How is it best to invest mums money and avoid too much being taken by tax to pay for her care?

[Flower24]

Hello, i have POA for my mum who is nearly 92 and moved to a residential home late last year. I have just sold her home ( which i cant tell her) as i need the money to pay for her care.

I am trying to work out the best way to invest it and was told to takeout some bonds after working out how much money she needs a year. Can i open those in mums name or do i open them in my name? Will she be taxed on any interest she makes? I am trying to make as much money as i can to pay for her care.

Is there a better way to invest her money?

I am conscious as having POA that if i do this wrong i can be liable for any looses.

Any advice would be much appreciated.

Many thnaks
Jo

 

[SAP]

Hello @Jo Hefferman , I replied to your last post too.
It might be an idea to get some financial advice regarding this , many independent financial services offer a free or cheap 20 minute consultation which I found very useful. I suppose the important thing is not to lose any funds. Some financial institutions will not allow a PWD to have stocks and shares if their money is to pay for care ( and they lack capacity). I moved my mums money into various accounts with different banks to ensure her funds were protected by the FSFC

Why claim direct with FSCS?

By claiming directly with FSCS when your financial firm fails, you'll receive all the money you’re entitled to. Click the 'Check if you can claim' button to get started.

www.fscs.org.uk

I also invested in some premium bonds for her. All of this was done using the LPA and all accounts are in her name with me at the attorney. It can be quite time consuming and some places still require seeing the original documents. The intrest rates are good at the moment so that works in her favour but she has now gone over the tax threshold you need to ensure HMRC have your details as attorney. Any tax on savings is reported to HMRC by the various banks etc and they will then either deduct it from any income like a private pension or will be in touch regarding payment. Mums comes straight off her work pension.
Following the sale of a property, the funds are protected for up to 6 months if under 1 million pounds so you can take some time to organise thing.

Temporary high balances

Learn more about the protection FSCS provides for temporary high balances. Check if your money is protected and find out how FSCS can help you.

www.fscs.org.uk

 

[nitram]

You open any bonds/accounts in her name using your LPA, they will be called something like mum - poa Jo, institutions differ in how they name them.

The first £1k of interest pa is tax free.

Not all bonds accept POA accounts especially ISAs, the individual bit in ISA can mean systems will not accept two names as holder.

To get an overview of what is available have a look at
https://savingschampion.co.uk/best-buys

Consider a mixture of easy access, notice, and fixed term.
Organise it so that all bonds do not mature at the same time of the year even if it means not going for the best rates, this gives a more regular supply of cash to put into easy access/current account and can also level out changes in interest rates.

 

[StressedDaughter]

I am not giving direct financial advice because I’m not registered but I did the following for Mum:
Put £20k straight into a fixed cash ISA in Mum’s name - I am registered as LPA - she hadn’t used this years tax free allowance. Then opened a couple of fixed rate bonds. Then some accessible accounts with higher rates.
You really need to do a cash flow to work out how much can be tied up and likely access dates.
All of this was in Mums name with my LPA registered. I did it all - Mum was never present.
Consider spreading funds over different institutions as in the longer run only £85k is protected in each one.

 

[Flower24]

Thank you everyone for all that really useful advice, which is much appreciated and very helpful. I will start working on this now as i have till beginning of November then and i also need to pay for her funeral in advance so this is covered. Thank you again for taking the time to reply Jo

 

[Duggies-girl]

If your mum's total income from pension, works pensions etc is less than the tax threshold that is currently £12570 she can earn up to £6000 interest from savings. The personal rate for savings is £1000 plus the £5000 starting rate for savers. If her earnings are more than £12570 then each extra £1 reduces the amount she can earn over £1
If her earnings or pension are less than £12570 she can earn interest up to the threshold of £18570 It's a bit complicated and if she earns more than £10000 she (or you) will have to fill out a tax return.

This Gov UK link explains it quite well

Tax on savings interest

You do not pay tax on your savings interest if you're on a low income.

www.gov.uk

 

[Rayreadynow]

Unfortunately even hundreds of thousands will only attract a meagre about of interest.

