Inheriting money - gambling addiction

Olinda99

yes but the op said in their first post that benefits will stop so there is no deprevation of assets to consider

Marcon

nightsky224 said:

Marcon said:

nightsky224 said:

Soon a family member will inherit a chunk of money. They have a gambling addiction and have reached out to me as they want me to “look after” the money as they know they will slowly (or quickly!) gamble it away. 

They are on benefits, disabled and have mental health problems some benefits will stop as they will have this money so they need to be able to regularly draw on the money so they have an income. 

I don’t think them informally giving me the money is a good idea. Anyone know of other ways to keep his money safe? I was thinking maybe a trust but I don’t know much about them. 

Gambling addiction is like any other addiction: it needs feeding.

Depends how much the chunk is - and how much pressure they will put on you to release funds. If you're talking about a few hundred pounds, that's one thing; if it many thousands, that's quite another. Could you give a rough idea? 

Purchasing an annuity might be a better idea than a trust. That way they won't be able to touch the capital and won't be able to put pressure on you. It can be done at any age, and needn't be for life - could just be for a fixed term up to (say) state pension age, depending on how old they are now.

It will be around 100k I think. Not thought of an annuity. They will need to be able to draw down from it (ideally monthly) to pay rent, live off etc. is that something that you can do with an annuity do you know? 

Someone purchasing an annuity agrees the terms with the annuity provider at the outset. This covers frequency of payments (monthly is the norm), duration of annuity (ie number of years until payments stop - doesn't have to be 'whole life'), whether the annuity remains payable at the same fixed amount or whether it will increase each year etc.

It isn't a 'drawdown' arrangement - he'll get whatever amount is agreed at the outset, paid at intervals agreed at the outset. In other words, he won't be able to treat it as a savings account to fund his gambling habit.

The tax treatment is favourable where the annuity is being bought with 'own money' (as it would be here) rather than the proceeds of a pension pot, because part of each payment is treated as a return of capital, so that part isn't subject to tax.

It would be wise to take some independent financial advice, and also check how this would interact with any state benefits, before proceeding - but this could be a much simpler option than faffing around with a trust, and will also mean you have no ongoing involvement.

nightsky224

Marcon said:

nightsky224 said:

Marcon said:

nightsky224 said:

Soon a family member will inherit a chunk of money. They have a gambling addiction and have reached out to me as they want me to “look after” the money as they know they will slowly (or quickly!) gamble it away. 

They are on benefits, disabled and have mental health problems some benefits will stop as they will have this money so they need to be able to regularly draw on the money so they have an income. 

I don’t think them informally giving me the money is a good idea. Anyone know of other ways to keep his money safe? I was thinking maybe a trust but I don’t know much about them. 

Gambling addiction is like any other addiction: it needs feeding.

Depends how much the chunk is - and how much pressure they will put on you to release funds. If you're talking about a few hundred pounds, that's one thing; if it many thousands, that's quite another. Could you give a rough idea? 

Purchasing an annuity might be a better idea than a trust. That way they won't be able to touch the capital and won't be able to put pressure on you. It can be done at any age, and needn't be for life - could just be for a fixed term up to (say) state pension age, depending on how old they are now.

It will be around 100k I think. Not thought of an annuity. They will need to be able to draw down from it (ideally monthly) to pay rent, live off etc. is that something that you can do with an annuity do you know? 

Someone purchasing an annuity agrees the terms with the annuity provider at the outset. This covers frequency of payments (monthly is the norm), duration of annuity (ie number of years until payments stop - doesn't have to be 'whole life'), whether the annuity remains payable at the same fixed amount or whether it will increase each year etc.

It isn't a 'drawdown' arrangement - he'll get whatever amount is agreed at the outset, paid at intervals agreed at the outset. In other words, he won't be able to treat it as a savings account to fund his gambling habit.

The tax treatment is favourable where the annuity is being bought with 'own money' (as it would be here) rather than the proceeds of a pension pot, because part of each payment is treated as a return of capital, so that part isn't subject to tax.

It would be wise to take some independent financial advice, and also check how this would interact with any state benefits, before proceeding - but this could be a much simpler option than faffing around with a trust, and will also mean you have no ongoing involvement.

