POA – Maximising Funds to pay for Care Home Fees

[splodgeroo]

I’m new on this forum, and it’s my first post.

My father in law has over the past 2 years been diagnosed with vascular dementia, which as you all gets a little worse as time goes by and he has had a few falls and injuries affecting his mobility. To cut a long story short, he has now been in a care home for the past 9 months or so.

He is self-funding and has his own home, and has a good bit of savings tucked away. He has a decent Company Pension, State Pension and the Attendance Allowance coming in to cover most of the cost, as well as that we have now got tenants into his home, but he is still a bit short having to dig into his savings to pay a little each month. With bank Interest rates very low, his savings will gradually dwindle over time.

His daughter (my wife) and i are the POA for Health and Finance, and have set everything up regarding direct debits, online banking and all healthcare issues.

My question is that the wife and i have a house that we rent out and is making a steady income from a long standing tenant. The property is mortgaged. My question here is,

Is there a legal way of making my father in law a partner and use his savings to pay off the mortgage and use his share of the income rent to pay the remaining part of his monthly Care Home fee. At the moment, the interest that he is generating on his account is nothing to compare with the rent that he could earn from his investment. H

I have trawled through this forum looking for a thread relating to this matter, and i understand that there are many legalities, and it seems that no matter which way you turn the Government and care Homes are determined to bleed everyone dry. It looks like when you reach a certain age, you are not allowed to do what you want to do with your cash.

But at the end of the day, surely we as POA’s are responsible for protecting their assets, and maximising their income and wellbeing.

Any thoughts or advice would be welcome.

 

[nitram]

In essence you are considering using (some of?) your FIL's savings to buy a property and using the rental profit to pay his care fees. This has the disadvantage that capital cannot be nibbled at if the rental does not cover the fees.

You are free to invest his assets in any way you want as long as you always act in his best interests, there are many who would say that buying investment property is too risky.

You also have the problem of his effectively buying a share in your house, this could raise all kinds of concerns.

All this can probably be done but you will need expert legal advice and assistance.

 

[jenniferpa]

Hi and welcome to Talking Point.

I think the major stumbling block, if I've read your post correctly, is that while this idea might provide a net benefit to your FIL, it's also going to (I assume) provide a benefit to you. And generally you cannot use your role as attorney to benefit. Having said that, assuming that the benefit to your FIL is noticeable, I think there is only one real way to get an answer: you need to apply to the cop for a decision.

You say make him a partner, but I think what you are effectively doing is make him the mortgage holder. I think you need to be very clear about what you want to do before approaching the cop. I have no idea if your partner idea is legally feasible so you need to consult a solicitor about that. Holding a mortgage is of course feasible, although I suspect that for it to be acceptable the rate you would pay him would be the same as the commercial rate.

I'm rambling now: you really need to make an application to the court, after first consulting a solicitor about how to structure this to provide adequate protection for all of you.

 

[Kevinl]

Given that he has a state pension and a company pension too you have allowed for the fact that any income from renting out a property could very well be liable to income tax at the relevant rate.
You'd have to do a self assessment for him and settle any tax before the money could be used to pay for his care so you have to knock something between 20-40% off the income to account for tax which may be due.
If you make him a partner in the house you're currently renting out I would think the OPG would want a third party to be involved to ensure that his best interests were being met and if your wife has any siblings I'd make sure they were onside with the idea too.
K

 

[splodgeroo]

Thanks for all your replies so far.

Nitram - My FIL is very lucky that all his pensions and allowances are pretty close to paying off the monthly care Home fees, therefore the capital will not need to be nibbled at as the rental income will more than cover the outstanding fee and also give him thereafter a better income back into his savings account than he would get if he left it in an ISA account that would be nibbled into. I would use that point to say that that would be acting in his best interest.

You are right Jenniferpa, as the Attorney’s we are not allowed to benefit, but at the moment in time we (the wife and I) would not, as all his investment would feed back into his account. There would be no mortgage, as his investment would pay that off making the property 75% his giving him 75% of the rental income.

Example: If he leaves £60,000 in an ISA, he will be lucky to get £1,000 interest back per year. If he invests the £60k in the property, that’s £4500 rent, less 20% Income Tax makes it about £3,600 income there or there about’s.

Kevinl – Yes, i’ve worked out the maths regarding the Income Tax etc, and and a self assessment shouldn’t be a problem. The wife has no siblings and that shouldn’t be a problem.

It all seems a bit of a minefield and like you say Jenniferpa, we shouldn’t use our role as attorneys to benefit, but the wife will be the beneficiary at the end of the day. So, really it is of interest i suppose to make sure that the funds are maximised to generate as much income as possible.

All being well, there should be no deprivation of a assets, so that shouldn’t be an issue.

 

[jenniferpa]

It really isn't a question of if your wife will eventually inherit what is left. I reiterate, you really need to make an application to the cop.

You are asking us if what you propose is acceptable, but the only way to find that out is to ask the court.

 

[splodgeroo]

It really isn't a question of if your wife will eventually inherit what is left. I reiterate, you really need to make an application to the cop.

You are asking us if what you propose is acceptable, but the only way to find that out is to ask the court.

Hi,
Yes, i'll contact our solicitor to find out, and i'll post areply with any progress. It may help others as well.

thanks

 

[canary]

Do bear in mind that although everything will cover the care home fees at the moment the care home fees will go up each year - and more than inflation too. The last year my mum was in her care home the fees went up by 15% and I have heard of higher increases.

Will your scheme be able to cope with these sort of increases?

 

[splodgeroo]

Yes, that's unfortunately what we're all up against with the increases. It's just that I'm looking at the options. We can either sit back and do nothing, or try and help by maximising the income.

 

[splodgeroo]

Thanks for that, so am I right in thinking that you need a COP ruling on all financial affairs. For example, if you come across a bank account paying a better rate of interest, you can not just open a new bank account for them and transfer the money?

 

[love.dad.but..]

Thanks for that, so am I right in thinking that you need a COP ruling on all financial affairs. For example, if you come across a bank account paying a better rate of interest, you can not just open a new bank account for them and transfer the money?

I was attorney for dad and opened many accounts for his house sale funds...the interest rates were as good as I could get in post sale year before he died but had the interest rate suddenly jumped I would have closed some and opened others to maximise his opportunities
whilst protecting his funds. That would have come under my remit and authority as his attorney for finance and no need to refer to COP as I would have been fulfilling my duty to look after dad's finances in his best interests. Perhaps with Deputyship it is more rigid?

 

[jenniferpa]

Thanks for that, so am I right in thinking that you need a COP ruling on all financial affairs. For example, if you come across a bank account paying a better rate of interest, you can not just open a new bank account for them and transfer the money?

No, not for that example. That's just regular financial management.

 

[splodgeroo]

It's a bit of a minefield, and you could end up in trouble by trying to do some good!

 

[canary]

If in doubt speak to the Office of Public Guardians.
I have found them very helpful. I had deputyship for mum and although I had authority to sell mums property I wanted to sell it privately to one of mums friends (who is almost family) and wanted to make sure it was all OK. I phoned them up and got valuable advice about how to do it.