently offers them from age 55 is Norwich Union, but
according to Tim Russell of specialist adviser Hinton &
Wild in Cheltenham, the most you would get under that
scheme at your age is 21 per cent of your current
property value, which is well below the 50 per cent you
would need to buy your husband out. Russell explains
that home reversion schemes, whereby you sell all or
part of your home to the home reversion company, can
provide larger capital sums, but they are not available
until age 65.

Whatever your age, Chris Ellicott of Age Concern
Financial Partnerships says it is always important to
consider carefully whether downsizing might be a
better alternative to equity release.

Moving to a smaller property would also enable you to
pay off your existing mortgage, but there would be
costs involved in the purchase, such as legal costs
and stamp duty. Russell says you could consider
taking an equity release scheme at the same time as
moving to a smaller property to help cover these costs
and other necessary expenses. This may provide you
with a little extra income but could mean a loss of
means-tested benefits, so it may not be worthwhile.
When you reach retirement you are likely to qualify for
means-tested pension credits, so you may actually be
better off than you expect.

If you did go ahead with an equity release plan, you
would be able to move in future provided you check
that the company you deal with is a member of Ship
(Safe Home Income Plans), which guarantees their
schemes are transferable.

If you take an equity release scheme, whether your
children would eventually receive anything from your
property would depend on how long you lived after the
scheme started and what had happened to the value of
your property. The longer you live, the larger the loan
will become, but rising house prices would mitigate
this effect. This is not guaranteed of course, and some
experts have forecast house prices will fall. But you
wouldn't have to worry about that as all Ship equity
release plans state that your estate cannot be liable for
more than the value of your property.

Anita's to-do list

1. Seek legal advice, as you may have a claim
against your former husband if he has a pension
or has acquired other assets since your
separation.

2. Discuss these matters with your children first.

3. Have the agreement incorporated in a Court
Order.

4. If this is not possible, downsizing is likely to be
your best option as equity release will not enable
you to buy out your former husband's share of the
property.

5. You could consider taking equity release on
your new property, but this might affect any
means-tested benefits to which you are eligible,
such as the pension credit.

6. Contact your local citizens' advice bureau if
you need further help.

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