£500k cash - what to do with it
Discussion
Long story short, my M&D are 86/91 respectively and benefit from final salary pensions - total income £3.7k/month
Recently moved out of there own house into a rented retirement flat, all up costs (food utilities etc) of this plus a small amount of spending money about equals there income. They want for nothing and while a moderate increase in spending money would be welcomed, they are past the point where they need or want much more than they have. Rental was chosen to keep assets liquid should there care needs/costs rise in the future.
They have approx £30k in savings and investments - income from this is in the £3.7k above. This capital has been pretty static for years.
There house is sold and will complete shortly - this will yield £500k. The question is what to do with it. Sister and myself have partial Power of Attorney - we can move money around and 'keep an eye' but parents have control.
Any thoughts?
Recently moved out of there own house into a rented retirement flat, all up costs (food utilities etc) of this plus a small amount of spending money about equals there income. They want for nothing and while a moderate increase in spending money would be welcomed, they are past the point where they need or want much more than they have. Rental was chosen to keep assets liquid should there care needs/costs rise in the future.
They have approx £30k in savings and investments - income from this is in the £3.7k above. This capital has been pretty static for years.
There house is sold and will complete shortly - this will yield £500k. The question is what to do with it. Sister and myself have partial Power of Attorney - we can move money around and 'keep an eye' but parents have control.
Any thoughts?
Edited by Smallblock1 on Tuesday 12th July 13:32
Read this https://www.gov.uk/inheritance-tax
Unless you want the gov to take 40% above £325k you need to get as much distributed to you, sister, grandkids asap. They can gift you all £3,000 each, they could gift you the lot but would have to live for another 7 years.
It’s all on the link above.
Unless you want the gov to take 40% above £325k you need to get as much distributed to you, sister, grandkids asap. They can gift you all £3,000 each, they could gift you the lot but would have to live for another 7 years.
It’s all on the link above.
BoRED S2upid said:
Read this https://www.gov.uk/inheritance-tax
Unless you want the gov to take 40% above £325k you need to get as much distributed to you, sister, grandkids asap. They can gift you all £3,000 each, they could gift you the lot but would have to live for another 7 years.
It’s all on the link above.
IIRC it’s effectively £650k as the first parent that dies transfers the £500k to the other tax free along with their £325k inheritance tax allowance. Unless you want the gov to take 40% above £325k you need to get as much distributed to you, sister, grandkids asap. They can gift you all £3,000 each, they could gift you the lot but would have to live for another 7 years.
It’s all on the link above.
Yep you need to distribute the £500k asap not only for potential IHT avoidance but also to prevent the Local Authority claiming it against rising costs should your parents require increasingly expensive long term care in a home.
Some local authorities ask searching questions about recent disposal of assets but most don't in assessing care home costs.
Some local authorities ask searching questions about recent disposal of assets but most don't in assessing care home costs.
As folks have mentioned about the gifts; regular payments have no such restriction so long as they still have enough money to pay for their normal costs and it comes from their regular income (so the £3700 pm pot). Well worth a look if you can perhaps do something like use some of that £500k pot to pay for something up front like fee's then get £1k a month out of that etc.
vulture1 said:
Slightly off topic but what is included in a retirement home village support wise? For £3700 a month I'd be looking for absolute top notch facilities and staffing.
Believe me, it is top notch. 2 Bedroom self contained top floor flat, service and food is like a good hotel plus 24hr access to staff for any medical or other emergencies. Purpose designed and built to be safe when your getting old/frail but still have your marbles, falls and associated risks reduced by 90% compared with where they were. Most important new friends, other people and company, particularly if/when one of them should die.
Quality of life vastly better, will extend 'quality of life' hopefully for years and fend off the need for the even more expensive care home.
I was very sceptical at first, now its an aspiration I have when I get to there age!
Smallblock1 said:
Believe me, it is top notch. 2 Bedroom self contained top floor flat, service and food is like a good hotel plus 24hr access to staff for any medical or other emergencies.
Purpose designed and built to be safe when your getting old/frail but still have your marbles, falls and associated risks reduced by 90% compared with where they were. Most important new friends, other people and company, particularly if/when one of them should die.
Quality of life vastly better, will extend 'quality of life' hopefully for years and fend off the need for the even more expensive care home.
I was very sceptical at first, now its an aspiration I have when I get to there age!
A neighbour who’s wife is in a care home / it’s £100m a year …. Say no more. Purpose designed and built to be safe when your getting old/frail but still have your marbles, falls and associated risks reduced by 90% compared with where they were. Most important new friends, other people and company, particularly if/when one of them should die.
Quality of life vastly better, will extend 'quality of life' hopefully for years and fend off the need for the even more expensive care home.
I was very sceptical at first, now its an aspiration I have when I get to there age!
Welshbeef said:
Smallblock1 said:
Believe me, it is top notch. 2 Bedroom self contained top floor flat, service and food is like a good hotel plus 24hr access to staff for any medical or other emergencies.