 

[Rayreadynow]

If your mum's total income from pension, works pensions etc is less than the tax threshold that is currently £12570 she can earn up to £6000 interest from savings. The personal rate for savings is £1000 plus the £5000 starting rate for savers. If her earnings are more than £12570 then each extra £1 reduces the amount she can earn over £1
If her earnings or pension are less than £12570 she can earn interest up to the threshold of £18570 It's a bit complicated and if she earns more than £10000 she (or you) will have to fill out a tax return.

This Gov UK link explains it quite well

Tax on savings interest

You do not pay tax on your savings interest if you're on a low income.

www.gov.uk

You mean £18570 worth of interest.....? you would need a lot of Capital to get that amount of interest.

 

[jugglingmum]

You mean £18570 worth of interest.....? you would need a lot of Capital to get that amount of interest.

As specified by Duggies-girl this would include any pension income, which would need to be below £12,570 to allow the additional £5000 savings rate to be available

As a house has been sold it could easily be £400,000 at say 4.7% gives £18,800

If the house was in London and wider South East it could easily have sold for more than this.

3 bed semi detached houses sell for a lot more than this

 

[Rayreadynow]

As specified by Duggies-girl this would include any pension income, which would need to be below £12,570 to allow the additional £5000 savings rate to be available

As a house has been sold it could easily be £400,000 at say 4.7% gives £18,800

If the house was in London and wider South East it could easily have sold for more than this.

3 bed semi detached houses sell for a lot more than this

Would you need to lock it away for maybe a year for 4.7% rate?No withdrawals.

 

[maggie6445]

As specified by Duggies-girl this would include any pension income, which would need to be below £12,570 to allow the additional £5000 savings rate to be available

As a house has been sold it could easily be £400,000 at say 4.7% gives £18,800

If the house was in London and wider South East it could easily have sold for more than this.

3 bed semi detached houses sell for a lot more than this

Those house prices are very much dependent on where you live! Semi in our area is less than half the £400,000 you quote! It's what makes funding care so unequal in my opinion !

I think pensions can be more than the personal allowance . The personal allowance plus £1000 tax free interest and £5000 savings starter rate then deduct pensions ,balance will give tax free interest on savings allowed . It's a reason why the freezing of personal allowances has hit pensioners with savings hard.

 

[nitram]

Would you need to lock it away for maybe a year for 4.7% rate?No withdrawals.

Currently, 'no'.
https://savingschampion.co.uk/best-buys/personal/easy-access-accounts .

Unwise to do this with all available cash, some should be locked in at a lower rate.

 

[nitram]

Those house prices are very much dependent on where you live! Semi in our area is less than half the £400,000 you quote! It's what makes funding care so unequal in my opinion !

There is a relationship between house prices and care fees,

 

[Rayreadynow]

There is a relationship between house prices and care fees,

I think you mean the average weekly rate in the UK circa £1300 but more in and around London.

 

[maggie6445]

There is a relationship between house prices and care fees,

Not quite a fair relationship though. 36 months average care home residency, at £8000 monthly is £288.000 leaving money for an estate. 36 months at £6000 is £216.000 nothing to leave to the estate and become LA funded. Not exactly fair for a lifetimes work.

 

[Rayreadynow]

Not sure I recognise those figures:

 

[maggie6445]

Not sure I recognise those figures:

View attachment 71265

The figures were an example. Dementia homes are £1300 - £1500 in our area and house prices are below national average.
Nitram said care homes costs are higher in high house price areas . I used those figures as an example of how much it might cost even if care homes are higher and how much capital might be left. As I say an example .

 

[Rayreadynow]

What is true is that its a totally unfair system that affects a small number of people in percentage terms that nothing will change

 

[jugglingmum]

Those house prices are very much dependent on where you live! Semi in our area is less than half the £400,000 you quote! It's what makes funding care so unequal in my opinion !

In general London and the South East have significantly higher property values, and I was making the point that if you sell a property it is possible to get enough money to generate that level of interest.

Mum's house was in a North of M25 commuter town and I sold mum it in 2016 for in excess of £400k - it was a needs significant improvement property and was sold to a builder for a quick sale.

A property of a similar age size and condition to mum's near me at the time would have fetched less than £100k.

Care home fees where mum lived would have been a lot higher than she paid up here, so I won but some people lose. I wasn't saying it was fair, just an example as to how you could generate that level of interest at current interest rates (found via Google).

 

[Rayreadynow]

I suppose to make it fair you would have to insist people took Care Homes within the council area they lived.