Investment Advice/passing onto next generation

[helpneeded]

This would be for parents who have asked for my help.

• Both early 60s.
• Both retired, with good public sector pensions that are more than ample to support outgoings
• No debt
• Own their own house outright as well as a holiday house (that was inherited by them as my mother's original home house and will not be sold). combined value of this I'd estimate to be c. €500k (split €350k on the home house and €150k on the holiday house)
• Following the sale of an investment property (being landlords didn't work for them anymore) they have c €500k in the bank.

Not a bad position to be in overall, but what can be done better with the €500k than leave it in the bank? They are risk averse, so they are not really interested in considering equity investments. There are a handful of products that might do slightly better than banks that I can see with the likes of Irish Life/New Ireland, but requires fixed term investment and the return is not guaranteed (equity linked with a floor of 100% type thing) which ends up not a whole lot better than a state savings at best and at worst get no return after the term ends. So is there a good, but low risk investment product worth considering?

They would be minded to reduce their assets before a fair deal type scheme might ever be a consideration. Thankfully myself and my one sibling are in comfortable positions - so no urgent or immediate need/reason for money to be passed on, but my parents are of the view it will all be given over eventually and there is no point in holding onto that much cash and it could be used to pay down mortgage/upgrade houses etc for us....

I'm adamant they need to keep a good amount in quick access savings (I'm thinking €100k), they also should invest in their own house to bring it up to an A energy rating to be suitable for them for the rest of their lives. I don't know how much that will cost - but even if that's another €100k, they'll still have €300k after that.

Whilst I'd rather they enjoyed their own lives with their own hard earned cash, they don't believe they will ever need that much and are very concerned that Fair Deal will end up taking it all anyway, so in particular in the absence of having a good investment option is passing on wealth at this stage of their lives really the optimum strategy? If so, any good ways to do this, as clearly the combined wealth will exceed the CAT thresholds for both of us? Neither of us live at home and neither of us ever will.

I was a bit more minded to have the inherited home house/holiday home transferred to one of us sooner, that would put it out of reach of Fair Deal and keep it in the family (a priority for them.) In reality this would mean nothing as we all use the house freely/on demand in any case and this wouldn't change. Given they would never sell it, there is no other way they can utilise that asset.

 

[thedaddyman]

Firstly, bear in mind that from a Fair Deal perspective, there is a 5 yr look back rule where the scheme can review any asset transfer done in the last 5 years. In that respect therefore, the sooner it's done, the better

In terms of the current main residence, aside from the energy efficiency work, is there anything else that should and could be done now?. Likewise, any car changes needed etc. Any health issues that they have the money to resolve privately. Are there grandchildren whose education could need funding or potentially a deposit at some stage in the future?

I'd recommend a few very good holidays also.

 

[helpneeded]

Thanks, no work required on the current main residence (other than energy efficiency) - cars they both happy enough, but being in early 60s they'd need to be planning for a few more replacements etc. These types of issues are all why I'd be adamant they keep at least €100k in a quick access account.


Aware of the 5year lookback rule, which is why they are minded to be taking steps like that now and not in 10 or 15 years time when they might be more likely to be closer to requiring nursing home care. Both are currently in good health so absolutely no reason to believe that they would need that care. But you never know what might happen

 

[cremeegg]

They can transfer €6k between them each year to; you, your spouse, each of your children, your sibling, their spouse and each of their children, without any tax being due. Depending on how many people involved, that could draw off significant money in 5 years.

 

[helpneeded]

Thanks,

I was aware of the €6k per person/€12k per couple small gifts allowance. No Grandchildren in the family.

I suppose was looking to see if there are any clever options that we should be considering, but it seems not, so given the risk appetite I think the best plan is to spread the cash amongst a number of the institutions (to avail of 100k deposit protection) in the best buy for deposits threads and pass on cash each year availing of small gifts exemptions so that the amount my parents hold reduces over time. In the meantime they get to upgrade the house and take as many good holidays as they can!

Regarding the holiday house they hold - am I right to think that the best option there is probably to give that to myself and my sibling now? This uses some of our lifetime allowance for CAT, but that would happen at some point anyway. Given it won't be sold to generate cash, and if they give it to us we'd still just keep it available to family as a holiday house, there doesn't seem to be any advantage in holding onto it and just downside risk if they ended up under fair deal?

 

[Steven Barrett]

If they are in their early 60's, it could be decades before they need to go to a home, if they need to go to a home at all. The could die in their beds!
Tell them not to be worrying about what might happen in decades to come and concentrate on enjoying life. They can always spend the money travelling the world and have years of stories to tell in the nursing home while they haven't a bean to their name.

If not paying for nursing home care themselves is their priority, they should give the money to you and your sibling now. This may leave them short if they need money in the future, but that is the chance they are taking.

If they do want to invest, remember that equity based investments invest in some of the biggest companies of the world. Apple's accounts for the year ending September 2022 showed profits of $70 billion. That is for ONE YEAR!! They don't have to go all in with equities but they need equity exposure. Anything with a guarantee is usually one of those structured products that usually ends up with you just getting your money back.


Steven
www.bluewaterfp.ie

 

[Silversurfer]

Just wondering while your parents have a emotional attachment to their home house (holiday home) How do you feel? Would you sell it all things being equal? Do you do the maintenance? My kids love ours but do very little other than visit! As time moves on keeping one house is looking very attractive €100,000 is not a huge amount of money for someone in their early sixties as a slush fund. A couple of cars and holidays over a ten year period would use it up fairly quickly. Do your parents want to go into a nursing home? Or if one of them was widowed perhaps extending or buying a larger home where they could live with you might be an option. They are still very young in my opinion to be making decisions for perhaps twenty five years time.

 

[NoRegretsCoyote]

Firstly, bear in mind that from a Fair Deal perspective, there is a 5 yr look back rule where the scheme can review any asset transfer done in the last 5 years. In that respect therefore, the sooner it's done, the better

This is true but as explained on a previous thread, you can easily overweight the advantage of keeping assets out reach of the Fair Deal.

They can transfer €6k between them each year to; you, your spouse, each of your children, your sibling, their spouse and each of their children, without any tax being due.

They should get started on this strategy, it's a no brainer.

The parents can also make low-interest loans which might be cheaper for the kids than paying a mortgage.

 

[helpneeded]

Thanks,

Re: the holiday house, I think we'd like the idea of keeping it, and as long as either of my parents were there to use it we definitly would. If we'd be as emotionally attached after that - I'm not sure. I couldn't justify keeping a house for the sake of it and not using enough to justify, but by the point of time that would be an issue myself and/or sibling would own it anyway.

This is true but as explained on a previous thread, you can easily overweight the advantage of keeping assets out reach of the Fair Deal.

Thanks for the link to the other thread, some interesting info there. My parents certianly have this to the forefrount of their mind, but I probabaly do need to have a realistic conversation with them as to why this is their priority.