Thank you, yes I feel like we may need some independent financial advice. 

nightsky224

Keep_pedalling said:

Too late for a trust, that is something that the testator should have thought about when making their will. Is £100k enough to buy a small house or flat where they live? 

Sadly no where near enough

nightsky224

Keep_pedalling said:

tls123 said:

Skipton building society have a trustee account perhaps that’s worth exploring 

A trust is not an option, it would be treated as deliberate deprivation of assets. 

There is no intention of continuing with means-tested benefits once they inherit the money so this would not be an issue. They will need to go back on benefits once the money runs out - We want something in place to make sure the money runs out at a reasonable rate that benefits would approve of and to avoid it all being spent very quickly gambling. 

nightsky224

Olinda99 said:

I believe an annuity is where you hand over a capital sum eg 100k in return for a fixed income each month

the amount of income you get is dependent on how long you want the annuity to run for and so on. get a couple of quotes and do the sums.

obviously once you hand the 100k over it's gone you can't get it back. all you can get back are the monthly payments

another option would be to put it into a long-term bond for example five-year or 10 year. this has the advantage that you will keep the 100k but obviously the monthly interest payments will be less than if you put it into an annuity.

Most of the things I have read have said that an annuity is meant to run for the rest of your life. Because of the loss in benefits, he will probably draw on the income over 10-15 years and is 60 now. Am I looking at the wrong type of annuity?

doodling

Hi,

An annuity is simply an agreement whereby someone is paid an agreed amount at regular intervals for an agreed period in return for paying a lump sum.

By far the most common form of annuity is where an amount is paid until the beneficiary dies and the lump sum to pay for it is funded by some form of pension savings arrangement but that is not the only type.

This is an area where an independent financial advisor is probably the best way to go as annuities are not often sold on a retail basis.

Bear in mind that if you are doing something other than specified in the will (or extra to it) anything you do will need the clear agreement of the beneficiary - I would recommend that that agreement is done with the aid of a solicitor (who may insist on the beneficiary having their own, separate, legal representation).

theoretica

One option which has not been mentioned is giving you power of attorney.  You could then, with their instructions, open accounts in their name and set up a monthly transfer into their normal accounts (or direct to pay rent) without being given the money informally.  This does *not* stop them having their own access and the person with POA needs to do as instructed, so if they were insistent about withdrawing more they could get access. 

Do they need to absolutely prevent themselves having access, or would making it a bit harder, and having a regular monthly transfer set up be enough to help them?

Marcon

nightsky224 said:

Olinda99 said:

I believe an annuity is where you hand over a capital sum eg 100k in return for a fixed income each month

the amount of income you get is dependent on how long you want the annuity to run for and so on. get a couple of quotes and do the sums.

obviously once you hand the 100k over it's gone you can't get it back. all you can get back are the monthly payments

another option would be to put it into a long-term bond for example five-year or 10 year. this has the advantage that you will keep the 100k but obviously the monthly interest payments will be less than if you put it into an annuity.

Most of the things I have read have said that an annuity is meant to run for the rest of your life. Because of the loss in benefits, he will probably draw on the income over 10-15 years and is 60 now. Am I looking at the wrong type of annuity?

Yes. As I mentioned above, it needn't be whole life. He will need to buy a fixed term annuity which will pay out an amount which will be reasonably likely to cover his expenses.

Has his state pension forecast been checked? If he has missing years, now might be a good time to buy them and ensure he has a full state pension. https://www.gov.uk/check-state-pension

nightsky224

theoretica said:

One option which has not been mentioned is giving you power of attorney.  You could then, with their instructions, open accounts in their name and set up a monthly transfer into their normal accounts (or direct to pay rent) without being given the money informally.  This does *not* stop them having their own access and the person with POA needs to do as instructed, so if they were insistent about withdrawing more they could get access. 

Do they need to absolutely prevent themselves having access, or would making it a bit harder, and having a regular monthly transfer set up be enough to help them?

Thanks, it will mean that I have control and I know that with this set up he may be asking for money and I’m not up for that.
will have to do some thinking.