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  • FIRST POST
    • pestopasta
    • By pestopasta 20th Nov 16, 8:54 PM
    • 25Posts
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    pestopasta
    Investing proceeds of house sale for care home fees
    • #1
    • 20th Nov 16, 8:54 PM
    Investing proceeds of house sale for care home fees 20th Nov 16 at 8:54 PM
    Hi

    I'm hoping someone might be able to offer some pointers to help on this situation.

    We have recently sold my Mum's property in order to pay for her care home fees. We have approx £200K to manage on her behalf. (She suffers from dementia and we have POA).

    After taking her income and all expenditure (care home fees, living expenses etc) into account we estimate that this sum represents approximately 12 years worth of shortfall between income and expenditure. Obviously (even though Mum is 82) it's unclear how long she will live.

    I'm therefore considering how best to save/invest this money. I'm taking professional advice from an advisor recommended to me but my confidence in IFAs has been shaken by previous experience.

    My risk appetite could be described as low - but interest rates on savings may not keep pace with inflation in the current climate and so even placing the entire sum in a series of savings accounts represents a risk of sorts.

    I'm therefore wondering whether I should invest a proportion in the best available savings rates and a proportion elsewhere on the basis that if I ring-fence several years worth of expenditure i could get a better return on a longer term investment (say five to ten years). I've read, for example, about passive investing - but I'm concerned that the current economic situation in the UK, Europe and US is particularly volatile and stock markets seem to be at a high point which suggests to me that this would be a bad time to enter these markets.

    I'm minded to be patient in making these decisions - I'll consider the advice I'm given but even an initial chat with my advisor has seen him pushing the case for active investment (with the consequent ongoing fees).

    Any pointers would be gratefully received. I'm not expecting to be spoonfed - happy to read further on the subject if I can pointed towards useful material.
Page 1
    • bigfreddiel
    • By bigfreddiel 20th Nov 16, 9:47 PM
    • 4,225 Posts
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    bigfreddiel
    • #2
    • 20th Nov 16, 9:47 PM
    • #2
    • 20th Nov 16, 9:47 PM
    I think you need to see an IFA who specialises in this type of investing/funding

    Good luck fj
    • AnotherJoe
    • By AnotherJoe 20th Nov 16, 10:12 PM
    • 6,910 Posts
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    AnotherJoe
    • #3
    • 20th Nov 16, 10:12 PM
    • #3
    • 20th Nov 16, 10:12 PM
    I wouldn't invest it. Too much risk and you might be liable for a shortfall.
    I'd either look at what it cost to buy an immediate needs annuity for the annual amount you need, or chance that the money will outlast her. She's very unlikely to live 12 years at 82 with dementia. The average is I think 10 years from diagnosis and she was presumably diagnosed several years ago ?
    • HarryFlatters
    • By HarryFlatters 20th Nov 16, 10:52 PM
    • 36 Posts
    • 9 Thanks
    HarryFlatters
    • #4
    • 20th Nov 16, 10:52 PM
    • #4
    • 20th Nov 16, 10:52 PM
    In a similar position with parent in nursing home (you mention care home, if so they may not cover till end of life as you may need to transfer to nursing home with the resultant increase in fees)
    I have resisted investing any capital outside savings accounts and have missed a potential increase waiting for the "right time"
    Very difficult to gauge life expectancy, my dad now has a long service award, 18 month prognosis 6 years ago and still going strong though I would add from viewing other "residents" this is the exception not the rule.
    Why not drip feed up to ISA limits to minimise tax implications into a S&S ISA and see how you fare ?
    Would also be wise to check your POA allows this, I think it is a rather grey area if you change any previous documented investment strategy.
    • bigadaj
    • By bigadaj 21st Nov 16, 9:07 AM
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    bigadaj
    • #5
    • 21st Nov 16, 9:07 AM
    • #5
    • 21st Nov 16, 9:07 AM
    You could look at an immediate care needs annuity, you'd need to go through a specialist ifa, and they can look and be very expensive but they provide security in payment of care home fees. You should be able to get a quote before committing.

