# Retired couple - no major queries, just want to check is anything missing?



## Cantillon (2 Jul 2022)

_These are my parents, I sort of help them with finances, do tax return, etc.
I don't have any major question, just am I missing anything?_



Age: 75 approx

Spouse’s/Partner's age: approx. 80 I think

Annual gross income from employment or profession:

*(1) PS pension = 35-36k

(2) ARF pension income (4% or 5% of capital value) = 3.5k approx

(3) Other small labour incomes, say 1.5k, total is 40k min, maybe 42k max*

Annual gross income of spouse: *0.5 State Pension Contributory = 6.5k*

Total combined gross is 48k approx. pa.

Monthly take-home pay = *I don’t know, but the tax plus USC is under 10%, so the net income is 43.5k, say 3,625 per month*

Type of employment: *both retired*

In general are you: (b) saving? *Yes, unplanned, savings simply accumulate*

Rough estimate of value of home = *350k*

Amount outstanding on your mortgage: *no mortgage*

Other borrowings – car loans/personal loans etc *= none*

Do you pay off your full credit card balance each month? *= yes*

Do you have a pension scheme? *Public service occupational pension*

Do you own any investment or other property? *= No.*

Ages of children: *three, all adults*

Life insurance: *None, other than usual PS pension survivor’s benefits



Summary of Assets and Liabilities*
Family home worth €350k

ARF = 70k approx., from which is drawn 4% or 5% annual income. I can't recall the funds, I think Consensus Fund and another fund?

Zurich (Eagle Star) Matrix investment bond, managed funds, started in 2007

100k, with 101% allocation, and 3.5% commission added into fund = 104.5k
AMC = 1%
Spread evenly across eight funds, as follows:
Balanced
Dynamic
Performance
Eurozone Equity
Dividend Growth
Eurozone Property
Long Bond
Active Fixed Income

At the eighth year, I think the fund was worth 150k approx., and approx. 20k tax was paid. Unless there is some sort of disaster, these funds will never be encashed. The parents wouldn't think about them, they would hardly remember them. A statement comes yearly.


Deposits = I estimate about 300k, including 150k in Savings Certs, growing each month as funds accumulate in current account and credit union.



*What specific question do you have or what issues are of concern to you?*

I don’t have a specific question.

I’m just wondering are we missing anything?

Is there something they should be doing that I am missing?

CAT should not be an issue at inheritance, as there are three children.

Thanks.


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## NoRegretsCoyote (2 Jul 2022)

Cantillon said:


> Deposits = I estimate about 300k, including 150k in Savings Certs, growing each month as funds accumulate in current account and credit union.


They are in very good financial shape.

The only thing that strikes me is the amount of wealth in financial assets here. If either of them needs the Fair Deal scheme it will not be sheltered the way that property is.

OTOH cash of that amount can be used to pay for home care to keep them out of a nursing home as long as possible too.


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## Clamball (2 Jul 2022)

Do your parents need to do any upgrades to their house to make it suitable for them in their old age?   Bedroom/bathroom downstairs?  Elimination of steps?  Upgrade of windows/heating/kitchen to make it more comfortable and easy to navigate/access.   They have great savings so now is the time to look at this critically.  

If they like gardening how about raised beds, pathways, etc.

Get them to think about this critically and use their savings to make the changes.  It can be hard to look around and see your own house without emotion or not even seeing the fraying 30 year old carpet.

I would be encouraging your parents to make their money work for them to make life more comfortable and easy.   For example, a cleaner, buying deli ready to heat meals, encouraging them to use taxis rather than slogging with buses/shopping.  Gardening service to do lawn hedges etc.  It really depends on their interests and abilities.

In terms of health use the money to access consultants, health checks, rapid access clinics, testing and screening etc.  Good quality hearing aids, glasses, etc.  Do they need any adaptive items in the house, grab bars, riser and recliner chairs etc.

Their aim should be to spend all their money and have it run out the day they die.  The last thing that should worry them is inheritance and CAT issues for their children.  But do encourage them to make wills, enact enduring power of attorney, make their funeral wishes known.


