Protecting her assetts

[Natashalou]

After selling my mothers bunglaow and sorting out all the odd bits of money she had in different places, she is now in the probably good position of having assetts of over 300k. She has about 1k per month coming in as she has a private pension from my now deceased father as well as her old age pension.
Her care home fees are £3200 per month alhtough I have been told there should be a slight reduction for the nursing element. I have also put in for attendance allowance for her.
there seem to be all sorts of schemes and bonds to purchase a fee care plan etc for her but I cant help being very suspicious of these. Her bank have suggested a bond but this ties up her money for long periods of time. A friend has advised the best thing is to buy another property with half the money and rent it out, then it can be sold when the first half of the money runs out, with the rent going towards the care fees in the meantime.
I really feel burdened with the responisibilty of all this money and the wisest thing to do to ensure there is enough to pay for her for the rest of her life.
Does anyone have experience of these care plans or have any suggestions?

 

[jenniferpa]

It is a worry: I have to say I find myself paralysed with indecision over these matters. I have seriously, am seriously considering purchasing an immediate needs annuity (you pay a lump sum and get a guaranteed return no matter how long the person lives) but it's a bit like gambling. If she lives a long time, then it's more than worth it, but if she doesn't... I very much resent the fact that my mother pays income tax on her pension/investments (except what she has in an ISA and the premium bonds). That's one of the advantages of the annuities: if they're paid directly to a nursing home they don't incur tax. I am a conservative investor by nature, which adds to the problem. In your situation I would be inclined to consult an independant financial advisor: you pay for the service, but like so many other things, you get what you pay for. Just make sure they are truly independent. There is a definitely an attraction to purchasing property: the appreciation for one thing, but there's also the hassle of managing it. So no advice really, just sympathy

Jennifer

 

[Skye]

Hi Natashalou

Have you thought about going to an Indepenent Financial Advisor?

It's a lot of money to risk losing, and if you purchase a care plan and your mum doesn't live long the money is lost.

I went to an IFA last year and explained the situation. He has invested our money in high income bonds (safe ones!) so that we get just the income we need just now, but should John need residential care in the future, we can increase the income.

You need to make sure (ask!) that the advisor is truly independent, not tied to one company, as bank advisors for example are.

It doesn't cost us anything. We could either pay ours a regular fee (quite high), or allow him to keep the commission he gets from the fund managers.

Apparently very wealthy clients are better off paying the fee, while the rest of us are better off with the commission deal.

Don't just go to the first IFA. Ask around, and go and have a consultation with several. The initial consultation is free.

This works for us, I never have to worry about money, but others will no doubt have other solutions. Think about it carefully before you decide.

 

[Norman]

Hi Natashalou
good advice from Skye.
The best thing we ever did was to get a FA.
I fyou do a search for financial advisers you will be able find some in your area.
Norman

 

[Kriss]

Same as above, get an IFA (I would recommend one not associated with a bank or building society) get recommendations from friends if possible.

My Aunts advisor was a Godsend and had loads of experience dealing with elderly clients. If you are nervous of investing then you can choose a low risk portfolio, it may never make money but there should always be enough there to maintain and pay for anything your Mum needs.

Kriss

 

[Michael E]

Personally I am very suspicious of Financial Advisers independent or otherwise. The money industry works on commission rates and often the least favorable deals offer the highest commission... It takes a very very honest person to recommend a deal which gives him only a £1000 commission when a very similar deal that is a bit worse or much worse for the client offers him £10,000 commission. Of course there are totally honest ones out there - its just I have never heard of one - yet. By the way they will often offer to share the commission on some basis with the client - you.

Another alternative is to invest the money in the best form of savings like a building society or similar (bonds are a licence to rob you) and use the interest together with the pension money to pay for the home. What is lacking each month make up from the capital. It is all a gamble as none of us know how long we will live for but at least that way her money is being used solely for her benefit and for as long as it lasts... After that the state can take the strain.

You should keep it really simple for your self.. Certainly take some free advice but trust nobody except friends who have nothing to gain.. A lot of people in the money industry become very rich - on other peoples wealth.

