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    • janeke
    • By janeke 19th Jun 17, 12:22 PM
    • 84Posts
    • 9Thanks
    Longer term savings and death!
    • #1
    • 19th Jun 17, 12:22 PM
    Longer term savings and death! 19th Jun 17 at 12:22 PM
    I`m looking to invest some money for my very elderly father following a house-sale. I am thinking about a couple of bonds and a notice account.
    As a general rule - what would happen interest wise if father died before the bonds had matured or before he had given notice on the notice account. (The ones I am looking at incur a large penalty if they are closed early)
Page 1
    • Malthusian
    • By Malthusian 19th Jun 17, 12:26 PM
    • 4,095 Posts
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    • #2
    • 19th Jun 17, 12:26 PM
    • #2
    • 19th Jun 17, 12:26 PM
    You should probably look at other bonds, unless his heirs would be happy to inherit them and let them run their course.

    Some banks and building societies do allow fixed term bonds to be redeemed without penalty on the accountholder's death, but you will need to check their terms & conditions.
    • bowlhead99
    • By bowlhead99 19th Jun 17, 2:03 PM
    • 7,832 Posts
    • 14,303 Thanks
    • #3
    • 19th Jun 17, 2:03 PM
    • #3
    • 19th Jun 17, 2:03 PM
    Clearly if you're saving/ investing in the best interests of the father -then it's what suits his needs that's important rather than whether the heirs "would be happy" to wait out a notice period. If he wants them to have access to some cash earlier, he could always give them some right now if that suits *his* needs...

    For example if he gets more income from a deposit that has a 3-month notice period than one with instant access, and he doesn't need instant access, then the one with notice is the one to go for. If the notice account doesn't automatically pay out penalty-free on death then typically the executor can just give the notice or suffer an interest penalty, depending on what's in the best interests of the heirs.

    The latter (paying penalty) is often preferred because when you're inheriting thousands or tens of thousands or more, nobody really wants to wait for the sake a few more pounds interest. But that doesn't mean you should have used an instant access account and forced the father to give up the opportunity to make better returns just so people could grab his cash quicker when he's dead. When you're trusted with someone's finances there's an "ethical" point rather than just the practical mechanics of running the account.

    When it isn't a notice account (which usually allow access with a penalty - or pay out with no quibbles on death if you plead nicely enough) but instead a fixed term deposit - there may be no automatic right to take the money back off deposit, and you can be at the mercy of the T&C.

    So, Ts & Cs are important but if they're not very favorable, when thinking about the heirs getting access to the funds, remember that if the person had lived another three months then they wouldn't be getting the money for another three months anyway

    A person who is potentially an heir but is responsible for father's finances has something of a conflict of interest as clearly they would prefer less hassle and fewer penalties when he's gone, while the father (for himself) would probably like a better interest rate and not mind too much of an heir had to give some of that back in penalties.

    Fortunately at the moment with interest rates pretty low, an argument can be constructed to say that (e.g.) a 5-year term deposit is not significantly better value than a one to two-year one, because if you go for the shorter term you don't lose a massive amount of interest and it buys you flexibility in terms of being able to take advantage of better deposit rates that might come along over the course of those 5 years. So you would not be judged harshly for suggesting shorter terms as long as it's not all instant access at derisory rates.
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