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## Gordon Gekko (3 Jul 2022)

They’re your parents, and you don’t know how old they are?


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## Brendan Burgess (3 Jul 2022)

Clamball said:


> I would be encouraging your parents to make their money work for them to make life more comfortable and easy.



This is very important. The children should make it clear to their parents that they want to see their parents enjoy their old age rather than leave money behind them. 

Brendan


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## Brendan Burgess (3 Jul 2022)

Cantillon said:


> At the eighth year, I think the fund was worth 150k approx., and approx. 20k tax was paid. Unless there is some sort of disaster, these funds will never be encashed.





Cantillon said:


> Deposits = I estimate about 300k, including 150k in Savings Certs, growing each month as funds accumulate in current account and credit union.



So they have about €450k which they are unlikely to use. 

It is likely that the children will inherit this. 

So their investment horizon should be their children's investment horizon.

On their death, the Zurich fund will deduct exit tax and pass the net amount to the estate. 

On the other hand, if they owned shares directly, and Capital Gains would disappear on death.  Death is not regarded as a disposal for CGT purposes. 

So they should invest their savings directly in a portfolio of shares. 

Share prices will go up and down over the longer term, so they must be prepared for that.  But if they are in a Zurich funds, they will have seen this.  Some years, the fund will have been worth less than the previous year's statement.

Brendan


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## Ceist Beag (3 Jul 2022)

Gordon Gekko said:


> They’re your parents, and you don’t know how old they are?


That was exactly my thought too. You know all this about your parents but you don't know their age?


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## Khublei (3 Jul 2022)

The only thing that jumped out at me from the post was not knowing the ages as well! Other than that all seems fine.


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## noproblem (3 Jul 2022)

If it was me I would be investing an awful lot of that cash into my house. Otherwise, as No Regrets Coyote has also mentioned, it will go in Fair Deal payments if they ever need nursing home care. People of a certain age don't pay enough attention to this detail. There's a flaw in the FD scheme, but one can, and should, turn such things to their and their family's advantage. Some may not agree, that's fine too. I don't hold the high moral ground on this.


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## jim (3 Jul 2022)

noproblem said:


> There's a flaw in the FD scheme


Whats the flaw?


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## noproblem (3 Jul 2022)

jim said:


> Whats the flaw?


If you keep the cash the state can claw an awful lot more from you. By putting it into the house, you're still keeping it for either yourself, or your children, but state will only get a percentage and you'll get Fair Deal that costs the tax paying public a lot of money. I'd call that a flaw. Don't think for one minute it's not being done.


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## Cantillon (3 Jul 2022)

Thanks for all comments, I will go over them in detail.

The father is 76.

The mother doesn't discuss her age, doesn't disclose it, is the last person to fill in the Census, etc.! She is 80+.

One of the adult children lives in the family home with the parents, and has a caring role with them. This person is not a homeowner.

The other two adult children (including me) live elsewhere, and own their own homes.

I know what you mean about the FairDeal scheme, 50k spent enhancing the house means unchanged wealth (in theory), yet 50k less cash to be means-tested by the scheme.


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## odyssey06 (3 Jul 2022)

Just floating an idea - is there anything to be said for transferring 3000 per year to the children starting now?

Also, if a new car might be needed soon, think about an automatic - if not already sorted.


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## Brendan Burgess (3 Jul 2022)

NoRegretsCoyote said:


> The only thing that strikes me is the amount of wealth in financial assets here. If either of them needs the Fair Deal scheme it will not be sheltered the way that property is.





noproblem said:


> If it was me I would be investing an awful lot of that cash into my house. Otherwise, as No Regrets Coyote has also mentioned, it will go in Fair Deal payments if they ever need nursing home care.





Cantillon said:


> I know what you mean about the FairDeal scheme, 50k spent enhancing the house means unchanged wealth (in theory), yet 50k less cash to be means-tested by the scheme.



If the house needs to be upgraded, then by all means do so.

But don't spend money unnecessarily so that you will avoid it being means-tested.

It's a waste of money
The rules may well change
They might prefer to spend the money on living at home longer rather than going into a nursing home.
They might never go into a nursing home 
If they do go into a home, the average "cost" of having €50k cash is €7,500 towards their nursing home fees. 

