How to logically explain to an 89 year old stubborn man not to give almost half a million to hiss adult grandchildren

[Rictasmorticia]

i have been approached my his DIL for help in how to explain to him why this is a bad idea.

He is a self made man, a widower and lives in luxury apartment on a complex with facilities . Presently he is almost fully independent but fears he may have the beginnings of dementia. 5 years ago, on the death of his wife he gave £100,000 to his DD and DS and £50,000 to each of his 4 GC. They were all in their 20s at the time and each of them have been extremely sensible with the money.

This money represents every thing he has except for the property. The son and daughter want him to keep the money for himself. Their view is that if he does need care it will buy him the very best.

He has always acted the Patriarch and thinks he knows best and can be quite pig headed.

What they are looking for is facts and figures that they can present to him.

What is his annual pension? That may take care of a fair chunk of the cost of care home. How much is the house worth. Even a fairly average house worth £250000 will cover 100 weeks minimum and few people who go into care homes remain there for that long.

I would just leave him to it.

You can gift as much as you want but if you have enough to pay IHT then that money you have gifted gets included in the IHT calculation but £3000 can be gifted tax free.

Because if he needs care, especially dementia care, as he gets older, it costs about £1,500- £2000 per week somewhere nice. So he will burn through the money he gave his children in three or four years. If he has no money, then he could end up in state funded care, which is utterly miserable and horribly understaffed. It is perfectly possible to have dementia and live a long time. My mum has had dementia for twenty years and is still fit as a fiddle. She's needed residential care since my dad died four years ago, and despite him leaving about 3/4 million to provide for her, we are already discussing, with some anxiety, what to do when it runs out.

He has a property to sell though, so it depends what that is worth as that potentially could cover care costs if necessary.

How much are apartments in his building selling for, if they are selling? Some retirement apartments lose 50% on first resale.
I would think they should sit down with him and budget for different scenarios, write it down and explain re deprivation of assets.

It depends on income really. If he gives all his savings away how will he pay for care if he needs it and wants to stay in his home? Any gift given will be subject to IHT unless he lives for a further 7 years. There is talk of this rule being tightened in the budget so that might change.

It's not just a care home though. I think his family would like to be able to go on holiday or maybe pay for medical treatment if needs be

ok, so if he has enough pension etc income to give his £500k away for his current needs excluding future care, then I would encourage him to put the £500k into the best interest paying banking option (or options) available and then make regular gifts out of the monies earned on interest - there’s a regular gifts exemption from IHT where you can gift an unlimited sum if it is made from income you don’t need and it’s not subject to clawback if you die within 7 years. Then he still has the £500k for care, but for so long as he doesn’t need more care than his current income allows, his grandkids get small amounts regularly that they could use in various ways. It wouldn’t be lots of money post tax compared to what he wants to gift but he could easily be giving his grandkids, say £2-3k per year out of income on the £500k post tax on today’s rates etc. That’s not bad. Don’t think you can do that if he is spending his capital on daily living though.

My mum had dementia. If he hasn’t arranged POA, that should be done (but might be too late if he is already showing signs of dementia). I accessed her savings to pay for 2 care visits a day. I can’t remember the exact cost but it was several hundred a month I think.

Then when the situation was reaching crisis point, she went into a care home for a month initially. It was a respite stay with no specific nursing needs, that cost about £5k.

I tried her out living at home again but there were too many risky situations and falls that occurred so she moved into the care home permanently and I sold her house. She was there about 17 months, towards the end, her care/nursing needs increased significantly and in the last few months, it was costing about £7.5k a month.

The fact that she had the money and was able to fund her own care meant that I was able to choose the caters I used, choose the lovely care home she went on to reside in, and move her nearer to me. If she didn’t have the funds, yes the council may have paid but the options would have been limited and there is very definitely difference in quality of care and care homes.

Ideally he keeps his money, however if he insists on giving it away to the gc, if they care as much as they say they do, it should be a family decision to ring fence it whilst he is alive to finance his care (I imagine the council will have something to say about deprivation of assets anyway).

If this helps, mother in law is still in her own home. Her health has deteriorated so much in the past 6 months she can no longer stand on her own so requires 2 carers at a time, so 2 carers 4 times a day = 8 carers daily, plus the extra time to shower her twice a week. Her monthly care bill is £4,637.

This.

Getting independent advice on his particular needs and circumstances and planning correctly for tax reasons for him and his heirs is surley the most logical thing to do for everyone.

If he is determined then they could instruct the grandchildren to keep the money safe in a savings account to be used for his care if needed.

Thank you for so many useful insights. Thoughts in the family are not that they are infantising him. They feel that they are protecting him. The view is that the grandchildren are at the stages where they are still building careers and some are caring for very young families. They do not want to add managing his money for him. They would be happy to leave it to their parents or his Financial Advisor to decide what is best.

They are extremely grateful to the money they have already received. It has made an enormous difference to their lives.

He's probably better off doing a percentage split in his will.

Even though he's in good health, he's still 89 and almost definitely living out his final decade. Time isn't on his side.

All being well, he'll pass peacefully while still in reasonable health and avoid large care home fees. But he needs to plan as if that's a possibility.

You all sound lovely - I think many people discover that whilst it’s nice to have big sums earlier on it can then create unexpected issues with either care needs, expectations or IHT ,

Care home cost are anywhere from £1.5k per week for standard home. Much more for luxury care.

It depends where you live. Those are London figures. The best care home where I live is around £1.5k a week.

Personally I don’t see the point of arguing with someone about this. Why can’t they take the money on paper, stash it away and give it back if he needs it later on?

@Blossomtoes they know nothing about investing. They don’t know anything about the impact on their own tax status. What happens if they split from the current partner. How to prove that they are just minding the money. A someone said earlier lots of money can add complications. He is used to money and knows how to handle it. There is also the thought that what happens if one of the grandchildren does not want to give it back when the time comes.

There is also the thought that what happens if one of the grandchildren does not want to give it back when the time comes.

You said they wanted to protect him. 🤷‍♀️

Sorry, in my comment below I meant that the grandkids could get £2-3k each per year. Which they could then put in their own ISAs, giving them a bit of a boost to cover maternity leaves and expenses when they have families.

People change. Maybe the influence of a partner or change in their circumstances. At the moment they are being carried on by the momentum of what others are saying. I doubt ant one individual wants to stand out at the moment. What they are saying in public might not be what they think privately.

It’s very reasonable to be aware of the risk that people change their minds, if you are counting on them not to do so.

They can accept the ££ but save it and then use it to support him in the future should care be needed.

If his apartment would sell for a lot on the open market that can cover a good portion of care costs, supported by his regular pension and Attendance Allowance

If he gives the ££ now the amount that will be subject to IHT will taper down over the years.

If he leaves it in his will it will be subject to whatever full IHT is.

I would say accept the money but save it for his potential use or to support him.

My mum’s financial advisor said allow £1m for 10 years in a good quality care home, or purchase an annuity for £450k

Also - if any of the grandchildren are married, and get divorced, the money may get caught up in a settlement and not be able to be ringfenced to give back.