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£120k to Invest - I get to keep the Interest...

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  • Frugalsod
    Frugalsod Posts: 2,966 Forumite
    Tenth Anniversary Combo Breaker
    If you have any debts it would be better to clear those than worry about the pitiful level of interest you might get.
    It's really easy to default to cynicism these days, since you are almost always certain to be right.
  • dancingfairy
    dancingfairy Posts: 9,069 Forumite
    Hmmm. This all sounds a bit complicated.
    You need to treat your mums money as her own. O.k you can help her save/invest it. The bit that worries me is her giving you the interest saved each year. Obviously, due to inflation 50k next year is worth less than 50k this year. If she is giving you the interest she is actually losing money due to inflation. Another thing is that there could be issues with the POA and elder abuse and other things if she is giving you the interest. Yes, she could be giving you the interest (or an amount the same) but how are you going to prove you are not taking advantage of your mum or exerting any pressure on her to give you this money? I'm not saying you are, but that you may want to prove this and make sure everything is well documented.
    Obviously you need to think about deprivation of capital issues and inheritance tax issues as well. With deprivation of assets you need to be careful that if you mum requires any medical care/to stay in a care home that she is not seen to have given away her assets in order to be eligible for state funding. With inheritance tax (i think it's that one), then for some monetary gifts then if your mum dies within 7 years then the gifts may be subject to tax.
    Also you need to say how old you mum is and what her plans are for the future. Does she want to go travelling around the world at some future date? does she want to buy again? rent a place on her own? You both need to do some long term planning before you decide on saving/investing the money.
    In terms of where to put the money everything is risky. Putting it under a matress is risky, putting it in a bank is risky (risk of inflation, risk of a bank collapsing and the government not gauranteeing the full amount), investing is risky. Everything is risky. Obviously the risks are different and some are higher/lower than others. Also the higher the risk the higher the reward generally. It is important I think therefore to understand the risks involved and to mitigate them as best as possible. I think the best way to do this is to invest in several different types of investment.
    For example keep some in cash, some maybe in bonds or guilts, some in property, some in equities (and this can also be split by American, UK, European, The Far East, developing countries etc). I'm not saying go crazy but if you go for a few different options then if one takes a hit the others should do better, the next year you might find the opposite, but overtime you should do o.k.
    To start with I'd make sure she has filled her cash ISA for this year and does the same in April and has at least 6 months (maybe more) in cash that she can easily get to if she needs to.
    df
    Making my money go further with MSE :j
    How much can I save in 2012 challenge
    75/1200 :eek:
  • duchy
    duchy Posts: 19,511 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker Xmas Saver!
    Must be lunchtime-I can spell spam
    Post 14 reported.
    I Would Rather Climb A Mountain Than Crawl Into A Hole

    MSE Florida wedding .....no problem
  • Frugalsod
    Frugalsod Posts: 2,966 Forumite
    Tenth Anniversary Combo Breaker
    duchy wrote: »
    Must be lunchtime-I can spell spam
    Post 14 reported.

    There are always problems with guaranteed investments.
    It's really easy to default to cynicism these days, since you are almost always certain to be right.
  • xylophone
    xylophone Posts: 45,602 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 2 January 2014 at 2:41PM
    First of all gifts and IHT ( if relevant to your situation) - http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

    See also http://www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm if relevant to your situation.

    I am assuming that your mother is currently in good health and not of an age where making monetary gifts would be very readily challenged on "deliberate deprivation" grounds?

    Interest rates are really very poor at present- if your mother is a standard rate tax payer then she will be losing out to inflation.

    Regarding tax and interest http://www.hmrc.gov.uk/taxon/ten-percent.htm#2 if relevant to your mother's situation.

    It might be better to consider using at least her ISA allowance to invest in a stock market based investment? A Distribution Fund or Equity Income fund might suit?
  • atush
    atush Posts: 18,731 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Ok, so there are a few problems (most not insurmountable).

    First of all, she is living with you. If she has written a will with you inheriting 100%, then that means you have a few plays. If she is living with you, is that from necessity or does she just want to? Or is she avoiding a care home? If she is fit and well and not likely to need care, then she can gift some of the capital to you now (which she would need to live between 3-7 years for it to come out of IHT danger). But look up Deprivation of assets too (DOA).