    Alternatively I'd be tempted to split the money given the timespan and look at maybe investing half and keeping the other half liquid and in cash, the proportions could be varied so if cautious maybe look at investing 30% for example.
    • badmemory
    • By badmemory 21st Nov 16, 9:33 AM
    • 513 Posts
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    badmemory
    • #6
    • 21st Nov 16, 9:33 AM
    • #6
    • 21st Nov 16, 9:33 AM
    Don't forget to claim attendance allowance. As she is in a care home she should receive full rate. She CAN receive this as long as she is self funding.
    • xylophone
    • By xylophone 21st Nov 16, 9:39 AM
    • 22,044 Posts
    • 12,712 Thanks
    xylophone
    • #7
    • 21st Nov 16, 9:39 AM
    • #7
    • 21st Nov 16, 9:39 AM
    http://societyoflaterlifeadvisers.co.uk/

    You can look at Immediate Needs Annuity.

    http://www.annuitydiscount.co.uk/Annuity_KFD/Immediate_care/Partnership_Assurance_Immediate_Needs_Annuity.htm

    https://advisers.friendslife.co.uk/products/lifetime-care/immediate-lifetime-care.jsp

    http://www.justretirement.com/your-money/planning-for-care/paying-for-care/
    • dunstonh
    • By dunstonh 21st Nov 16, 10:45 AM
    • 88,374 Posts
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    dunstonh
    • #8
    • 21st Nov 16, 10:45 AM
    • #8
    • 21st Nov 16, 10:45 AM
    I'll consider the advice I'm given but even an initial chat with my advisor has seen him pushing the case for active investment (with the consequent ongoing fees).
    Don't blame him. His active investments are probably doing better net of fees. However, advisers will adjust portfolios to suit the clients preference. So, if you instruct passive only then an IFA has to factor that into their research. They cannot refuse as they are IFAs. Only FAs can refuse.

    However, the average life expectancy in a home is three years. An economic cycle is around 10 years. What if you get the bad three years first and you only end up losing money?
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • pestopasta
    • By pestopasta 10th Mar 17, 8:35 PM
    • 25 Posts
    • 16 Thanks
    pestopasta
    • #9
    • 10th Mar 17, 8:35 PM
    • #9
    • 10th Mar 17, 8:35 PM
    Thank you for all of the help in the posts above.

    There's been a delay in my IFA being able to advise me - this was down to the GP being tardy in completing a medical questionnaire in respect of a quote for an Immediate Care Annuity. He's meeting with me next week to discuss my options.

    I've used the time to do some research in order to better understand the options I may be presented with and (hopefully) to make a more informed choice. In the last few days I've been reading up on Investment Trusts - although I've found them more difficult to understand than some of the other potential options. Is anyone able to say whether they are an option I should be considering - or are they totally unsuitable for this purpose?
    • LondonD
    • By LondonD 10th Mar 17, 9:29 PM
    • 1 Posts
    • 1 Thanks
    LondonD
    Not sure it helps but we had to do the same last year. We're in London and care home fees are very high - even for a rubbish home. As my father has a good mind and wants good activities from his care home, he's ended up with a very expensive home - although it's one the kids are happy to visit so that's a plus.

    Unfortunately he's quite young - just 77 and only in there due to his physical disability. Since his vitals are all 100% (no drugs needed), he's likely to live another 10 years quite easily. Unfortunately his money will only last 3 or 4. No annuity will make up for this issue and i've seen a range of experts to confirm this (although it's blindingly obvious).

    We've taken the decision (together) to spend the funds on a great place in the short term. The other option was go to a poor-quality care home now and be able to fund his care for longer. It's a strange feeling to justify something that is so clearly a bad idea in many ways but he'd rather have a great time whilst he has his faculties.

