Investing savings for elderly relative in care home

spg1

My dad (93) recently moved into a care home and we have just sold his house.

The care home fees are mostly met through his inflation-linked pensions and attendance allowance but there is a £8k a year shortfall which the c£240k proceeds from the house will make up.

I have PoA and manage his money for him (he has mental capacity but not up to managing money).

The plan is to invest his money across various savings accounts and hopefully the interest should cover most of the shortfall without eating into the capital too much although I'm conscious savings rates heading down.

Obviously he will pay tax on most of the interest and we also can’t really benefit from better rates from tying the money up for a long period given his age. 

It has occurred to me that if he was happy to do so he could gift me and my siblings (who are sole and equal beneficiaries of his estate) some of his money (say half) and we then invest it ourselves in our names in ISAs/savings bonds although still regard it as his money.

The remaining half should be enough to cover the shortfall in care home costs however long he lived, and if it wasn’t (eg if his care home fees went up by way more than inflation or he had to move homes) we could always pay it back to him.

The proceeds from the house sale make up his entire estate so IHT isn’t a consideration.

I suppose there could be potential issues if one of his children died, but other than that does it sound a reasonable idea?

 

 

 

 

p00hsticks

spg1 said:

It has occurred to me that if he was happy to do so he could gift me and my siblings (who are sole and equal beneficiaries of his estate) some of his money (say half) and we then invest it ourselves in our names in ISAs/savings bonds although still regard it as his money.

. 

i can understand your logic, but your legal duty as a PoA is always to act in your father's best interest, and moving a large sum of money from his name to yours, even with the best of intentions, would I think be looked at as a definite no by the Office of the Public Guardian.

 If either you or you brother were to face bankruptcy, divorce etc the money would be treated as yours.

 Keep it in his name.

talexuser

The average stay in a care home is between 2 and 3 years. My mum was in care for just over 2 years and I had POA for her. I kept at least 2 years worth of fees in easy access, shopping for the best rates. The rest I kept in her ISAs but went for more cautious funds that would not drop so much in a downturn. A POA must legally act in the persons best interest, transferring their money into your own and other peoples accounts is not allowed.

Keep_pedalling

No, the money needs to be kept in his name it may very well be needed should his care needs change and become more expensive.

tr7phil

It might be worth buying an immediate needs annuity to cover the shortfall, at his age this could be relatively cheap.  I bought one for my mum to cover £26000 per annum escalating at 7.5% paying directly to the care home on a monthly basis, my mum is 78 and this cost approximately 5 times the annual pay out.  It also has the advantage of being free of income tax.

spg1

Thanks for everyone's comments on this, very helpful. Keeping the money in his name is clearly the right approach and I'll explore an immediate care needs annuity. Obviously at his age anything could happen but there's nothing much wrong with him other than mobility issues so could live for quite a few years yet.

IanManc

JamesRobinson48 said:

The care home fees may escalate in the future by more than you expect, if your dad's mental or physical ailments worsen.  Also, bear in mind that care home costs will increase next April due to the hike in employer's National Insurance on their staff. Your dad may also have other expenses, e.g. for dentists' and opticians' fees and occasional new clothes. So if he lives on more than a few years, which he well might, even £240k could start to look precarious.

For comparison, my dad is also 93, lives in a care home, and is mentally sound but not up to managing his money. Given his dependent state and generous nature, he would willingly make generous gifts to his children or grandchildren. But as his Attorney, I cannot possibly allow that, in any circumstances. Keeping dad as comfortable as possible, with the best care that he can afford, must be the overriding priority. I never intermingle Dad's money with my own, as it is possible that I might die before he does. As a retiree myself, one never knows.

I realise that you have your father's best interests at heart, but a power of attorney does not give someone any power over an adult who is "mentally sound". You have no lawful authority whatsoever not to "allow" him to make gifts. All you can do is try to reason with him. Unless he has been diagnosed as lacking mental capacity then actively not allowing him to deal with his own money could be seen as elder abuse.

poolboy

Care fees for say dementia are about 50% more, nursing likewise. Make sure you are claiming all available allowances too, attendance allowance at the increased night rate.

Best of luck

Albermarle

OP,
You mention both saving and investing.
Normally investing means putting money into things like stocks and shares. This is fine for the long term, but for periods less than 5 years you are best to stick to savings accounts.
Currently savings rates are beating inflation anyway and are only drifting down quite slowly.
You could use a mix of easy access and fixed term accounts.
With his income it looks like he will pay tax on any interest above £1000 per tax year. You should put £20K into a cash ISA now and another £20K after April 6th, which will protect the interest from £40K from tax.
Cash ISA's can be easy access or fixed term as well, but you would probably aim to use these last to keep the tax free status.