Selling home to fund Care home fees

jibberingwreck

I would appreciate advice please. I have Power of Attorney for my cousin - who has dementia and is in a nursing home. When the funds come through from her house sale - approx £230,000 - where do I invest it to keep it safe? I shall be withdrawing £3000 per month to pay her fees. I am aware that if I invest more than £85,000 in one institution - I risk losing anything over that if the institution goes bankrupt. If I open a joint account at her bank NatWest - in a bond, will we be protected for 2 x £85K = £170K? I could put the rest into National Savings - she has always invested there, but I then have to complete tax returns I think? Any advice in where to invest the money much appreciated. Thanks;-)

Archi_Bald

Each person has up to £85 per financial institution - so yes, £170K in a joint account at Natwest (and assuming you have no other money in the RBS Group).

NS&I do pay gross interest, so some tax may be due but only if the person in question has a total income in excess of the personal allowance http://www.hmrc.gov.uk/incometax/personal-allow.htm.
1.5% on £230,000 is £3,450 per annum - way below the limit. What other income does your cousin have?

alanq

In my (not legally qualified) opinion a joint account is not an option.

As attorney you need to keep your funds and those of the donor separate.

If a financial institution allows such an account to be opened, which is doubtful, then as far as a it is concerned either of joint account holders can withdraw all of the funds from the account so you could be seen as giving yourself the money. In the case of your cousin's death all the funds would automatically go to you which may or may not be what is specified in any will or by the rules of intestacy. If you died first the money would count towards your estate and your cousin would lose their money unless they inherited all of it (perhaps minus inheritance tax?).

As far as the tax man is concerned half of the funds belong to each account holder so you would be declaring and paying tax on part of your cousin's income.

Any funds in the joint account would be taken into account if you ever needed means tested benefits. If you divorce the funds could be taken into account as part of any settlement. etc. etc.

Why not just split the money between three or more financial institutions? You could almost certainly get better rates than from Natwest / NS&I once you have got past the hassle of opening the accounts with POA.

jibberingwreck

She only has a small private pension and the government one, so probably wouldn't have to pay tax on NS&I. Thanks for your advice - will probably go with £170k in NatWest and rest in NS&I as they have always been her preferred companies. Am currently awaiting a reply from NatWest CEO as I wrote complaining about my treatment at one of their branches recently - so will wait to see what he has to say about that;-)

jibberingwreck

Thanks Alanq - my son had said much the same thing - it may look as though i am trying to help myself to her money if we have a joint account - so I won't do that. Whenever I try and open an account as LPA, the institutions insist on writing to my cousin - which they shouldn't as she is so far demented now - she has no understanding of any post. Will persevere anyhow and probably open three accounts. Wish me luck;-)

alanq

Don't forget that if your cousin's total income is below that at which tax is due you can complete a form R85 and submit it to each financial institution to receive interest paid gross.

Linton

I suggest it would be sensible to get professional advice from an independent adviser on this. At the moment you are depleting you cousin's money by £36K per year as the amount of interest you get will be very small. There may be better options than simply putting the money in a deposit account.

Biggles

Linton wrote: »

I suggest it would be sensible to get professional advice from an independent adviser on this. At the moment you are depleting you cousin's money by £36K per year as the amount of interest you get will be very small. There may be better options than simply putting the money in a deposit account.

One that you should consider is an Immediate Care Needs Annuity. You pay a lump sum to an insurance company and they invest the money and pay it to the care home for the rest of your cousin's life. The proceeds are tax-free.

An IFA will obtain competitive quotes from the insurance companies that provide this product.

You shouldn't have any trouble opening savings/investment accounts, though in many cases you will need to make sure you are talking to someone who understands PoA, which tends to narrow it down a lot. But I certainly agree with alanq that you should never consider a joint account.

xylophone

Your cousin's money should not be in a joint account - it should be in an account/ accounts in her name with you as POA.

https://www.moneyadviceservice.org.uk/en/articles/immediate-need-care-fee-payment-plans might be worth a browse.

grizzly1911

As attorney don't you have an obligation to obtain the best return possible whilst taking limited risks. Just putting it in Nat West savings/term account maybe easy but not necessarily the best use of the funds.

jibberingwreck

I will not put the money into a joint account - I only considered this as a way of protecting £170k rather than £85k, but realise that shouldn't be done. Not prepared to take any risks with it, so want it somewhere safe, so will probably take advice and put in various accounts. I have found various papers she wrote regretting her investing unwisely in the stock market in the past, so not prepared to do that. I've also always been told never to put all eggs in one basket.