Retired couple with 'money under the mattress'- what to do?

meep

In advance of consulting a financial adviser, I'm seeking some thoughts on best next steps in a particular scenario, what kind of options might be available etc., what questions to ask said advisor and what kind of advisor would be best to approach........

I'm sure this query has arisen before, but a quick search didn't yield any applicable results.

I'm acquainted with a retired couple, early 70s, who have funds in various financial institutions including Credit Union, Post Office & Ulster Bank. They also have a not insubstantial sum in cash 'under the mattress' so to speak.

This is cash accumulated as 'rainy day savings' over a lengthy period. They dip into it for walking around money, paying some bills such as, say, tradespeople or paying for home heating fuel, when required etc.

All the cash is genuinely accumulated from work, tax would have been paid etc.

I don't know how much, but lets assume for the sake of discussion, 100K

The couple own their house outright, but have no other investments (apart from a pension they are drawing down).

They have several children, all grown up and with families and properties of their own. They couple are in good health.

With the recent announcement from Ulster Bank, they are now nervous about where to move the UB accounts, but also how to get the cash out of the house and into some form of institution. The idea being to deal with both issues in one fell swoop, while they remain healthy and 'with it'

So, options?

They are wary of taking the lump sum to a financial institution. I tell them there's nothing to hide or any reason to worry, but they are anxious about the questions and forms that would arise.

The first question would be, what would this process actually entail? The easiest solution would be to rock up to the CU with the bag of cash and deposit it. But of course no institution wants to see any more deposits, and the risk of negative interest in the future is a worry. 'Its better under the mattress', maybe.

There's also the not insubstantial issue, in their minds, of 'people knowing their business' in a rural area.

Another option would be to distribute the cash to the children. The outlook would be 'they'll be getting it eventually'. While there would be no issues around inheritance tax as the amounts would be within thresholds, the couple worry that the form filling and explaining would just then fall to the children.

My thoughts are that they should be considering their own future, and while health is good presently, who knows what care and support will be required 5 or 10 years down the line.

Thanks for reading. As noted, I'd appreciate comments on how to approach the situation, and point them in the right direction in terms of financial advice, and what questions to be asking, and from whom.

gogo

Send them to a financial advisor, a bank/credit union will offer advise for free, quell their fears about it and advise them to speak to someone who can advise them correctly. Bank staff aren’t on commission, they won’t try and offer advise for sales, they can only fulfill a need and now have to outline & record why it was the most suitable for the customer, they won’t be swindled, is what I’m really getting at.
Your 100% they will need funds themselves as they get older, nursing homes etc are not cheap.
I’m not sure why you think institution don’t want deposits? Negative interest rates currently apply to balances over approx 3million (dependent on the institution), the likely hood of them hitting that level I assume is not likely? They won’t get any interest on it, as no sound advisor will tie there money up if they are elderly, but anywhere is better than having that much money under the mattress so to speak.

Also any person who works in any institution and talks about theirs customers locally, out side work or otherwise is breaking both their contract of confidentiality and the law, it happens less than people like to think it does. Tell them to seek professional advise, if they are nervous tell them to go to their solicitor as a first port of call.

mickdw

gogo wrote: »

Send them to a financial advisor, a bank/credit union will offer advise for free, quell their fears about it and advise them to speak to someone who can advise them correctly. They will 100% need funds as they get older, nursing homes etc are not cheap.
I’m not sure why you think institution don’t want deposits? Negative interest rates currently apply to balances over approx 3million (dependent on the institution), the likely hood of them hitting that level I assume is not likely? They won’t get any interest on it, as no sound advisor will tie there money up if they are elderly, but anywhere is better than having that much money under the mattress so to speak.

Also any person who works in any institution and talks about theirs customers locally, out side work or otherwise is breaking both their contract of confidentiality and the law, it happens less than people like to think it does. Tell them to seek professional advise, if they are nervous tell them to go to their solicitor as a first port of call.

