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Helping Grand children.

Bod

Registered User
Aug 30, 2013
1,376
0
MiL has gone into care.(self-funded) House has been sold, an anuitiy has been purchased to cover the fees, less her pensions income.
So is now fully costed for the remainder of her life.
There is quite a surplus of funds remaining. (Hard working late husband, with good investments over the years!)
Could an interest bearing loan be made to a Grandchild? (BoE base rate +1/4%)
Or could the money be used to buy a property to rent out? (investment property)
Having the money in a savings, or worse, a current account, would be of no investment value.
Would either of these ideas need Court of Protection permission?

Bod.
 

MaNaAk

Registered User
Jun 19, 2016
3,423
0
Essex
Some else may have better experience but
otherwise this money will of course be used to pay for her care.

MaNaAk
 

jugglingmum

Registered User
Jan 5, 2014
5,993
0
Chester
Could an interest bearing loan be made to a Grandchild? (BoE base rate +1/4%)
I don't know about the legalities but I think you would need to strike a balance between what savings rate can be obtained and what the grandchildren could borrow at - my instinct says + .25% might be considered too low and +0.50% would be more the minimum market rate.

In both cases the interest or net rental income are taxable but suspect you are aware of that (for interest first £1000 or £500 exempt depending on other income).
 

MartinWL

Registered User
Jun 12, 2020
586
0
You have to consider what is in her best interests, not the interests of the grandchildren. You should get the best return that you can ( consistent with security) so only loan cash to family members if they are offering a better of equal rate if interest than any other option. You must also take into account how safe her investment will be if loaned to the grandchild. You could certainly invest in property if that gives the best return. I would be careful here and engage an independent financial adviser to propose an investment plan. He/she must wholly disregard the grandchild's interests. If you follow the advice of an IFA you will be doing your duty and won't need the Court of Protection to be involved.
 

Hayley JS

Registered User
Feb 20, 2020
271
0
I agree with MartinWL, also have you thought of investment bonds? Better rates than ISA's etc. I would definately contact a financial advisor, most give free initial advice
 

canary

Registered User
Feb 25, 2014
14,379
0
South coast
I understand that you want to help the grandchildren, but you have to be careful here, because it is illegal to use the POA in order to benefit yourself or your family. You could loan the money, but the interest would have to be market rate.
Again, you could buy to let, but the rent would have to be market rate.
 

nitram

Registered User
Apr 6, 2011
21,539
0
North Manchester
If you decide to go for professional help bear in mind that you cannot delegate the power, COP approval is needed for any discretionary investment,
 

MartinWL

Registered User
Jun 12, 2020
586
0
If you decide to go for professional help bear in mind that you cannot delegate the power, COP approval is needed for any discretionary investment,
Could you expand on that? All investment decisions are discretionary, the investor chooses whether to invest in shares, building society, national savings, or get-rich-quick bonds. An attorney has to use judgement on these things to take into account the donor's best interest and circumstances. What do you think needs COP approval?

By the way nobody has suggested delegating any powers, but getting expert advice before using those powers, which isn't delegation.
 

nitram

Registered User
Apr 6, 2011
21,539
0
North Manchester
Could you expand on that?

Discretionary investment is the term used when an investor hands over day to day control of a portfolio to a fund manager who invests in accordance your declared acceptable level of risk, financial goals, tax position etc.
It is delegation of power.
 

Rosettastone57

Registered User
Oct 27, 2016
1,431
0
Could you expand on that? All investment decisions are discretionary, the investor chooses whether to invest in shares, building society, national savings, or get-rich-quick bonds. An attorney has to use judgement on these things to take into account the donor's best interest and circumstances. What do you think needs COP approval?

By the way nobody has suggested delegating any powers, but getting expert advice before using those powers, which isn't delegation.
I came across this issue when my mother in law first went into care. Others will be along soon with better advice to explain it ,but my understanding is that if you were to invest money for example in the stock market via a platform known as discretionary funding, you are reliant on a third party moving your money around, without the platform consulting you on every decision. As an attorney, this is not best practice, so needs permission from COP as attorneys or the platform may not be acting in the best interests of the donor
 

Bunpoots

Volunteer Host
Apr 1, 2016
5,107
0
Nottinghamshire
I don’t know if this helps but I invest (in a very small way) in property and get an average rental yield of 6-7% - way better than any other investments I’ve found recently.
 

MartinWL

Registered User
Jun 12, 2020
586
0
I came across this issue when my mother in law first went into care. Others will be along soon with better advice to explain it ,but my understanding is that if you were to invest money for example in the stock market via a platform known as discretionary funding, you are reliant on a third party moving your money around, without the platform consulting you on every decision. As an attorney, this is not best practice, so needs permission from COP as attorneys or the platform may not be acting in the best interests of the donor
Now explained, that makes sense, as you would in effect be delegating investment decisions to someone else. Safe low-risk investments are probably the wisest for attorneys in most circumstances.
 

Bod

Registered User
Aug 30, 2013
1,376
0
I don't know about the legalities but I think you would need to strike a balance between what savings rate can be obtained and what the grandchildren could borrow at - my instinct says + .25% might be considered too low and +0.50% would be more the minimum market rate.

In both cases the interest or net rental income are taxable but suspect you are aware of that (for interest first £1000 or £500 exempt depending on other income).

The interest rate to be commercial, rather than preferable, is not a thing I had considered.
The OPG website makes much of if the loan is interest free, then the whole loan is a "Gift" because the interest is given away. Making an interest bearing loan is not mentioned.

Bod
 

nitram

Registered User
Apr 6, 2011
21,539
0
North Manchester
Bear in mind that on MIL's death there will be CGT to take into account, don't know if an interest bearing loan comes under the 7 year exemption.

The CGT rules may change when the chancellor decides how to pay for covid.