Moneymakeover Trying to future proof family position

[housemurph99]

Myself and siblings are looking at the best options to future proof our family position. My mother was widowed 25 years ago and as a result came into unexpected wealth circa E1M. Cash was invested with aid of a financial broker, my mother would be prudent so the remit was not to lose the the money (haven't witnessed friends lose money on the eircom shares). The broker has done his job, I think equities were avoided and the money was invested in bonds.

Personal details
Mothers age: 70
3 children ( All three married with family homes and 5 grandchildren)

Income and expenditure
Widows pension circa E13k annually
Draws down E20K from investment policy

Summary of Assets and Liabilities
Family home value: E400,000
Holiday home value: E300,000

Total net assets: E1.6M (property & investments)

Pension information
None

Other savings and investments:
Irish Life Signature Bond invested 400K in 2023. Current Valuation 500K. Total Charges on policy per annum 1.65%. Exit Fee's of 5% for 2026 & 2027.
Standard Life With profits bond. (not sure when this was taking out, draws 20K annually, current valuation 400K)

What specific question do you have or what issues are of concern to you?
a) To get a pension opened (PRSA/PRB/ARF) in 2028 when exit fees have expired to minimis tax on the growth of the fund or Is there merit in paying the exit charges and investing in a pension product asap. Factoring in what are the best options as we will be the beneficiaries on the policy/value on death. (i.e Income Tax liability PRSA. CGT on a PRB)
b) If its best to avoid exit penalties we would probably switch to higher risk fund, it is currently in MAPS 3.
c) We are in the process of organising a yearly payments run of 3k per person gift to reduce the pot size as I know we are over the CGT limits.
d) Standard Life With profits bond - not sure of this product, maybe just let it run its course. It provides for living expenses.

Any comments greatly appreciated. We will discuss with a financial planner in the new year but just trying to get a bit of advice from the AAM community for us to think about. I think the yearly charges are on the high side (1.65% ) but we weren't involved at time of opening the policy. We will take ownership on investing in the future via EO broker.

 

[ClubMan]

the remit was not to lose the the money (haven't witnessed friends lose money on the eircom shares). The broker has done his job, I think equities were avoided and the money was invested in bonds.

If she's invested in bonds rather than equities over the past quarter of a century then she's almost certainly lost money big time in terms of the opportunity costs involved and the equity growth foregone but that's water under the bridge now I guess.

a) To get a pension opened (PRSA/PRB/ARF) in 2028 when exit fees have expired to minimis tax on the growth of the fund or Is there merit in paying the exit charges and investing in a pension product asap.

I don't understand what the benefit would be of starting a pension at 70+ with money that isn't earned and thus presumably not eligible for tax relief?

as I know we are over the CGT limits

I presume you mean CAT/Inheritance Tax group A exemption threshold?

We will take ownership on investing in the future via EO broker.

This sounds odd. Is she incapable of making decisions for herself?

 

[housemurph99]

If she's invested in bonds rather than equities over the past quarter of a century then she's almost certainly lost money big time in terms of the opportunity costs involved and the equity growth foregone but that's water under the bridge now I guess.

Agreed. If only money was invested in SNP index.

don't understand what the benefit would be of starting a pension at 70+ with money that isn't earned and thus presumably not eligible for tax relief?

I thought I could open a pension with a lump sum. I was looking into tax free investment growth, duly noted.

presume you mean CAT/Inheritance Tax group A exemption threshold?

yes meant CAT. Ideally would like to keep more money by managing it efficiently.

sounds odd. Is she incapable of making decisions for herself?

More than capable. I am just looking into the finance’s now. I am thinking why pay 1.65% on a product that could be bought EO for 0.65%. This money is never discussed, it’s just something in the background that will be passed on to us. We’ve tried to get her to splash the cash on herself but not in her nature. It has funded house deposits, weddings etc. maybe just leave it be.

 

[TomEdison]

If she's invested in bonds rather than equities over the past quarter of a century then she's almost certainly lost money big time in terms of the opportunity costs involved and the equity growth foregone but that's water under the bridge now I guess.

But that reflects her preferences, her attitude to risk and volatility and her investment objectives. As the OP says,

The broker has done his job,

OP also says:

Myself and siblings are looking at the best options to future proof our family position . . .We will take ownership on investing in the future via EO broker.

OP, you say that your Mum is more than capable of making financial decisions herself. You "taking ownership" of her investment decisions is absolutely fine as long as that's what your Mum wants. But if you do that, your role is not to "future proof our family position"; it's to give effect to your mother's wishes, and to to act in her best interests, not those of the wider family. This is her money.

The suggestion of 3k annual gifts to family members is good from a CAT-minimising point of view, but of course that's your CAT liablity that you're minimising, not your Mum's. So this is a non-starter unless Mum wants to start distributing her money with a view to minimising her family's CAT liabilities, and prioritises this over other considerations which might point to her retaining the money.

And, with the suggestion of a . . .

switch to higher risk fund

If your Mum hasn't had a preference for higher risk in the past, why would she suddenly develop an appetite for it now? And if this happens at the same time as you move her assets to an execution-only service provider, so that she no longer has access to professional advice . . . well, that's not a good look.

The bottom line her is that, when you're managing your Mum's money you can't subordinate your Mum's wishes, preferences, values, attitudes, etc in order to improve your own situation, or with a holistic view of "the family position". You can only do what you suggest if that's what Mum wants done — which it very well might be, of course, but her wishes and preferences are what matters here, not yours. Your starting position here can't be "this is what Mum should want; can we get her to want it?"; it has to be "What does Mum want?"

 

[housemurph99]

yours. Your starting position here can't be "this is what Mum should want; can we get her to want it?"; it has to be "What does Mum want?"

Ty, for giving a clearer perspective.
There is no other motive here, probably over complicated things. We can prepare an overview of the current situation to her and leave it be.

 

[Cervelo]

This is her money.

An excellent and very well worded post there @TomEdison and one that I agree with fully

We will take ownership on investing in the future via EO broker.

Straight off I think this is madness, do you fully understand what EO is and are capable of all that that entails
Your mother is a great position at the moment, she has more then enough to see her out and leave you all a nice sized inheritance

For the little info provided your widowed mother of 25 years ago with a million has €900k left after 25 years of living expenses, running 2 houses and paying for weddings and house deposits and all the other things, has done very well in my eyes
Could she have done better, possibly, could she have done worse, most definitely but as you say the "broker has done his job"

My advise would be to listen to the broker with your mothers best interests at heart and focus on maintaining your mothers wealth and not trying to grow it through high risk/return EO investments

We are in the process of organising a yearly payments run of 3k per person gift to reduce the pot size as I know we are over the CGT limits.

You haven't said how many people will be benefiting from this, is it just the 3 kids or is it all 11 of you
while I think this is a great idea, one has to remember that on one hand, she might not see tomorrow while on the other she could live another 30 years so it's important to make sure she has enough funds left to enable her to live out her life the way she wants to live it

 

[GSheehy]

I think equities were avoided and the money was invested in bonds.

There is (currently) circa 37% in Bonds/Cash in MAPs3 and circa 40.5% in SLAC WP Fund. Rest is (mainly) equities, plus some Alternatives, Property in MAPs3.

Highly likey there might be an Market Value Adjustment on the WP 'bond' and the potential tax implications of consolidating a loss/gain on the products would probably end the notion of moving them elsewhere.

 

[housemurph99]

An excellent and very well worded post there @TomEdison and one that I agree with fully

100% agree. I probably should have worded all of this better.
The intent was to think of preserving and reduce the tax element.
As mentioned from the outset 'we will discuss with a financial planner in the new year'.