Brendan


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## Brendan Burgess (3 Jul 2022)

They pay 7.5% of their assets each year.

The average stay in a nursing home is 2 years

So it is likely that having €50k cash will "cost" them €7,500.

Brendan


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## noproblem (3 Jul 2022)

But in this  case it will be 7.5% of 350k which could be €26,250.00 in the first year if the annual fees were that high. The stay may be for much more than 2 years so the cash reserve will disappear very quickly. With the house as his only asset the payment stops after 3 years and is therefore limited to a certain amount which means the asset won't evaporate like the cash.  Like you say they may never go into a nursing home, but the house value will hold in most cases if people are smart. In any case, many thousands of people are doing this and I don't agree when you say it's a waste of time. Just an opinion by the way, nothing's written in stone.


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## Brendan Burgess (4 Jul 2022)

Hi noproblem

This is a really interesting discussion and I will move it out into a separate Key Post when we have it sorted.

I am not an expert on the Fair Deal, but this is how I _think _it works

If one of them went into a nursing home today...

House 350k
Zurich 130k
Deposits 300k
Total assets: €800k
Means test: 3.75%   :€30k

Pensions €40k@40% €16k

Total €46k for the first three years. 

So they pay €46k and the taxpayer pays the balance. 

(In the unlikely event that they are in a nursing home for over three years, the house is removed from the means, and so their contribution falls to €34k) 

Burning €50k or spending €50k on the house and assuming it does not increase the value of the house, would save them 3.75% of €50k or €2k a year.   It's not good value to burn €50k to save €2k a year for 2 years.

The average, for those who go into nursing homes, is 2 years.

The average for all adults is a lot less than 2 years as I assume most do not go into nursing homes at all.

If they need to spend money on their house so that it is more suitable for them in old age, then they should do so.

But they should not spend money solely to save money on their nursing home fees.

Brendan


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## NoRegretsCoyote (4 Jul 2022)

Brendan Burgess said:


> Burning €50k or spending €50k on the house and assuming it does not increase the value of the house, would save them 3.75% of €50k or €2k a year. It's not good value to burn €50k to save €2k a year for 2 years.


Not strictly correct Brendan, the three-year cap only applies to your PPR, not financial assets.

So a five-year stay in nursing care would see 3.75%*5*€300k=€56k surrendered. 

In their shoes I would look at using some of the €3k annual gift exemption as part of estate planning. But every family is different and this kind of thing can often cause more problems than it solves, so maybe best to leave it be.


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## Brendan Burgess (4 Jul 2022)

NoRegretsCoyote said:


> So a five-year stay in nursing care would see 3.75%*5*€300k=€56k surrendered.



Let's be clear.

Are you suggesting that they should blow €300k on their home

just in case 
1) One of them goes into a nursing home
2) That they stay in that nursing home for much longer than the average stay

just so that they can save €56k? 

It's not even that much. If they spend €300k on their home, presumably it will increase the value so they will pay 3.75% of the increased value for three years. 

Brendan


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## NoRegretsCoyote (4 Jul 2022)

Brendan Burgess said:


> Let's be clear.
> 
> Are you suggesting that they should blow €300k on their home


No. I'm saying that in the back of their mind they should be aware that a material chunk of their savings could disappear due to a nursing home stay.


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## Brendan Burgess (4 Jul 2022)

NoRegretsCoyote said:


> Not strictly correct Brendan, the three-year cap only applies to your PPR, not financial assets.



I understand that the three year cap applies only to the PPR so I am not sure what statement I made which needs correcting?


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## NoRegretsCoyote (4 Jul 2022)

Brendan Burgess said:


> I understand that the three year cap applies only to the PPR so I am not sure what statement I made which needs correcting?


I think it's relevant that people should understand that the three-year cap is for PPR, not financial assets.

I don't have statistics on the distribution of nursing home stays, but I know of several people who have lasted longer than three years in one.