 

[Skye]

Michael, I do think you are being unnecessarily cynical. When it comes to investing our money, I'd rather trust someone who takes our situation into account, and advises accordingly, than a bank or building society who are totally impersonal and only receive commission on sales of their own product.

As for bonds being a licence to rob, I haven't yet been robbed. Our money is there, and growing, I have a good income from it, and I don't have any worries. If a bond is not performing well, my advisor will recommend moving the money -- it's up to me whether I follow his recommendation.

As for leaving the money in a building society account, the interest would not be sufficient to fund a NH, and once you start drawing down capital it depletes very quickly as the interest factor reduces. My aim is to keep our capital intact for as long as possible, so that I keep control of John's care.

Sorry to disagree so strongly. This is just my opinion.

 

[Natashalou]

Many thanks

for everyones views and advice. I too have slight concerns about financial advisers..but my real concern is it seems so often we hear of money being wiped off the stock market, pension plans collapsing etc I worry that whatever option I took would be the one in a hundred that collapses/fails or whatever without any compensation!
When the money runs out, however and wherever it is invested, I dont think the state WILL take the strain...as there are substantial top up fees which unless my situation changed radically I wouldnt be able to afford..so I guess this would mean a move to a different cheaper home. Thankfully that scenario is still some time away.!

 

[Brucie]

Part of me agrees both with Michael and with Hazel.

I've never had a financial adviser, mostly for the reasons Michael has given, but I also realise my own shortcomings in understanding what is best for whatever funds we have.

I always veer to the safe options, but I spread what we have around. Never going to get huge capital growth, but hopefully won't be broke either.

As with all advice on TP - and this is the power of TP - differing views given in public provide us with the basis for making some sort of decision. Sometimes they can confuse us, but I'd prefer to hear the good and bad stories and then judge risk on the basis of that.

 

[Skye]

Bruce, of course you're right, if you're able to look after your own investments, that's the best way. I did it myself until last year.

Now, I'm only too glad to let someone else take the responsibility. My poor addled brain just can't cope!

 

[Michael E]

There is something in me when it comes to investing money that says -- If the 'deal' is so much better than the building society why on earth does not everybody do it? The answer quite simply is the degree of risk... In my 'richer' days I played the stock market on a daily bases.. It was a game with money which if I lost it all I would not be 'broken'. I only say that to indicate I am not a 'wimp' with dosh.

A very 'close relative ' of my self and my mother became a 'financial advisor' for Sun Life/Axa and wanted her to take a proportion of the capital on which she lived (she had no pension state or otherwise) out of the building society investments (which she regularly swapped around to get the best rate) and into a 'bond' which would produce far better income... She asked my permission - advice and I told her that the commission the relative would receive was almost a 25% of the money invested. In the end she would possibly loose - long term a high proportion of her investment in this bond and the income would shrink. Her response was that the very close relative needed money at that moment and the 'relatively' small amount was no problem for her.

A short time later the 'close relative/financial advisor persuaded her to double her investment because it was such a good opportunity!

3 years later the bond continued to pay out the high rate of interest but my mum, a wise old bird, realised it was in fact paying part of the 'interest' out of the capital and if she continued with it there would be no capital left at all and of course no 'interest' payments... she managed to get out only loosing HALF of her capital... Interestingly - or not - another friend of mine invested the proceeds of a small house sale in a similar Sun Life/Axa bond and eventually lost the lot! The rule is if it seems so much better than a safe and secure investment then it is probably dodgy..

Safe secure investments in places like building societies - but of course you must shop around for the very best rate available and not hesitate to move from society to society in the chase for the best rate and never ever put all your eggs in one basket... Cannot believe it's me writing these things but........... safe investments are safe - ish... Stock markets crash, property prices can fall, major insurance companies go broke and secure pension schemes can totally fail... If it is your main income - your only income - be very careful of any investment which produces substantially more than the best high street building society rate...

why do financial advisers exist? To pay their mortgage and feed the wife and kids.... If you make safe investments then they will fail in their primary objective. All of which is just opinion... Of course there are good ones - the problem is to identify them.