Investing a lump sum of money on behalf of elderly mother

Linton

davidradtke said:

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.

So the house will return £15000/year. Assuming all of that money is available for your mother and neglecting any costs that is a return of 5% on her investment.  As she presumably wont be selling the house she wont benefit from any increase in value.  Also you have the time taken for the house to be bought and put in a state where it can be rented out and the risk of gaps in the rental income.  Were she ever to need the money it could well be many months for the house to be sold and the money to be available.

In order to get a return of 5% you dont have to be wildly adventurous with fund investments.  They require minimal effort to manage and can be sold at any time.  In any case if the £200K + rental income will last say 3.5 years that amounts to a cost of £252500.  SImply holding all the money as cash would last twice as long.  

Linton

Sea_Shell said:

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.

As a non lawyer, my understanding is....
There is no detailed definition of how an Attorney should act.  Just guidelines and general principles.  The two key ones are:

1) Whatever actions the Attorney takes should be in the donor's Best Interest.  The law does not define what this means, but clearly acting in someone else's best interest does not meet requirements.  It is up to the Attorney to decide how the principle should be applied in any specific situation - an Attorney has a pretty free hand to do want they want.  In extreme circumstances the courts can provide explicit direction.

2) Mental capacity is not a binary option.  The Attorney has the duty to ensure that the donor is involved in and takes all decisions in as far as mental capacity permits.

There is no obligation on the Attorney to help implement a decision so I believe the Best Interest principle applies here.

In this case it would seem appropriate to me that Mother should make the decision but the options and their costs, advantages  and disadvantages could be collated by the OP, possibly with professional guidance.  Clearly the OP has to be involved, guided by the Best Interest principle,  if only from a duty of care to ensure that Mother doesnt make a foolish decision from lack of financial knowledge.