94 year old - review

G_M

My father has an aversion to managing his money - It is mostly in bonds a few ISAs where it has sat for decades doing quite well over time.

Mostly various equity funds.

I've finally persuaded him to change his laisez-fair attitude ("does not matter if market drops it will come back again").

While avoiding CGT (so selling out is not an option beyond the CGT annual allowance) where is best to switch his funds to?

I'm thinking gilts for safety.

(The S&S ISA into a cash ISA.)

jimjames

If income is his priority is there a need to switch? If he is happy with the level of risk and has sufficient cash funds available for spending could he not just keep them?

Your_Hero

It's a tricky situation with a 94 year old. Can he afford to give the money away to children/grand children?

collingbone614

G_M wrote: »

My father has an aversion to managing his money - It is mostly in bonds a few ISAs where it has sat for decades doing quite well over time.

Mostly various equity funds.

I've finally persuaded him to change his laisez-fair attitude ("does not matter if market drops it will come back again").

He sounds like an expert passive investor if you ask me.

G_M

He does not need the income. He has been happy to date with the level of risk in as much as each time he's taken out a bond he's taken some advice, then forgoten about the investment compeletely.

But his age obviously changes things. Although the last consultant he saw gaily predicted he'd qualify for a telegram from the queen (does she still send them to 100 year olds?), he is clearly no longer investing for the same extended time period as when the bonds were set up.

It seems sensible, given the current market high, to lock in the growth and protect it.

He already makes annual gifts to children within tax thresholds.

There is also the possibility of a need for Care Home costs in the future, though if that were needed he could sell his property.

kidmugsy

No CGT to pay on death.

Are gilts really "safe" at the mo'? Perhaps short-maturity index-linked gilts, but ILGs currently guarantee a loss in real terms if held to maturity; if not held to maturity it's hard to see that they are safe.



Cash might be a better bet. Diversify a little bit to foreign currency too? A little bit of gold? Otherwise a decent spread of equities might be about as safe as anything else. I'm afraid assets are costly at the moment, and that's that. At least UK shares aren't as costly as in the US.

Perhaps every time he sells something to use his CGT nil rate band, he could either hold the surplus in cash, or at least put it into modern low-cost trackers, or some of the ZDPs mentioned in this morning's Tel?

Linton

From what has been said it sounds like a non-problem to me. If he has enough income to meet his needs and cash to cover emergencies why change anything? For whose benefit? CGT isnt an issue as it isnt payable on death.

xylophone

http://www.theneitherworld.com/popeye/lyrics.htm

"Leave Well Enough Alone" from the cartoon of the same name (1939) [Parrot]

Leave well enough alone (squawk, squawk!)
Leave well enough alone (snort, snort!)
I've got my bottle and bread
And a roof over my head.
Leave well enough alone (honk, honk!)
Why should I want to roam?
I know me stuff
And I'm smart enough
To leave well enough alone!

:rotfl:

Mistermeaner

I say he should blow it all on whatever takes his fancy

bowlhead99

I agree with Linton. If he already has enough income to live his life and make whatever gifts he thinks appropriate, and could liquidate house and other assets to pay for care home if necessary, I can't see what the problem is. If you don't have an end goal there is never a 'correct time' to decide to stop making money for yourself and your heirs.

He's perfectly correct in that markets usually bounce back given enough time. They always have done before. If they do not, and the world collapses into itself because it is less profitable to own companies rather than cash in the bank, you and the rest of his family have bigger problems!

If he lost 25% of his portfolio in a crash when he's 97 and then he dies at 101 when the markets have not fully recovered, that reduces the IHT burden (if there is one?) right? His heirs inherit cheap shares. If they want, they can cash them in, or hold them until the point ten years after the crash when he would have been 107 and the markets have recovered or grown strongly. Presumably they are not planning on spending the money before he is 107, because he might not have died until then anyway and it is not theirs to spend.

I have the exact opposite problem from you G_M in that my father is younger and generally risk averse and does not want to take any real equity exposure. If he continues with the same attitude, he and wife could conceivably be around for 30+ years during which time they would burn through all their cash pile and home with nothing left. This is not a big issue as myself and siblings don't plan on needing any inheritance, it's just very frustrating to watch from the sidelines while he doesn't bother to make his money work for him and simply holds a monster 'rainy day fund' together with a token S&S ISA or two. I mention this not because their 30+ year timeline is directly comparable with your father's 5, 10, 15 year timeline - but just from a perspective of watching something from the sidelines thinking your would have done something differently if it were you, and getting annoyed.