    Or she could buy half your home, then the capital is yours. But the local authority could have a claim when you come to sell if she ever goes into non 100% self funded care. If she died while in residence, you would inherit the other half back. At the very least, she could pay you 1/12 of whatever the top rent a room relief is at present- this would be tax free paid from her to you and IHT or deprivation of assets problems.

    Then the whole risk thing, if you keep it in cash you are 100% guaranteed to at least suffer from inflation. So you should invest a large tranche of it, and keep some in cash for safety if you like.

    then where to invest? Do you have a pension? If not, getting one would be a good idea. Then a split between cash and equity investments would be good.

    Also she could set up investment trust savings plans (or Jisas) for your children as money given by non parents dos not fall under the 100 pound rule (where it is taxed as if it was yours if they make more than this in interest). Gifts given from her income, are taken out of IHT and if not too large wont trouble DOA rules either.
  • Jonbvn
    Jonbvn Posts: 5,562 Forumite
    Part of the Furniture 1,000 Posts
    OP,

    Everyone keeps bothering you about inheretence tax (IHT). It is only an issue if your mother's assets exceed £325k. From your first post, I assume that this is unlikely to be the case, given that she has already sold her primary residence.
    In case you hadn't already worked it out - the entire global financial system is predicated on the assumption that you're an idiot:cool:
  • Jegersmart
    Jegersmart Posts: 1,158 Forumite
    Jonbvn wrote: »
    OP,

    Everyone keeps bothering you about inheretence tax (IHT). It is only an issue if your mother's assets exceed £325k. From your first post, I assume that this is unlikely to be the case, given that she has already sold her primary residence.

    That was my first thought. Secondly, why does everyone presume to give advice around the effects of inflation?

    J
  • Jegersmart
    Jegersmart Posts: 1,158 Forumite
    nonnatus wrote: »
    My Mum has moved in with me and my kids. It's a great arrangement for all concerned.


    She's now sold her little Bungalow and has made a good amount of money. She's keeping £50k to play with, take some holidays and just spoil herself.


    That leaves £120k to "save" (or invest) somewhere. She's happy for me to take charge of this (we've written Wills together to make things official and I have POA in place for the (hopefully far off) future). In return, she says I can keep any / all the interest that the money earns.


    I DON'T want to risk losing any of the capital. I can't see that we will need to call on the money for at least 5 years, so it can happily be locked away. I'm self-employed and would love to spend time learning a bit about Proper Grown-Up investing - there was a 2-page article in the Daily Fail at the weekend about where best to Invest £100k and I found it really interesting but does anyone here have any suggestions for me?
    I'm not going to be the next Warren Buffet but surely there are ways to make such a good Lump of Cash make a profit for me, even in the current climate...?


    (I realise this thread follows on from the Troll who pretended to have £100k to invest and who promised it wasn't a joke, but this is genuine. I haven't got the patience or the memory to waste time starting fake, threads!!)

    Hi

    I will give you my 2 cents fwiw.

    Firstly ignore all posters who are talking about IHT unless your mother's estate is worth more than 325k.

    There is always going to be some risk when investing - however if you do nothing with the money then there is CERTAINTY that the capital will lose value over time - and potentially at a fair rate these days.

    Personally, I would do the following:

    1. For a portion of the funds, find some accounts where you can earn a decent interest rate by funding the account each month and going through the hoops of having to set up a couple of DD's - for example Santander 3% for up to £20K max. This can act as a cash fund which you can access at any time in any case.

    2. Is it applicable to set up a pension of sorts for your mother? Depending on age etc. this may be a tax-effective solution, I would recommend some professional financial advice.

    3. There are many different types of investments you can take a look at but it would need to be your choice as to what to go for.

    4. Whatever happens you may consider splitting any interest/profit earned each year between you, your mum and your children for example - for your children in terms of money tucked away until they are 18 etc. but again this is your choice.

    Just remember to do plenty of research and get advice where/if applicable.

    J
  • xylophone
    xylophone Posts: 45,602 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Secondly, why does everyone presume to give advice around the effects of inflation?

    I haven't seen anybody "giving advice" - this is not allowed on the boards. I have seen comments.

    http://www.which.co.uk/money/savings-and-investments/guides/understanding-investment-risk/investment-risk-from-inflation/

    With regard to IHT, this may or may not be relevant to the OP's situation - relevant links have been provided.

    With regard to "deprivation", this is not related to IHT - this complex subject is more fully discussed here http://www.ageuk.org.uk/home-and-care/care-homes/deprivation-of-assets-in-the-means-test-for-care-home-provision/
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