Investing proceeds of house sale for care home fees

pestopasta_2

Hi

I'm hoping someone might be able to offer some pointers to help on this situation.

We have recently sold my Mum's property in order to pay for her care home fees. We have approx £200K to manage on her behalf. (She suffers from dementia and we have POA).

After taking her income and all expenditure (care home fees, living expenses etc) into account we estimate that this sum represents approximately 12 years worth of shortfall between income and expenditure. Obviously (even though Mum is 82) it's unclear how long she will live.

I'm therefore considering how best to save/invest this money. I'm taking professional advice from an advisor recommended to me but my confidence in IFAs has been shaken by previous experience.

My risk appetite could be described as low - but interest rates on savings may not keep pace with inflation in the current climate and so even placing the entire sum in a series of savings accounts represents a risk of sorts.

I'm therefore wondering whether I should invest a proportion in the best available savings rates and a proportion elsewhere on the basis that if I ring-fence several years worth of expenditure i could get a better return on a longer term investment (say five to ten years). I've read, for example, about passive investing - but I'm concerned that the current economic situation in the UK, Europe and US is particularly volatile and stock markets seem to be at a high point which suggests to me that this would be a bad time to enter these markets.

I'm minded to be patient in making these decisions - I'll consider the advice I'm given but even an initial chat with my advisor has seen him pushing the case for active investment (with the consequent ongoing fees).

Any pointers would be gratefully received. I'm not expecting to be spoonfed - happy to read further on the subject if I can pointed towards useful material.

bigfreddiel

I think you need to see an IFA who specialises in this type of investing/funding

Good luck fj

AnotherJoe

I wouldn't invest it. Too much risk and you might be liable for a shortfall.
I'd either look at what it cost to buy an immediate needs annuity for the annual amount you need, or chance that the money will outlast her. She's very unlikely to live 12 years at 82 with dementia. The average is I think 10 years from diagnosis and she was presumably diagnosed several years ago ?

HarryFlatters

In a similar position with parent in nursing home (you mention care home, if so they may not cover till end of life as you may need to transfer to nursing home with the resultant increase in fees)
I have resisted investing any capital outside savings accounts and have missed a potential increase waiting for the "right time"
Very difficult to gauge life expectancy, my dad now has a long service award, 18 month prognosis 6 years ago and still going strong though I would add from viewing other "residents" this is the exception not the rule.
Why not drip feed up to ISA limits to minimise tax implications into a S&S ISA and see how you fare ?
Would also be wise to check your POA allows this, I think it is a rather grey area if you change any previous documented investment strategy.

bigadaj

You could look at an immediate care needs annuity, you'd need to go through a specialist ifa, and they can look and be very expensive but they provide security in payment of care home fees. You should be able to get a quote before committing.

Alternatively I'd be tempted to split the money given the timespan and look at maybe investing half and keeping the other half liquid and in cash, the proportions could be varied so if cautious maybe look at investing 30% for example.

badmemory

Don't forget to claim attendance allowance. As she is in a care home she should receive full rate. She CAN receive this as long as she is self funding.

xylophone

http://societyoflaterlifeadvisers.co.uk/

You can look at Immediate Needs Annuity.

http://www.annuitydiscount.co.uk/Annuity_KFD/Immediate_care/Partnership_Assurance_Immediate_Needs_Annuity.htm

https://advisers.friendslife.co.uk/products/lifetime-care/immediate-lifetime-care.jsp

http://www.justretirement.com/your-money/planning-for-care/paying-for-care/

dunstonh

I'll consider the advice I'm given but even an initial chat with my advisor has seen him pushing the case for active investment (with the consequent ongoing fees).

Don't blame him. His active investments are probably doing better net of fees. However, advisers will adjust portfolios to suit the clients preference. So, if you instruct passive only then an IFA has to factor that into their research. They cannot refuse as they are IFAs. Only FAs can refuse.

However, the average life expectancy in a home is three years. An economic cycle is around 10 years. What if you get the bad three years first and you only end up losing money?

pestopasta_2

Thank you for all of the help in the posts above.

There's been a delay in my IFA being able to advise me - this was down to the GP being tardy in completing a medical questionnaire in respect of a quote for an Immediate Care Annuity. He's meeting with me next week to discuss my options.

I've used the time to do some research in order to better understand the options I may be presented with and (hopefully) to make a more informed choice. In the last few days I've been reading up on Investment Trusts - although I've found them more difficult to understand than some of the other potential options. Is anyone able to say whether they are an option I should be considering - or are they totally unsuitable for this purpose?

LondonD

Not sure it helps but we had to do the same last year. We're in London and care home fees are very high - even for a rubbish home. As my father has a good mind and wants good activities from his care home, he's ended up with a very expensive home - although it's one the kids are happy to visit so that's a plus.

Unfortunately he's quite young - just 77 and only in there due to his physical disability. Since his vitals are all 100% (no drugs needed), he's likely to live another 10 years quite easily. Unfortunately his money will only last 3 or 4. No annuity will make up for this issue and i've seen a range of experts to confirm this (although it's blindingly obvious).

We've taken the decision (together) to spend the funds on a great place in the short term. The other option was go to a poor-quality care home now and be able to fund his care for longer. It's a strange feeling to justify something that is so clearly a bad idea in many ways but he'd rather have a great time whilst he has his faculties.

Anyway back to practical investments - you won't close a large funding gap unless you can top up yourself. That will suit some families but didn't work for me. if i could, i would have preferred the annuity option and there appear to be a good range of options available in market. When they price them, they will write to the care home and get an assessment from them in terms of costs. Note that you may be liable for any shortfall yourself.

pestopasta_2

Thank you London D. Greatly appreciated.

I hope that things work out as well as they can for you, your Dad and your family.