How to invest windfall for elderly father

Albermarle

five_o said:

Thanks all for the input. Just to address some of the point raised.

1. I have POA over my dad both financially and with regards to well-being. We did it for both him and my mum a few years ago.

2. I don't think IHT will be an issue. His net worth is just under £1.1m and expect this to fall below £1m within the next 2 years. He "inherited" my mum's IHT allowance when she passed away. so his allowance of £500k has doubled.

3. My dad's needs will increase as he will now be able do more of the things he enjoyed doing. E.g. up to now he had a couple of annual holidays which we paid for. Now he can go on more expensive holidays such as cruises (which he has always wanted) and pursue more of his pastimes and social outings. So the jump in expenditure is not surprising....to us at least.

4. I had mentioned annuities to him before but he flat out rejected the idea. I think he prefers to be in control of his own finances rather than handing money over to a company that will then give him an "allowance".

Perhaps the best idea is to put the money into Fixed Savings accounts (topping up Cash ISAs every year) and then withdraw it as he needs. That would probably mean they will be fully exhausted in about 10 years and by then he will probably be in a position where he is living with one of his 3 kids so we could always sell his house to fund any ongoing expenses at the time. Also as he gets older his expenditure should reduce. I don't think our 90 year old dad would still be as active as he is now :-)

Good answers but I would still see if a more detailed expenditure plan can be estimated . If he spent £40K pa rather than £50K pa, this would seem more sensible from a financial point of view at least.

Perhaps the best idea is to put the money into Fixed Savings accounts (topping up Cash ISAs every year) and then withdraw it as he needs

Normally you can not withdraw from fixed term savings accounts before the term ends. So you need some cash in easier access accounts, and for the term accounts to mature at different times. So some forward planning is needed.

sherbie28

I'm in a sort of similar position with my parents and we haven't a clue what to do. We are all out of our depth having never had any money. They rent from housing association, both on state pension (in 60s and 70s, no other income). No debts. My mum has received a similar unexpected inheritance. They want to buy a house but until we find one all the money is sat in their current account doing nothing. Different people are telling us to do different things. Some say put it all in ns&I. Younger relatives are saying split it up into different easy access savings accounts. What scares me is if they put it in easy access how easy is it really to get it back to buy a house if one comes up they like? I've read horror stories about NS&I dragging their feet.  I'd be the one opening online accounts for them and I'm petrified of choosing the wrong account. The other concern is paying tax, I know if they had over 200k in a savings account it would generate over £10k interest so they'd have to fill in a self assessment. When is that done and how is it done? Having always lived near the breadline it's a massive shock and there's so much to get your head around.

mebu60

What is the rationale for buying a house?

You could shield £140k from tax by putting £50k for each of them into premium bonds (assuming currently zero) and £20k each into an easy access Cash ISA (also assuming currently zero). In normal circumstances it should be straightforward to get the funds back out. Then put the remainder into easy access instant access, max £80k-ish per institution or double that if account in joint names. Dependent on the savings amount and the duration of the house acquisition there may be no tax liability due to their allowances. Don't worry about the filling in of SA forms at this stage, that's a long way off if it is required. 

EthicsGradient

In terms of needing the money for a house purchase, I wouldn't worry about NS&I (or any other provider) "dragging their feet" enough to make a difference - when they find the right house, you've still got to get a survey done, and that will take a few days. It's not like a seller will be demanding the cash in their account the next day.

The simple thing would be to have it in one NS&I account and then there's no worry about compensation limits, and only one account to deal with. You will get a bit more interest if you split it into several, each under £85k (if you're keeping it in the accounts, start off with say a max of £80k, and then there's room for any interest that builds up).

From a tax point of view, it'd make sense to have it in a joint account, so that the interest is split between them (or individual accounts with each having half of the total). If they're each getting the state pension of £11,502 per year (exact? Or are there SERPS/State Second Pension complications involved), and it's possible they might take a year to find and buy the right house for them, then their total income, each, can be up to £18,570 before they pay tax on the interest - or about £7,000 each in interest. That would be about £140k each, ie £280k total.

If they have it in the savings accounts for a full year. If the amount is more than that, and they hold it a full year, they might pay tax (a tip, if you need to keep under that limit and/or under the £10,000 reporting requirement: put some in accounts that pay the interest monthly so you get it this year, and some that only pay the interest a year after you open it, ie in the next tax year; when they buy the house, just leave the minimum in the account (might be just £1 if you pick the right one, or it might be reasonable to find one with a minimum of £100 or £1000) and the interest still won't appear until next year).

The Self assessment can be done online, and shouldn't be that complicated - you fill in their details, the amount they've had from their pensions, and from each account. But unless they do take a full year to buy the house, you may not have to do it anyway. You'd do this during the next tax year, ie after April 2025 (and you'd have until Jan 2026 to do it).

sherbie28

The house isn't a brick house and the neighbour and area isn't great so I think this gives an opportunity to get out. It's not a question of trying to avoid tax but just making sure they don't make any costly mistakes by not knowing how the system works. 

Albermarle

What scares me is if they put it in easy access how easy is it really to get it back to buy a house if one comes up they like? I've read horror stories about NS&I dragging their feet. 

Some easy access accounts you can withdraw from in seconds. Some can take a couple of hours. For some of the smaller banks it can take one working day. The odd one might take longer .So basically nothing to be scared about at all.

NS&I have a clunky website and can be a bit of a pain, but you can save unlimited amounts and still be totally safe.

As above start with £50K each in Premium Bonds and £20K each in easy access cash ISAs.

Have a read of this .

Savings - All Guides - MoneySavingExpert

sherbie28

Thank you so much for taking with the length posts (Ethics gradient and Albermarle) You've given me a lot of info. I really appreciate it and my apologies to OP for piggybacking on your post!