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## twofor1 (4 Jul 2022)

"_When Fair Deal first started, the average length of stay was approximately four years. But at the end of 2014 it reduced to 1.9 years in public and private facilities," it said._

.

Two years average looks right. That said, longer stays are not unusual, two of my relatives lasted 8 & 9 years  in a nursing home under Fair Deal,  but  another lasted only 2 months.


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## Brendan Burgess (4 Jul 2022)

They are unusual. 

1) The population you are looking at is probably aged 80+ 
2) Most of them do not go into nursing homes. 
3) Of those that do, the average stay appears to be 2 years. 
4) That means that the majority must be there under the 3 years. 
5) So very long stays would be a small minority of the total population of people aged 80+


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## The Ghoul (4 Jul 2022)

A couple of things and as much in the realm of a family review as a money makeover. First of all, your mother doesn't disclose her age, is there anything else that she hasn't disclosed, are you certain that there aren't other financial assets? The second thing is that one sibling lives in the family home and is a caregiver. This scenario can result in a serious falling out over who inherits what after the parents pass on.

How well do you know and get on with your siblings and is the caregiver sibling being adequately compensated for their caregiver role. Also, what happens if the parents' health deteriorates and the caregiving becomes much more intensive?


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## noproblem (4 Jul 2022)

Cantillon,
One thing I haven't seen mentioned is private health insurance. They have the money to ensure they have a good policy. I would prioritise this. 

Nursing home in the future and cash reserves have already been mentioned by quite a few posters, pointless me adding more to what I've already said on that for now. Brendan mentioned he may open something else on that eventually.


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## Purple (5 Jul 2022)

Brendan Burgess said:


> This is very important. The children should make it clear to their parents that they want to see their parents enjoy their old age rather than leave money behind them.
> 
> Brendan


I know families where this is not what the children want. They are like vultures circling over a wounded animal.


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## twofor1 (5 Jul 2022)

Indeed, I know an elderly widower whose children live abroad and are outraged at this ‘’effin Fair Deal, using  their inheritance to pay for their fathers nursing home care as he can no longer manage at home on his own. Should be the state's problem, not theirs.

Unfortunately, there is a lot of that mentality out there.


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## noproblem (5 Jul 2022)

Purple said:


> I know families where this is not what the children want. They are like vultures circling over a wounded animal.


There's always a cohort in society that aren't thinking of others, it's always themselves. Ireland have their share, as have others.


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## mtk (7 Jul 2022)

are there wills in place?
power of attorney in place?


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## Cantillon (4 Jan 2023)

*I am back, with some queries about the father’s ARF, which I am reviewing.*

There were two AVCs, one was linked to main pension, one was a PRSA-AVC.

The ARF started with Irish Life in Dec 2008, broker is Cornmarket, 101% allocation.

Initial sum into ARF = 38,770
initial fund is Consensus Fund Series V, Irish Life risk code 5/7
the AMC is 1.50%
Nearly three years later, June 2011, the PRSA-AVC was matured, and added to the ARF.

Second sum = 24,130
Second fund is Public Sector Cautious Fund Series V, Irish Life risk code 3/7
The AMC is 1.53%
24,371 went into the fund, so 101% allocation

Neither the parents nor I paid much attention to the fund values until now.

What I did notice over the years was that even after the withdrawal of 5% of the fund as an annual income, the capital value was holding up, or growing. I am now having a better look at the annual statements.


Consensus Fund unit price

2009 = 0.876 euro
2022 = 2.035 euro
Growth over 13 years is 132%

Public Sector Cautious Fund Series V unit price

2011 = 1.031 euro
2022 = 1.296 euro
Growth over 11 years is 25.7%
I presume the growth is dragged down as in the initial factsheet, 25% of this fund is in cash, 25% in Govt Bonds

One thing I noticed: the 5% income each year has always been taken from the (better-performing) Consensus Fund. This means this fund has fallen from over 48k units to 16k units. The units in the Cautious Fund are unchanged.

*I never noticed this until now, years later.*

Total saved = 62,900, most recent value = 63,500, after 5% income each year


My question: given that my father is reasonably physically healthy, given that the 5% annual income is not needed (it is not spent, it is saved), are we better to do a fund switch?

