To take or not to take

juliacraven

My father who is 94, is now in a dementia nursing home and unable to make decisions for himself. Not likely to improve to a point where he could make a decision.
We have LPA for his finance and health. He currently has £137,000 in III, a mixture of stocks, shares and ISAs, the original investment being £50,000 some time ago. It has averaged around £110,000 for some time.
Two of us think we should now take the money out and put it into his bank as he doesn't need long term investment, in other words take the profit and the original investment, rather than risk losing it if the markets fall. Two think it should be left where it is.
What do people think?

dunstonh

You need to look at the need for the money and where it will end up being distributed in his estate. if the beneficiaries are likely to continue investing then there is no point moving to cash. If they are not likely to invest then move it to cash.

xylophone

Do you consider it to be in your father's best interests to disinvest?

AS LPA, that consideration must be your guide.

enthusiasticsaver

The markets may fall or they may continue to rise as they have done for the last few months - who knows? The question should be is it in your fathers best interest to withdraw it. Where are nursing home fees paid from?

DrSyn

juliacraven wrote: »

My father who is 94, is now in a dementia nursing home and unable to make decisions for himself. Not likely to improve to a point where he could make a decision.
We have LPA for his finance and health. He currently has £137,000 in III, a mixture of stocks, shares and ISAs, the original investment being £50,000 some time ago. It has averaged around £110,000 for some time.
Two of us think we should now take the money out and put it into his bank as he doesn't need long term investment, in other words take the profit and the original investment, rather than risk losing it if the markets fall. Two think it should be left where it is.
What do people think?

I would expect to be mainly in cash, if I ever reach 94.

If you are are worried about the risk of the markets falling then take the money out. However you must also except the risk that you may be wrong and the markets could stay the same or go up.


To meet the nursing home costs has your family considered either of the following ?

1.Keeping 50% in the markets and 50% in cash ISA's.

2.Move out of the markets gradually. For example sell 20% of the investments each year, putting the cash in a cash ISA.

Malthusian

DrSyn wrote: »

I would expect to be mainly in cash, if I ever reach 94.

Why, if you don't need the money imminently?

If you reach age 94 you would have on average 3 years' life expectancy. However someone who's managed to save up a big pile of cash would have a higher than average life expectancy. And 3 years is the average life expectancy for a 94 year old now, not for when you turn 94 after several decades' worth of improvements in medicine. So there is plenty of scope for inflation and opportunity risk in stuffing your money under the mattress in preparation for when the Grim Reaper and your executors come calling.

Also, I would expect my children to be well-versed with long term investments, and to know that if I die during a market crash and leave them a pile of stockmarket investments, they should hold onto them for a few years. If they needed the money in the short term then I'd've given it to them already. (Not an option in LPA cases, of course.)

Two of us think we should now take the money out and put it into his bank as he doesn't need long term investment, in other words take the profit and the original investment, rather than risk losing it if the markets fall. Two think it should be left where it is.

Assuming your father diversified his investments properly, the money will not be lost if the markets fall. The money will only be lost if the beneficiaries cash in during a market fall.

In other words we don't have enough information to say one way or the other because we need to know who his beneficiaries are and how likely they are to cash in his investments the moment they get their hands on them.

Keep_pedalling

What every you do don't dispose the whole lot in one go, as you would be lumbering him with an unnessasary CGT bill.

If these assets are well diversified, and survived Brexit without any significant loss then I would simple sell a portion each financial year if required to meet care costs.

bowlhead99

There is certainly something to be said for moving some of it to cash if it needs to cover tens of thousands of pounds of care fees over the next years. But.

The "beware of CGT" comments are sensible, because if much of the value is not likely to be needed over his remaining years, and would pass instead to heirs, then his converting to cash now all at once creates a loss of value to CGT, which would be avoided if the assets were sold after he passed away with no CGT needing to be assessed.

You really don't want him to pay tax at 10% and 20% on the gains in excess of his annual CGT exemption, in haste to avoid a potential loss of market value of those gains.

To the poster who mentioned being substantially all in cash at age 94 and those mentioning only 3 year life expectancy for the average person of that age. The life expectancy at 97 would be similar, as would the life expectancy at 100. So the fact that many don't survive more than 3-4 years after being admitted to care for reasons of dementias, does not mean it couldn't be longer term if one is lucky (or unlucky depending on perspective).

Cash reserves to cover the projected term (and then some, as a buffer) is a sensible thing to have, but there is probably no need to convert further long term assets into cash beyond that - and CGT means there may be no good reason to go and pull (e.g.) the assets for year two and three into cash during this tax year when tax would be avoided by waiting 6 months or more

DrSyn

Malthusian

I accept the arguments you make, they are reasonable and will apply to many people. However, everyones circumstances are different.

My judgment is that I am very unlikely to reach 94 years of age. The amount I will not have in cash by then, will hopefully makeup to for inflation to some extent.

I of course could be wrong, only time will tell.

Biggles

If a significant proportion of that investment is outside ISAs, it won't be possible to withdraw it all this year without incurring CGT.

Therefore, if that money may be needed in the next two or three years to fund his care, it might be prudent to withdraw the maximum each year that you can, within his CGT allowance, and put it in a savings account in his name.