Handling savings for elderly parents

LHW99

If you split the money equally between them, they can put £40k pa into cash ISAs. The ISA's can pass to the other partner on death, without losing tax-free status.

Keeping savings as equally divide as possible means care needs are only assessed on half the total savings.

LifeAfterForty

Thank you very much for this comment @lr1277. I had been pondering the tax implications of all this. I wasn't aware of the £10k interest threshold. My mother is only on the basic state pension and I don't believe she'll receive anything more than that when dad passes. I assume they don't submit tax returns, but I will ask. I am going to have to discuss with them how they should split the money to maximise the allowances whilst they're both still around.

I remember shifting all of my own savings into ISAs when the rates came up and I became a higher-rate tax payer so your comment does resonate with me.

LifeAfterForty

https://forums.moneysavingexpert.com/discussion/comment/82088729#Comment_82088729

Thank you. That's something I hadn't considered :)

lr1277

https://forums.moneysavingexpert.com/discussion/comment/82088871#Comment_82088871

I suggest you look into the state pension issue. My mum never worked but did get some kind of pension from 60 or 65. When dad died, DWP increased her pension to match his pension.

I don’t know why this happened. Mum suggested after his death, that my dad had done something whilst he was working that decreased his pension but increased hers.

StewedApple

https://forums.moneysavingexpert.com/discussion/comment/82088567#Comment_82088567

These sorts of things are so outside the scope of what is likely to happen that they are best ignored - and even if they did come into scope (which is very unlikely) the capacity to mitigate is another issue entirely as they would impact right across the economy and right across all investment options for most people.

You should definitely focus on what is a reasonable choice and what is a reasonable risk, and how easily these are managed by you on behalf of someone else.

You may end up with a mixture of savings and low-risk investments. I would also try to focus on a small number of well-run institutions as this is more practical when dealing with someone else's property and their estate.

lr1277

Check how your parents have written their wills. My parents wrote wills in 2006 that put every asset they had into a trust. This was ostensibly done to avoid care costs and were all the rage at the time. I looked into this and found it was impossible to get savings account and share holding accounts that could be held in trust. The will put the their house into the trust but more on that later.
Each will made me and the surviving parent the executor and whoever it is that administers the trust. Frankly I didn’t want to do the work with administering the trust, including have to submit tax returns for the trust. For these reasons I persuaded my parents to rewrite their wills such that no trusts were created but simply that all their assets would go to the survivor. Then when that person died, the assets would be split between my brother and I. Much simpler and a much smaller inheritance tax bill.

To put the house into trust they changed ownership of their house from joint tenants to tenants in common. This would have reduced inheritance based on the law in 2006. However in 2016 the inheritance laws changed such that it no longer made sense to put things into trust nor be tenants in common. So as part of rewriting their wills, they changed ownership back to joint tenants. Btw the solicitor charged them for changing the ownership back to joint tenants.
On these boards I have seen advocates of tenants in common to then avoid care costs. But with say £175k cash each, I am not sure care costs can be avoided. You and your parents need to decide if they want to minimise inheritance tax or care costs. Bear in mind only a fraction of people need care. Also if you want the council to pay care costs, your parents are putting themselves selves at the mercy of decisions made by the council. However I have seen news reports about the new prime minister wanting to change how care is funded. So I have no idea how this will all end.

LHW99

My mother is only on the basic state pension and I don't believe she'll receive anything more than that when dad passes.

Check that:

https://www.gov.uk/state-pension/inheritance-spouse-civil-partner (look about 2/3 way down the page for inheriting basic state pension)

Alternatively for the new State Pension:

https://www.gov.uk/new-state-pension/inheriting-or-increasing-state-pension-from-a-spouse-or-civil-partner

nottsphil

https://forums.moneysavingexpert.com/discussion/comment/82088536#Comment_82088536

I think that opening reprimand is out of order.

I believe the OP is simply stating that there will be no conflict with his parents' views about risk.

Albermarle

It is fortuitous that our risk appetites are aligned because I have no personal experience of high-risk investments

'High Risk' can mean different things. In these forums investing in crypto, trading in individual shares, gambling on currency movements etc would be seen as very high risk and best avoided by the vast majority.

However investing in many mainstream funds linked to financial markets would only be seen as high risk, if the time scale for investing was too short. In the long term ( say >10 years) the risk becomes much smaller, and in fact it is riskier not to be invested and have too much cash, due to the threat of inflation.

This is not really relevant for your parents, but it is for you. Being younger you should try not to be too risk averse, as it will probably damage your finances long term.

Thank you very much for this comment @lr1277. I had been pondering the tax implications of all this. I wasn't aware of the £10k interest threshold. My mother is only on the basic state pension and I don't believe she'll receive anything more than that when dad passes. I assume they don't submit tax returns, but I will ask.

The basic situation is:

They can individually earn interest up to £18570 per tax year, tax free. However this figure is reduced by other taxable income they receive. So for your Mother can earn £18570 minus her state pension in interest, tax free.

Even if they have taxable income above that limit they can still earn £1000 tax free.

They can add £20K per tax year to cash ISAs that will be tax free, and have £50K in Premium Bonds tax free.

If either earns more than £10K in interest outside ISas and PBs, they should fill in a tax return even though they might not owe any tax .

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82089018#Comment_82089018

It was more of a clarification than a reprimand!