Could we request the 5% income to be drawn from both funds?

Or should we switch out of the Cautious Fund into 100% Consensus Fund?

Or switch brokers to get better AMCs?

I suppose my query fits into the debate on asset allocation in ARFs.

Thanks.


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## Look ahead (5 Jan 2023)

NoRegretsCoyote said:


> OTOH cash of that amount can be used to pay for home care to keep them out of a nursing home as long as possible too.


Id like to pick up on this point.

Is the cost of private home care any cheaper?

 Im assuming the elderly person/ people will require 24 hour monitoring/care at home in the same way as they would in a nursing home.


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## NoRegretsCoyote (5 Jan 2023)

Look ahead said:


> Is the cost of private home care any cheaper?


My grandfather paid a six-figure sum out of his own savings for 24-hour home care.

It kept him out of a nursing home for about a year but at a certain point a nursing home became medically necessary at which point the Fair Deal kicked in.


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## Look ahead (5 Jan 2023)

NoRegretsCoyote said:


> My grandfather paid a six-figure sum out of his own savings for 24-hour home care.


Thats what i was thinking, its a similiar cost.


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## NoRegretsCoyote (5 Jan 2023)

Look ahead said:


> Thats what i was thinking, its a similiar cost.


Full time care at home is more expensive to my knowledge.


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## bish123 (5 Jan 2023)

They are not using 5% annual income fully and finances are already in good shape. You could focus on non-financial matters to help them -
1. Sort out will
2. Improve quality of life by making home/ car more comfortable, travel etc.
3. One of the children is living with them and also playing role of carer. Has this arrangement being thrashed out openly and preferably formally.


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## Wheelie Bin (5 Jan 2023)

NoRegretsCoyote said:


> Full time care at home is more expensive to my knowledge.


I'd imagine full time 24 hour home help would be way more expensive. I think there is a tax break of up to €30k per incapacitated person per anum if the person who pays is is in the 40% tax bracket .Mind you , you'd have to have spending €75k per anum , nett cost €45k.


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## Hasbeen (5 Jan 2023)

Wheelie Bin said:


> I'd imagine full time 24 hour home help would be way more expensive. I think there is a tax break of up to €30k per incapacitated person per anum if the person who pays is is in the 40% tax bracket .Mind you , you'd have to have spending €75k per anum , nett cost €45k.


If an elderly married couple had the means to fund 24 hour home care , could they , in practice reclaim €60k  assuming one of them was paying the higher tax rate on a high end pension fund /ARF and home help cost €150k + ?


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## NoRegretsCoyote (5 Jan 2023)

@Hasbeen 

The max that can be claimed is for expenditure of €75k so ≈€30k is relieved if I'm not wrong.

But it would be a very rare case of a retired couple having paying that much tax at the higher rate in the first place.


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## Cantillon (5 Jan 2023)

Many thanks for all the replies.

Yes, there is a will in place.
No, there is no power of attorney, AFAIK.

In the short term, it is the queries raised in post #31 about fund choices in an ARF that I am focussed on.


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## Hasbeen (5 Jan 2023)

NoRegretsCoyote said:


> @Hasbeen
> 
> The max that can be claimed is for expenditure of €75k so ≈€30k is relieved if I'm not wrong.
> 
> But it would be a very rare case of a retired couple having paying that much tax at the higher rate in the first place.


Are you saying that the maximum relief per COUPLE rather than per person is €75k =€30k savings , rather than €150k=€60k savings ?
I would have thought that if both partners were elderly and needed home help and were paying the appropriate home help charges they could claim on the double accordingly.
Apologies , I'm probably straying off topic a bit here but I would imagine there must be people out there paying big amounts of tax on ARF distributions . A lot of older people have pumped everything they have in to ARFs on the advice over the years from their financial advisors and are now forced to take out 5% and 6% mandatory distributions at penal tax rates rather than having the option of gifting or leaving their savings to their children who could have availed of the generous CAT thresholds if the money was tied up in a bog standard deposit account or Prize Bonds.
At the very least they should be able to offset home help costs against their huge tax bill .


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