Purpose designed and built to be safe when your getting old/frail but still have your marbles, falls and associated risks reduced by 90% compared with where they were. Most important new friends, other people and company, particularly if/when one of them should die.
Quality of life vastly better, will extend 'quality of life' hopefully for years and fend off the need for the even more expensive care home.
I was very sceptical at first, now its an aspiration I have when I get to there age!
A neighbour who’s wife is in a care home / it’s £100m a year …. Say no more. Purpose designed and built to be safe when your getting old/frail but still have your marbles, falls and associated risks reduced by 90% compared with where they were. Most important new friends, other people and company, particularly if/when one of them should die.
Quality of life vastly better, will extend 'quality of life' hopefully for years and fend off the need for the even more expensive care home.
I was very sceptical at first, now its an aspiration I have when I get to there age!
Investment bond can pay 5% return of capital and often not means tested for long term care. Could also consider discounted gift trust as part of this (must keep fixed income)
They need proper advice, not just IFA but a wills and trust specialist. Message me if you want some recommendations.
They need proper advice, not just IFA but a wills and trust specialist. Message me if you want some recommendations.
DonkeyApple said:
In terms of where to invest, I'm not sure there is any immense rush just at present. The important thing is for it to be safe and for the family to ensure it's tax efficient re IHt etc but in terms of what assets to convert part or all into, it's all a bit of a flux at present.
Very much this. There is a storm coming the like of which we have not seen before. Sit on your hands for the moment.
darreni said:
DonkeyApple said:
In terms of where to invest, I'm not sure there is any immense rush just at present. The important thing is for it to be safe and for the family to ensure it's tax efficient re IHt etc but in terms of what assets to convert part or all into, it's all a bit of a flux at present.
Very much this. There is a storm coming the like of which we have not seen before. Sit on your hands for the moment.
Thanks for your helpful input guys, some useful pointers in there. Fully on board with the 'somewhere safe' and 'there's a storm coming' message, we also need a better understanding of the tax position and how to minimise exposure.
We are aware that there is no rush, only concern at present relates to there current investment company SJP. M&D trust there sales guy (such a nice man...) sister and I are a little more cynical. The PoA is primarily there to stop them being mis-sold/buying an unsuitable/high cost product from them without professional independent advice being sort first.
We are aware that there is no rush, only concern at present relates to there current investment company SJP. M&D trust there sales guy (such a nice man...) sister and I are a little more cynical. The PoA is primarily there to stop them being mis-sold/buying an unsuitable/high cost product from them without professional independent advice being sort first.
Although 2x allowances inheritance tax would still be an issue unless 1 left half and the other left half. ie. as I imagine if one dies first, they will leave to the other. Then when that one dies, only one allowance so a potential issue. I'm not inheritance tax expert though.
Potentially exempt transfer (ie. transfer and survive 7 years) is wise on that front but as others mentioned above to protect it against the government getting their hands on if care home wise.
There is always the risk the could be lay in a bed next to someone that the state is providing the care for when they are burning through their pot of cash to pay for the same care. Only a very small amount is protected in this regard and quite a sad state of affairs we face unfortunately.
I would say it's about discussing with parents what they would like to happen. As the property sold that takes one issue away re. IHT avoidance of gifting the home and having to pay rent to avoid tax issues so certainly more straight forward with cash.
Potentially exempt transfer (ie. transfer and survive 7 years) is wise on that front but as others mentioned above to protect it against the government getting their hands on if care home wise.
There is always the risk the could be lay in a bed next to someone that the state is providing the care for when they are burning through their pot of cash to pay for the same care. Only a very small amount is protected in this regard and quite a sad state of affairs we face unfortunately.
I would say it's about discussing with parents what they would like to happen. As the property sold that takes one issue away re. IHT avoidance of gifting the home and having to pay rent to avoid tax issues so certainly more straight forward with cash.
Smallblock1 said:
Thanks for your helpful input guys, some useful pointers in there. Fully on board with the 'somewhere safe' and 'there's a storm coming' message, we also need a better understanding of the tax position and how to minimise exposure.
We are aware that there is no rush, only concern at present relates to there current investment company SJP. M&D trust there sales guy (such a nice man...) sister and I are a little more cynical. The PoA is primarily there to stop them being mis-sold/buying an unsuitable/high cost product from them without professional independent advice being sort first.
SJP really shouldn't be advising any investments to 86 & 91 year olds. We are aware that there is no rush, only concern at present relates to there current investment company SJP. M&D trust there sales guy (such a nice man...) sister and I are a little more cynical. The PoA is primarily there to stop them being mis-sold/buying an unsuitable/high cost product from them without professional independent advice being sort first.
D7PNY said:
Although 2x allowances inheritance tax would still be an issue unless 1 left half and the other left half. ie. as I imagine if one dies first, they will leave to the other. Then when that one dies, only one allowance so a potential issue. I'm not inheritance tax expert though.
If one parent dies and has left the whole £500k (and anything else) to the other then the remaining parent gets £650k inheritance tax cover. https://www.which.co.uk/money/tax/inheritance-tax/...
Gassing Station | Finance | Top of Page | What's New | My Stuff