    Anyway back to practical investments - you won't close a large funding gap unless you can top up yourself. That will suit some families but didn't work for me. if i could, i would have preferred the annuity option and there appear to be a good range of options available in market. When they price them, they will write to the care home and get an assessment from them in terms of costs. Note that you may be liable for any shortfall yourself.
    • pestopasta
    • By pestopasta 10th Mar 17, 9:42 PM
    • 25 Posts
    • 16 Thanks
    pestopasta
    Thank you London D. Greatly appreciated.

    I hope that things work out as well as they can for you, your Dad and your family.
    • talexuser
    • By talexuser 11th Mar 17, 5:03 PM
    • 2,203 Posts
    • 1,670 Thanks
    talexuser
    I have POA for my Mum in a care home. The attendance allowance suggestion above is very pertinent for dementia, the manager of the home should be able to advise you on filling the forms, and it will be worth approx £4280 a year.

    The following is not advice, just my experience:

    My mum has an ISA which I have now in monthly income funds. With 200k available you could put £15240 in before April 5th and £20000 in after April 6th. Last year my funds provided an income of 4.3%... on £35240 that would be around £1500 a year with a very slightly increasing capital. In the future event of a market correction or crash you have not risked a great proportion of your capital, leaving money for less risky uses.

    Options not requiring an ISA depend on tax status and whether your Mum is exceeding her allowance.

    I opened multiple TSB, BoS current accounts, transferred her Lloyds to Club under POA, which was rather a hassle to be truthful, but used to give me 5%, but now less at 2 to 3% but still better than instant access accounts around 1%. 2 x TSB and 3 x BoS +Lloyds could account for around £23000 if you can still open them.

    Apart from the best rate you can get for cash the other options are the annuities mentioned above.

    With 200k you're not in panic territory, get the best rate you can meanwhile and explore all the possibilities in depth.
    • talexuser
    • By talexuser 11th Mar 17, 5:05 PM
    • 2,203 Posts
    • 1,670 Thanks
    talexuser
    p.s last years increase in the care home fees for me was 7%, we'll see what this April brings, but bear that in mind too.
    • pestopasta
    • By pestopasta 30th Mar 17, 9:46 PM
    • 25 Posts
    • 16 Thanks
    pestopasta
    I thought I'd update this thread as people in future in the same situation may be interested in the outcome.

    Had the advice today from my IFA. It took a long time (5 months!!) which he freely acknowledged but I have to say I found his advice useful and it's massively put my mind at rest.

    I won't go into great detail because everyone's situation is different and his advice to me wouldn't be appropriate to everyone.

    But it came down to two main options.

    (a) Set aside the money for a number of years care (maybe 5) now and get the best rate of interest possible. Invest the rest - interestingly in a passive multi-asset fund. I had previously given a steer that I was more minded (rightly or wrongly) towards passive rather than active and the proposed solutions matched that (which he openly acknowledged). We discussed two options - involving basically a 35/55 and a 55/45 equity/bond split. From this forum I know that I could buy something similar or the same - he quoted 2 per cent initial and 1.5 ongoing fees (although he quickly said this could be reduced to 1.0 ongoing). If I go down that route I think I could manage that myself

    (b) An Immediate Care Annuity - which several posters had already mentioned. I'd not previously appreciated that the cost to cover our shortfall plus a 5 per cent increase per year could be covered by significantly less than the amount of capital we have. Or that we had the option of investing now with a view to buying such an annuity in years to come at a fraction of the cost. This peace of mind was worth the cost of the advice (£800) in my view. Arguably I could have researched this myself but I would have been much less confident in the conclusions I reached.

    My Mum is in a residential home and one of the big factors is the unknown of whether and when she might need more intensive care. This was factored into the different scenarios that were in the report and at least I can now make an informed choice.

    I felt that my IFA had empathised with me - he'd seen many clients in the same position and there wasn't any hard sell. I paid the cheque for the advice and said I'd think about it. He said it was always possible for me to act on his advice from a DIY position but then review it with him in future - and I'd seriously consider that option.

    I've had bad experiences in the past with IFAs but (just when I really needed help) this seemed to me to be different and I'd certainly recommend that people in the same position as me do not rule out getting advice out of hand.

    I hope this is helpful to future posters.
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