Sale of house to pay for care home

kayzee7

My 96 year old father in law has recently moved into a care home and we are selling his house to pay for the fees. There will be about £400k in total. Obviously the money needs to be easily accessible for ongoing payments to the home, but we are unsure where to put it. It has been suggested to us that an investment bond would give us the best return, while still giving us access, but we have no experience of these so wondered if anyone could give us any advice. Thanks

Albermarle

t has been suggested to us that an investment bond 

It has been suggested by who ? You need to be careful of scammers .

I would think in this case safety is more paramount than return .

coyrls

Albermarle said:

t has been suggested to us that an investment bond 

It has been suggested by who ? You need to be careful of scammers .

I would think in this case safety is more paramount than return .

SJP by any chance?

Thrugelmir

Life expectancy of people who move into care homes is relatively short. Holding the money in fixed term deposit accounts is normally adequate. Makes life easy for the future executors of the estate as well. 

Chickereeeee

Premium bonds, NS&I and a Bank account or two.

xylophone

Your father presumably has some regular income from pensions?

You need to work out how much is needed over and above that to cover his fees and his incidental expenses - clothes, toiletries, favourite sweets, small gifts for grandchildren etc.

You then calculate the amount required for a year's fees and hold that in an easy access account.

You will have a current account - you might hold a couple of months fees there to meet the DD/SO for the fees and then top up as required from the easy access account.

You might then set up  fixed term accounts as required to cover fees in succeeding years.

You might also choose to prepay a funeral - when my relative held POA for his very elderly relative, he did this after the property was sold - it wasn't required for another six years but he said it was a relief that it was all ready when the time came.

masonic

Agree with the others, "investment bond" could mean almost anything, but would generally risk the capital. Seems unlikely this risk would be in his best interests.

csgohan4

Investment bond at his stage in life is not suitable and infact any stage of life for that matter

https://www.which.co.uk/consumer-rights/advice/how-to-spot-an-investment-scam-a7CeY6d5Luf0

Please think carefully where to put the money, Better safe than sorry in this scenario

LHW99

Do you have PoA? You have to make sure any decisions are in his best interest.

NS&I products are Governent backed, and bank accounts cover up to £85,000 if there should be an issue such as happened by HBOS etc. An Investment Bond probably would not have that kind of protection.

donemedosh

Consider using a independant financial adviser. They do charge a fee but they can save you lots more than their fee. Most will offer a free first consultation.So no harm in just asking a few questions & if you are not sure you can walk away nothing lost. I used one a few years ago when I inherited some cash . It is very hard to know what to do when a family member has to go in a home & they are relying on you to look after finances.

dunstonh

t has been suggested to us that an investment bond would give us the best return

There is no logic in that.    An investment bond (onshore or offshore variants) is just a tax wrapper for investments.   The investment bond does not provide any returns.   It is the investments within the investment bond that do that and you can hold the same investments in an investment bond as you can in an ISA, pension or unwrapped (exception if you use old fashioned products like those from salesforces and some insurers where you can only hold own brand funds which tend to be poor quality).

while still giving us access

Access would be severely restricted due to taxation.   Like all tax wrappers, there are pros and cons.    Investment bonds have complicated taxation rules on withdrawals.   

but we have no experience of these so wondered if anyone could give us any advice.

An IFA can but you should avoid an FA.   

Personally, I would be concerned on two fronts.  

1)  The investment bond tax wrapper is a niche wrapper nowadays.    Changes to capital gains tax and dividend taxation dropped investment bonds down the pecking order as internal taxation on onshore bonds equates to around 13-18% depending on the underlying assets.  Whereas ISAs are tax free and unwrapped can be held with around 150k-£200k without generating enough to suffer taxation with the excess only taxed at 7.5% on income (up to basic rate band).  Capital gains tax, with allowance, would be lower than internal taxation on a bond.

2)  People that go into nursing homes have an average life expectancy of under 2 years.   A 94 year old going into a nursing home doesn't have the life expectancy to see out a large market fall and recovery.    There may not be a large market fall in that period but you are playing with fire if you do this.

A certain salesforce is overselling investment bonds in my opinion.  We keep coming across them and the reasons for the investment bond are justifiable, on paper, but not actually necessary and result in more tax being paid.  I am not alone in observing this as other IFAs I have spoken to have seen it.  Often they use trusts with tenuous objectives to justify the trust.  That gives them the excuse to use an investment bond.       However, in reality, its because once you set up an investment bond with them, it's near impossible to get the money out and lose the business to an IFA.  It forces it to remain with that firm and the seller gets paid every year it is held.

So, I would be on guard with an investment bond recommendation.  It can be suitable in niche situations but it is not a mainstream wrapper and it is being abused by certain salesforces and also it is a term misused by scammers a lot (who are not referring to genuine investment bonds but just using that phrase in their scam).