Savings for best monthly income to fund care home

gallygirl

Dear old ma is reaching the stage where she will probably have to go into residential care in the next year. I am having a preliminary look at what to do with her money to fund it. She will probably have around 100k after selling her house.

Monthly income 1200. this should stay the same.
Monthly outgoings - care home 2150 :eek: :eek: :eek: , 'pocket money' say 200 (needs to pay for transport to doctors, also ciggies, bottle of whisky etc....)

Shortfall 1150.

On a back of fag packet calculation she'd need to get 15% gross before eating into capital... short of helping some Nigerians out with their banking problems I can't see how she can achieve this! So we're looking to minimise the damage to her capital.

A further possible complication is that I will be applying for an enduring power of attorney so would prefer to steer clear of any organisations that have difficulty coping with this!

Have never had the need to examine savings rates etc (unfortunately!) so could do with any tips. My only thoughts so far are:

1. Open a decent ISA. I will investigate this when time comes, probably won't go for an introductory bonus though. I don't want to open accounts and forget about them, I am prepared to monitor and change investments but have limits on the amount of time I have available!

2. Regular savings accounts - had thought these were a good idea - possibly A & L - but if they all have 3k limit is a lot of effort for a small return. Still, worth doing I suppose.

3. 'Ordinary' savings accounts and fixed term accounts etc. ICICI etc. But at 5.45% gross her money will run out in 8 yrs (although I know state will fund, but woudl be worried wouldn't do in same home etc).

Don't really want to play the stock market with her funds, but maybe could be convinced to invest some......Help folks!

Edit: just to say, am happy to see IFA, but wanted some advice from 'you lot' first, especially if you've been in this position.

dunstonh

Don't really want to play the stock market with her funds, but maybe could be convinced to invest some......Help folks!

If you dont consider this option, you will be watching her money vanish very very quickly. There is also annuities to consider.

Investment options can include some will limited guarantees (such as lock-ins after increases or guarantees to pay 5% p.a. net regardless of capital performance).

Savings accounts are just not an option in this case.

gallygirl

Thanks, I know you're right, but is scary playing with someone else's money.....

dunstonh

ali007 wrote:

Thanks, I know you're right, but is scary playing with someone else's money.....

Not really. I do it all the time :rotfl:

I suggest you get a proper investment adviser to look at it (not a bank tied adviser or an IFA that mostly does mortgages, a proper investment IFA).

There are a range of options, some with guarantees or limited security (such as minimum return of capital invested on death if value drops) but you wont have a hope in hell researching most of these yourself. Many of these are IFA only options and not available direct. You would also need the annuity option costed up and that requires some calculations with the alternatives.

I just see the savings account is the guaranteed option to watch the money vanish the quickest way.

gallygirl

Thanks D! I used an independent IFA a few years ago for my circs, he was excellent, I will try to track him down (worked for a co. that went [STRIKE]tits[/STRIKE] belly up). ALthough if he was that good why did firm close????????

EdInvestor

Here's some info on the immediate needs annuity

EdInvestor

This firm of specialist long term care IFAs has a useful website with a lot of helpful info.

I see they have recently been bought by HSBC.

gallygirl

Thanks EdInvestor, have bookmarked both, they look really useful. Will go through them in detail soon.

Stonk

I have a theoretical and possible future real interest in this subject. I admit that my knowledge of the subject is mostly fuelled my Daily Mail style newspaper articles and hearsay from people who don't really know anyhting about the subject, so it seems a good opportunity to try to get the genuine picture.

What I hear is: the government pays for care if the patient has little money; otherwise the patient pays until they have reached the point of having little money, and have sold all their assets including their home.

If this is true, is it feasible for the patient to gift all their assets and money to their children? I guess it would be ideal for this to happen as far as possible in advance of care being needed. Obviously there are tax implications with gifting - but it's more efficient to pay 40% tax, than drain away 90% in care home fees.

dunstonh

If this is true, is it feasible for the patient to gift all their assets and money to their children?

If done far in advance and cannot be traced then yes.

There are investment options available as well which are not included in the means test for local authority care. However, these have to be done in at least 12 months before care is needed and at no point must it me shown or let known that the investment was done to avoid paying for own care.

EdInvestor

Stonk wrote:

What I hear is: the government pays for care if the patient has little money; otherwise the patient pays until they have reached the point of having little money, and have sold all their assets including their home.

Err No.Only the assets belonging to the actual patient can be used, not the home if the partner is living in it and especially not if s/he owns half of it.

The cost of care is paid by a mixture of the individual's pensions, Attendance Allowance ( a Govt subsidy), a possibly NHS contribution (which could be 100%).On top of that, an "immediate needs annuity" is often used to cap the total cost.These annuities are good value for money.

If this is true, is it feasible for the patient to gift all their assets and money to their children?

Not necessary, lot legal and not really wise anyway as it puts the parents at the mercy of whatever happens to the children's lives (eg an avaricious ex spouse who wants half of the ex spouse's assets, leading to the forcible sale of the home).

Regarding deals which purport to save IHT and care costs, check that you are not paying the same amount in fees and charges to the insurance industry as you would pay in tax, and may still pay if the council/taxman goes on a fishing expedition.