Is there a possibility G_M that you or family members are seeing your father's passively invested assets as 'yours' and knowing the current valuation you personally don't want to have equity exposure for the next 5-10 years until it becomes yours to actually spend? If that is borne out of you personally already having a lot of equity exposure in your own name, and not wanting to be exposed to your father's equities too, you could consider simply unloading some of your own equities...

I agree with kidmugsy that gilts are not particularly good value. Clearly they are more defensive in a crash than straight equities but if the headline return is not significantly greater than cash and they can fall where cash would not, perhaps not worth using. After all, you are selling equities because you think they are high - do you not think that gilts are also high? If you sell an expensive asset just to buy another expensive asset, you haven't really achieved the goal of exiting at the top of a cycle.

If the goal is not so much to 'cash in gains at the top of a cycle by rebalancing to a cheap asset class' , but just to 'lock in a known value and get out of investing altogether, happy with your life's work', then just move to cash and be done with it, and accept you don't really need to keep up with inflation if you are only going to be around a few years. Certainly you're unlikely to keep up with inflation in short dated gilts at today's prices, and with longer dated gilts you could get a price shock depending on interest rates over the next 5 years.

Mistermeaner

bowlhead99 wrote: »

I agree with Linton. If he already has enough income to live his life and make whatever gifts he thinks appropriate, and could liquidate house and other assets to pay for care home if necessary, I can't see what the problem is. If you don't have an end goal there is never a 'correct time' to decide to stop making money for yourself and your heirs.

He's perfectly correct in that markets usually bounce back given enough time. They always have done before. If they do not, and the world collapses into itself because it is less profitable to own companies rather than cash in the bank, you and the rest of his family have bigger problems!

If he lost 25% of his portfolio in a crash when he's 97 and then he dies at 101 when the markets have not fully recovered, that reduces the IHT burden (if there is one?) right? His heirs inherit cheap shares. If they want, they can cash them in, or hold them until the point ten years after the crash when he would have been 107 and the markets have recovered or grown strongly. Presumably they are not planning on spending the money before he is 107, because he might not have died until then anyway and it is not theirs to spend.

I have the exact opposite problem from you G_M in that my father is younger and generally risk averse and does not want to take any real equity exposure. If he continues with the same attitude, he and wife could conceivably be around for 30+ years during which time they would burn through all their cash pile and home with nothing left. This is not a big issue as myself and siblings don't plan on needing any inheritance, it's just very frustrating to watch from the sidelines while he doesn't bother to make his money work for him and simply holds a monster 'rainy day fund' together with a token S&S ISA or two. I mention this not because their 30+ year timeline is directly comparable with your father's 5, 10, 15 year timeline - but just from a perspective of watching something from the sidelines thinking your would have done something differently if it were you, and getting annoyed.

Is there a possibility G_M that you or family members are seeing your father's passively invested assets as 'yours' and knowing the current valuation you personally don't want to have equity exposure for the next 5-10 years until it becomes yours to actually spend? If that is borne out of you personally already having a lot of equity exposure in your own name, and not wanting to be exposed to your father's equities too, you could consider simply unloading some of your own equities...

I agree with kidmugsy that gilts are not particularly good value. Clearly they are more defensive in a crash than straight equities but if the headline return is not significantly greater than cash and they can fall where cash would not, perhaps not worth using. After all, you are selling equities because you think they are high - do you not think that gilts are also high? If you sell an expensive asset just to buy another expensive asset, you haven't really achieved the goal of exiting at the top of a cycle.

If the goal is not so much to 'cash in gains at the top of a cycle by rebalancing to a cheap asset class' , but just to 'lock in a known value and get out of investing altogether, happy with your life's work', then just move to cash and be done with it, and accept you don't really need to keep up with inflation if you are only going to be around a few years. Certainly you're unlikely to keep up with inflation in short dated gilts at today's prices, and with longer dated gilts you could get a price shock depending on interest rates over the next 5 years.

I'd still go with my suggestion