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Which type of income-providing investment?

Here's the score: My 90-year old mother lives in a house left in trust by my late father. Due to her age she'll soon need to move to sheltered accommodation. The trustees (family members) want to sell the existing house and invest the money to provide (hopefully) enough income to pay for rented sheltered accommodation for my mother. The house is valued at 300,000. Which type of investment would be appropriate? How much income can be got from a secure investment of that size without eating into the capital sum?

It's possible that my mother might die in the near future, in which case we'd want to liquidate the investment and divide it up betwen the beneficiaries of my father's will. The fact that she's likely to die within the next five or ten years is one reason why I'm inclined to suggest they rent the sheltered acommodation rather than buy it. The other reason is that if we rent the sheltered accommodation, it will be easier for her to move if she finds she's not happy there or needs to move somwhere with a greater level of care at some stage.

Thank you for any advice

Jim V

Reply to
James V
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Is it out of the question for some (or even just one) of the trustees to move in with her, thus obviating or postponing the need to consider sheltered accommodation?

It would be worth checking out the rental market to see how much the house might be rented for. This might comfortably exceed the cost of sheltered accommodation. On the other hand, if the purchase market is poised to turn, it might be prudent to stick with plan A, striking while the iron's hot, and getting more for the place now than several years down the line.

Gilts? Maybe 6%? What's the tax position of this trust?

That sounds sound.

Reply to
Ronald Raygun

Hi RR.. It's not absolutely out of the question that I could move in with her (I'm her son, but not one of the appointed trustees). I live closer to her than the other two sons - but it would still mean moving town and take some considerable organisation, since I'm rather well settled in in my own town.... And I still need to be convinced that it would be worth it.

That's a good deal more than the rent I think can be got from the house. House valued at 300K, and rent, PA = 10,200 gross. That's less than 2.9% net.

I think I was recently told that there would be an inheritance tax liability on a sum exceeding 270K, I think it was.. Does that suggest any particular strategy or route we should follow?

Many thanks

Jim V

Reply to
Jimes V

Looks like the house is worth more as cash than as a rent cow, then, assuming both valuations are realistic. I would have expected rental yield to have been a bit more than 6%, unless the house is ridiculously over-valued.

Trusts are a bit funny, they're not like individuals. I was thinking more of the income tax position. Is it not the case that they get taxed at a higher rate, and get no allowance? From that point of view, your "net 2.9%" seems a bit high to correspond to a gross 3.4%.

That's why I asked about the tax position of the trust. Or has it somehow been arranged that its income is taxed as her personal income? Or would the trust be taxed only on the excess of its investment income over the expenses of discharging its obligations (paying for her care)?

Reply to
Ronald Raygun

"Jimes V" wrote

Don't forget that the 6% from gilts is a fixed (level) amount into the future, whereas the 3%-odd rent from the house would (be hoped to) increase in future ...

[850pm (rent) now, increasing to (say) 2500pm in 20 years time is not necessarily worse than 1500pm (gilts) which doesn't increase in future.]
Reply to
Tim

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