Friend has £70k to invest - Advice please.

She can gift what she jolly well likes: the £3k figure is just the amount that will automatically be exempt from Inheritance Tax when she dies. There is no gift tax in Britain. And her estate is so small that questions of Inheritance Tax will not arise anyway.


The worry for the future might be what's called the Deprivation of Assets rule, whereby if she needed taxpayer subsidy - e.g. for a care home - her wealth would be assessed as if the gifted money were still hers. This (apparently) is not a worry if she is currently in good health.

I suggest you use your browser to find out more about it, or wait until someone more expert than me comes along to this thread.

Although premium bonds are very safe their spending power will get eroded by inflation over time. Without understanding how the daughters would use the money it is hard to comment on if premium bonds would be appropriate for their needs.

Alexland wrote: »

Although premium bonds are very safe their spending power will get eroded by inflation over time. Without understanding how the daughters would use the money it is hard to comment on if premium bonds would be appropriate for their needs.

Yes, putting it all in Premium Bonds will most probably 'earn' less in winnings than interest you would get in bank savings and current accounts.

zilla6 wrote: »

See this about gifts
https://www.gov.uk/inheritance-tax/gifts

No, don't bother. [FONT=&quot]"The present value of the property she lives in is around £105k so total assets are approx £240k[/FONT]" - Inheritance Tax is a non-issue.

chrisjoanne wrote:

[FONT=&quot]She would like to give both daughters around £25k each to be placed into Premium Bonds. Is this advisable?[/FONT]

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If she gives the money to her daughters the daughters will decide what to invest it in, if anything.

There is no reason on earth she cannot give them £25k each. If the day after she made the gift she had to go immediately into care, she would still have assets worth £190k which would be used to pay for her care. The post suggests she lives modestly, and the average stay in a care home is two years (albeit there is a very long tail). The possibility of her exhausting the £190k on care is extremely remote.

You have not even mentioned care fees, and it is not deliberate deprivation when someone gives £50k of surplus cash to their children when they do not anticipate needing care.

If her daughters want to know what they should do with the money, they should be the ones asking on here. Taking advice from a friend of your mother's who has asked some random people down the pub isn't even second hand information, it's third hand.

Your friend needs to understand that if she gives them £25k it is their money, and it does not matter if she wants them to invest it in Premium Bonds or anything else; it is their money and they may choose to invest it or blow the whole lot on a round the world cruise.

Why does she want to give them money if she expects them to not spend it and just hold onto it in Premium Bonds? Inheritance Tax is a non-issue, so there's no need to give the money away before death to avoid a 40% penalty (subject to the 7 year rule). If she wanted to allow her daughters to reduce their mortgages or fund their children's (her grandchildren's) education or weddings then that would make sense. But from what you've said she wants to give her children money but then they're not supposed to do anything with it. Why not just hold onto it until her daughters have something to spend it on - or she does?
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