Investing a lump sum of money on behalf of elderly mother

davidradtke

My brother and I have power of attorney over my mothers assets. She is in a nursing home costing £5k a month. Her cash was running out so we made the decision to sell her house. This has left us with £500k in the bank. We now realise it was probably the wrong decision to sell the house. It was getting £1700 pm in rent, and its value would have appreciated by nearly 10% in the seven months since selling it due to the mini property boom. We now have to decide the best way to invest the £500k, which is earning nothing in interest in the bank. I am thinking the best way forward is to buy a new build house in my mothers name for £300k, and put the remaining £200k in an investment bond that can be drawn as necessary for nursing home fees. Will my mother be able to buy the house in her name and avoid stamp duty if complete before the June deadline?
Advice and ideas welcome as to the best way to invest the £500k! My mother is of sound mind and wants us to do the best thing possible with the money, but obviously wants the security of knowing that the nursing home fees will be paid. 

Albermarle

and put the remaining £200k in an investment bond

'Investment bond' is quite a loose term, and in fact is often used by scammers . Have you already got a product in mind and/or do you have any experience of financial products ? The golden rule is that anything that earns/returns at a level higher than you can get in a safe savings account , will carry some level of risk . Not saying that is a bad thing but just be fully clear about it .

dunstonh

and put the remaining £200k in an investment bond that can be drawn as necessary for nursing home fees. 

Investment bonds used to popular a decade ago but are a niche option nowadays as tax changes have made alternatives better in most cases.  For example, S&S ISA, pension and unwrapped all have better tax positions for "most" people.    Investment bonds come further down the pecking order or where a niche arrangement, such as a trust, is required.

The term "investment bond" is also frequently misused by people who don't actually mean investment bond.

Advice and ideas welcome as to the best way to invest the £500k! 

Probably best not to invest it.    The average life expectancy of someone in a nursing home is 2 years.  To invest, you need at least 10 years but may get away with 5 years.    At 2 years, there is a very high chance of the investments falling to a value lower than the original investment.

My mother is of sound mind and wants us to do the best thing possible with the money, but obviously wants the security of knowing that the nursing home fees will be paid. 

There is an annuity for that purpose.  That has pros and cons and is a pretty advanced product but it does fit the objective.

eskbanker

The fact that her previous home would (with hindsight) have generated a decent return doesn't mean that her buying a new one in her current circumstances is the right thing to do - I'd have thought that it would make more sense to set up a ladder of fixed term accounts that can be relied on to meet nursing home fees for the foreseeable future, rather than committing a significant chunk of her money into an illiquid asset with no guarantee of capital growth....

Linton

Investing on behalf of another person using PoA brings serious responsibilities.  You must invest "prudently" in your mother's best interests.  The interests of future beneficiaries should be of no concern.   If your mother is in a nursing home which I assume she is unlikely to leave how can her buying a new house possibly be in her best interests?  Given, again an assumption, that her life expectancy is limited and she has more than enough money to meet her needs I find it difficult to see how taking any form of risk is in her best interests.

In my view the prudent approach is to keep most of the money in cash.  Perhaps you could justify something very cautious for a smaller part of the pot.

xylophone

https://helpandadvice.co.uk/immediate-care-annuity/ may be worth a read for information only.

You might wish to take professional advice.

https://adviserbook.co.uk/   You would tick "confirmed independent" and "long term care" when the menu comes up on the left hand side.

Presumably your mother has pension income - have you checked on whether she qualifies for Attendance Allowance?

Sea_Shell

Linton said:

Investing on behalf of another person using PoA brings serious responsibilities.  You must invest "prudently" in your mother's best interests.  The interests of future beneficiaries should be of no concern.   If your mother is in a nursing home which I assume she is unlikely to leave how can her buying a new house possibly be in her best interests?  Given, again an assumption, that her life expectancy is limited and she has more than enough money to meet her needs I find it difficult to see how taking any form of risk is in her best interests.

In my view the prudent approach is to keep most of the money in cash.  Perhaps you could justify something very cautious for a smaller part of the pot.

Does this (BiB) still apply if your parent is of sound mind and can effectively "sign off" on any decisions, even if you are using the PoA to assist the ease of implementing those decisions.

talexuser

When I had POA for my mum I had at least 2 years worth of care home fees in cash savings accounts (you could have one of those years in a 1 year fix for higher return). Luckily she had an ISA I had run for years so the rest I had in income funds (some monthly). Any investment bond would have to be 100% guaranteed, many scammers promise this in the advert, you have to be very careful in this area promising high returns. Any stock market crash could just as well lead to negative equity, buying a house when she is in a care home could mean selling for less in a few years. Attendance Allowance above is good advice if applicable, the home helped me fill that in.

Notepad_Phil

How much additional income is needed to be generated so that the £5k per month can be covered, and excuse me for being blunt, how long? There is also the overriding factor of how risk averse your mother is.

If your mother is not used to having investments then I'd say it is very likely that you should keep clear of putting anything but a very small amount into any type of investment. You do not want her to start worrying when the next stock market downturn strikes.

As with others above I would steer clear of putting any of the money into a house purchase - unless you're used to renting houses out and are aware of all the pitfalls I'd want to keep this as simple as possible.

It could be that an immediate needs annuity might be a part of the solution for you, take a look at https://www.moneyadviceservice.org.uk/en/articles/immediate-needs-annuity for some high level information if you've not come across them before.

davidradtke

An additional £4k is needed to cover the nursing home fees, and I have based calculations on eight years. She is immobile but very sound of mine, and otherwise fit and healthy having never smoked or drank alcohol.  My mother is wartime generation so very careful with money. She will be horrified at the thought of it dwindling away to nothing and not investing it at all. I was thinking of buying a brand new 3 bed house for £300k which will rent easily for £1250 pm. There will be 2 years aftercare so maintenance for a good long period will be minimal, and I am used to dealing with property. The pot will benefit in any uplift in value - and prices would have to drop considerably to negate the rental income, so I am thinking this is a pretty safe investment.
I must admit I know nothing about investment bonds, but will probably appoint a financial manager to set up and manage funds with the £200k remaining cash , which with the rental income should last 3+ years. My mother is not particularly risk averse, but she will want a reasonably safe investment and would be disappointed if nothing was left for grandchildren.

Notepad_Phil

davidradtke said:

I must admit I know nothing about investment bonds, but will probably appoint a financial manager to set up and manage funds with the £200k remaining cash , which with the rental income should last 3+ years.

A financial advisor/manager is going to take a chunk of that money, but if you're not used to investing then it might well make sense.

Personally I'd want to keep at least a year's fees in cash - this can then be used as a buffer from which cash can be taken should there be any shortfalls from rent or the investment yield fall for any reason.