Investment advice for Power of Attorney please

dunstonh

Also can you kindly explain the tax matter you mentioned in passing.

When you are aged over 65 (and increased at 75) you get an increase in your personal tax free allowance. Currently, the personal allowance is £6035. Meaning that you can earn £6035 tax free. For over 65s it is £9030 and over 75s it is £9180.

So the aunt can earn £9180 tax free. However, if you take her income over £21,800 the extra personal allowance is reduced by 50p for every £1 it is over that amount.

By using savings accounts on the whole amount you will be taking your aunt's income through the £21,800 mark and will fully wipe out her age allowance. In the current tax year that will be an increase in tax of £629. However, it will get worse over the next few tax years and get her towards £1000 as the Govt has said it intends to increase the age allowances.

Income for tax purposes is pension, interest on savings, rental income, dividends and other earned income. However, income/interest on wrapped investments is not included. So, ISAs do not go towards it nor do onshore or offshore investment bonds.

If she does go into residential care her assets are currently well above the level to get any help. However, any savings/investments in an invesmtent bond do not get included in the means test. In the extreme example, if £300k was an in investment bond then the means test would ignore that £300k and if she had say £10k of savings in an account she would get local authority care funding. you could have £3 million in an investment bond and they couldnt touch it.

However, you cannot put money into an investment bond for that reason. The reasons have to be valid investment reasons (no reduction on age allowance is a good one here). You can also not do it when you know residential care is likely to be needed in the next few years. That is known as deprivation of assets and the local authority can bring that value back into the means test.

I am not saying that this is the best option but its one of the options to consider. Often a mix and match approach is the best option.

Derek1000

Hi DunstonH
Very many thanks for your detailed and useful reply. Clearly we need professional help. I'll send you an email directly, if I may.
Derek