OpinionApr 23 2014

When family finances are a matter of life or death

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My brother, sisters and I were forced to move my mum into a care home just over a year ago. It was a heart-rending decision, but she had been diagnosed with Alzheimer’s and a series of incidents had convinced us it was no longer safe to care for her at home.

For the past year or so we have been clearing the house and deciding what to do with it. Letting it would have proved the best investment, delivering a decent income. But there were obstacles.

The house would have needed renovating first. Try getting a brother and two sisters to agree on how much renovation and whether you should aim to let to students or a family.

It quickly became clear that the work would be left to me – and I live more than 100 miles from my mum’s home in Norwich. So, I suggested selling it instead; I felt considerable relief when they agreed. We have had a decent offer and I hope to clear around £185,000 once the various bills are paid.

But what to do with the money? My mum will be 92 next month. Mentally she has almost left us, but physically she has become stronger due to the excellent care she is receiving. She has a tax-free war widow’s pension, which, along with state pensions, come with a hair’s breadth of covering her fees.

So what to do with that £185,000 in the current climateas her with power of attorney? If it were my money I would put most of it in the stock market. But it is Mum’s money. Aside from her age, I also have a responsibility to my siblings, who will eventually inherit it.

Neither she nor they have ever had any truck with the stock market, except for windfall shares. Banks and building societies can be reluctant to accept power of attorney on their best rates, because they are on the internet, so I have been reading the terms and conditions of fixed-rate bonds very carefully.

I recall from when my father-in-law died that banks and building societies can behave very differently in the case of death before the bond comes to the end of its term.

I reckon that if I choose with care I should be able to get around 3 per cent on however much I decide to invest. That is considerably more than easy access will supply.

If I choose with care I should be able to get around 3 per cent on however much I decide to invest

What is more, it should be tax-free thanks to changes made in the Budget last year.

The one relief is that, unlike some friends, I will not have to buy an annuity with the money. Mum would have hated her life savings to be used in such a fashion.

And that is the other key element in this scenario – and perhaps the most difficult. Trying to decide what she would want and carrying out those wishes.

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Dependants come first

PwC’s pension survey published last week is, I suspect, another case of consumers saying one thing to survey firms and then doing something completely different.

According to the survey, the lowest priority was making sure dependants had security after their own death.

What nonsense. Most parents will make enormous sacrifices to help their children.

The other dubious finding is that 63 per cent of 50-75 year-olds say they intend to pay an IFA for advice on how to access their pension pot.

Sorry, but much as I would like to believe it, I just do not.

When push comes to shove, many are just as likely to have a chat with one of their mates who is already retired or seek help at work.

Of course, it remains to be seen what will happen to the government’s pledge on retirement advice.

But unless someone else is going to pay I suspect these findings must be taken with a pinch of salt.

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Stress for the bereaved

I was interested to read the comments of IFA Stuart Dewin of Questa Chartered suggesting that providers hang on to deceased clients’ money for as long as possible.

I have been asked about this before, but evidence has always been anecdotal.

I have therefore been forced to put hold-ups down to incompetence or error. However, his comments somehow ring true.

Certainly, I have always suspected that some firms may not put as many resources into this area as they should and do not deem paying out money to executors a priority.

By doing this they not only create hassle for an IFA – they run up bigger bills for executors and create unnecessary stress for the bereaved.

Perhaps the regulator should take a peek to check everything is working as it should.