Finding IFA to help with my gran's financial affairs

dancingfairy

Ageuk have some useful factsheets on their website to do with carehomes and fees etc. It is pretty heave going and there is a lot of detail but it does explain things like how the capital is assessed and whether she will get funded nursing care etc so whilst I appreciate that wasn't your original question it might be having a read just to make sure that the council/local authority/ccg or whoever are stepping in to fund what they should be and not just leaving you to pick up the whole bill.
df

patanne

The problem with selling a house is that the interest can push someone from a non-taxpayer to a tax payer which means all the R85s have to be withdrawn. You should check this out as I believe it is an all or nothing situation. The good news is that there is an amount at only 10% tax but this is the last year, after that it is 20% as with any other income.

BeePeachBee

Thank you dancing fairy & patanne, I'll keep doing my homework!

pjb2u

Without sounding morbid, funeral plans are also a great idea

BeePeachBee

We're all sorted on that front thanks, she's had it planned for years!

dunstonh

Also, you don't need to worry about ISAs if your grandma is a non-tax payer. Given her age, she is not likely to be. You need to put her investments in something which has a good interest rate/best returns and find out what benefits she is supposed to get and make sure she is getting them.

That is not good advice.

jamesd

BeePeachBee wrote: »

Hello all! I have Power of Attorney for my grandma who's 90 & lives in a care home.

The first thing to know is that typical life expectancy for those who need to go into care homes tends to be two or three years. However, that's not guaranteed and she could live a lot longer so you do need to plan for that case.

BeePeachBee wrote: »

the best way to pay for her care home costs (which I imagine will be an annuity)

An immediate needs annuity can be a good buy. These tend to be based on lower life expectancies than standard annuities, so they pay out more. They also pay directly to the care home so they are more tax-efficient.

Before doing any purchasing of such an annuity you'll need to know what her income could be without the purchase. If she has £50,000 a year of income anyway or can get that from investing money there won't be any need to buy an annuity. Same if a moderate capital drawing rate on top of income will last a good long time.

To give you some idea of what investments can do, putting the money into a fund like Invesco Perpetual Distribution would be expected to pay about 5% a year, in monthly pieces of non-uniform amounts, and that would be tax free from inside an ISA.

So, first add up her investable assets then divide by 20 to get the income that they could pay forever and add her other income from pensions or whatever else. Compare that to her expenses. If it's more then there won't be a need to buy an annuity.

If it's less, the next thing to do is see whether drawing on capital at a reasonable rate can top it up to what is needed for long enough. Taking perhaps 10% or even 15% of initial capital a year for this would not be unreasonable at this age. More than about 15% would compromise the long life provision and some use of an annuity, though maybe not all annuity, might be a better idea around that level.

The cost of that capital spending can then be compared to the cost of providing the same top-up by purchasing an annuity. Is the annuity more expensive or cheaper, after allowing for say three years of drawing to approximate a fairly long life in care? Is there a desire to protect inheritance against a longer life, which might mean buying the annuity even if it is a bit more expensive, to cover the long life case?

It's quite likely that the solicitor mentioned an annuity in part because sometimes relatives with POA are reluctant to spend capital that they might inherit, when their POA obligation is to spend the capital as required to meet the needs of the person they are caring for. It isn't necessary to buy an annuity but it is necessary to have some sort of plan that explains the reasoning behind the choice to have one or not. A small shortfall that can be easily paid for by doing a bit of capital drawing would be fine as a plan.

If she has mental capacity it may also be useful for you to ask her to give you a statement of her objectives. That would be particularly helpful if she wanted to preserve money for inheritance, since it would help to explain some decisions sometimes.

BeePeachBee

Thank you for taking the time to reply in such detail- really appreciate it! I'll have a look through the figures. In brief we have £150,000 from the house sale, & her pension income is about £800 a month. I don't care about what I inherit,I just want to do the best for her & keep her comfy as long as possible!

Thanks again

patanne

Don't forget the £350 approx attendance allowance which I am sure she will get without a problem. Have you tried doing the basic maths? Total cash available divided by - cost of care plus hairdressing, footcare, clothes etc minus income from pensions and attendance allowance. I worked it out for my Mum (without taking interest into account as it is rubbish at the moment). We will be alright as long as she doesn't make it to the world's oldest woman @ 118. It wouldn't surprise me if she does as she is very healthy & strong - just has trouble remembering if my son is 10, 20 or 30+.

jamesd

Assuming she gets £350 attendance allowance as well I make that about £13,800 a year of income. Adding 5% of the £150,000 adds another £7,500. About £21,399 a year before tax, about £20,000 after using the £15,000 approximately of personal allowance plus savings interest allowance from next year. I assumed none of the interest came from investments inside an ISA, in reality a lot should come that way so this is a bit pessimistic.

The average cost of a care home is apparently £532 a week for residential or £750 for a nursing home. I'll use £532 here. That's £27,664 a year and means that the after tax income has a shortfall of at least £7,664 plus personal expenses, I'll assume those are about £1,330 a year to get to a round shortfall of £9,000 a year.

Next I put the anticipated spending, income and capital into a spreadsheet to see how long I think it might last if capital is drawn to top up the income need. That tells me that the topping up could be sustained until she reaches age 123. That's a nice sustainable level so there would be no need to purchase an annuity.

What happens if she needs nursing care and the NHS doesn't pick up any of the bill - they probably should? That's an extra £11,336 a year to fund. I add that to the existing £9,000 shortfall and the new shortfall is £20,336. I use that in the spreadsheet and the money lasts until she's aged 98. Given normal life expectancies for those who'd require nursing care that's also pretty good. However, if nursing care is needed, an immediate needs annuity would pay out more than if it isn't so it would be worth checking what's available in price/income if she does need nursing care. Not with a view to covering the whole cost perhaps, but instead looking to cover perhaps half of it to get the remaining capital to last a longer time so her current needs are met while also preserving capital for possible inheritance if she does not live for the uncommonly long life case.

I've completely ignored the "cap" on care home costs here because I think it's effectively useless in most cases. If she does live a long time it may end up mattering.