Legit funds or not, there will be questions to answer if turning up with 100k in cash at a bank.
Revenue will be notified too.

gogo

There will be, but if they have nothing to hide then they have nothing to worry about. It’s not unusual for people, especially elderly to keep cash. When my friend cleaned out there granny’s house after she died, they turned up approx 260k cash.. what can you do, just go in and tell the truth.. it happens more than you think. Trust me, revenue are not overly interested in two old people with 100k.. it’s not that much money in the grand scheme of things.

mosii

Hi, This is an awkward position to be fair, and a position a lot more people will be in going forward in my opinion. Giving money to Children is fine ,maybe small amounts, but they would have to be careful ,at the end of the day, that money more then likely wont come back. I would suggest lodge the money slowly into different accounts ,and then buy prize bonds with that money ,that can be done online after setting up an account online, its easy enough. They would need a trusted member of family to help them if they arent computer savvy.
Prizebonds are safe ,the chances of winning are slim, but the money would be safe, they could just will the prizebonds to whoever they want. keeping a lot of money when getting old is a risk. I was told recently of an old man who died, they found a cupboard about 4 ft high ,full of cash. As we get old ,we tend to get very insular ,and tend to hang on to things especially money. I hope this helps a small bit.

Phoebas

A couple in their 70s, financially secure in good health with 100k of 'spare' money.

Not really the advice that was asked for, but would they consider spending it - buy themselves nice things, go on more holidays, give over generous birthday gifts to the grandkids...

meep

Thanks everyone for the thoughts so far. All very useful.

Just on this query;

gogo wrote: »

I’m not sure why you think institution don’t want deposits?

Probably stories like this one;

https://www.irishtimes.com/business/financial-services/credit-unions-impose-savings-caps-on-deposit-accounts-1.3923696

And, more recently, CU statements on their own websites like this one;
https://www.unitycreditunion.ie/Savings

meep

Phoebas wrote: »

A couple in their 70s, financially secure in good health with 100k of 'spare' money.

Not really the advice that was asked for, but would they consider spending it - buy themselves nice things, go on more holidays, give over generous birthday gifts to the grandkids...

Indeed, that's more around the 'distribute to family' strand. There's college fees and what not, its just making sure it's all done properly.

gogo

meep wrote: »

Thanks everyone for the thoughts so far. All very useful.

Just on this query;




Probably stories like this one;

https://www.irishtimes.com/business/financial-services/credit-unions-impose-savings-caps-on-deposit-accounts-1.3923696

And, more recently, CU statements on their own websites like this one;
https://www.unitycreditunion.ie/Savings

Credit unions aren’t banks?

bank deposits up to 100k are protected under the deposit guarantee scheme.
European banks e.g. Danske have similar schemes.
If more than 100k then spread across multiple bank accounts.

BrianD3

Have they considered the cost of nursing homes and the Fair Deal rules. Nursing homes cost anywhere from about 800-2400 euro PER WEEK. Under the Fair Deal you pay 80% of your income and 7.5% of the value of your savings and other assets towards your care per year. Assets transferred to others up to 5 years before applying for the Fair Deal count as though the applicant still has those assets.

You never pay more than the cost of your care but even so, with charges running at up to around 2400 per week, if you have assets you can end up paying through the nose.

Having savings also affects the over 70s medical card means test, that test is just related to income but assets such as savings are assumed to generate income so affect eligibility.

Meanwhile, Jimmy down the road has a bundle of cash stuffed under the mattress and "feck all assets" and....of course Jimmy is a terrible person isn't he.

meep

BrianD3 wrote: »

Have they considered the cost of nursing homes and the Fair Deal rules. Nursing homes cost anywhere from about 800-2400 euro PER WEEK. Under the Fair Deal you pay 80% of your income and 7.5% of the value of your savings and other assets towards your care per year. Assets transferred to others up to 5 years before applying for the Fair Deal count as though the applicant still has those assets.

You never pay more than the cost of your care but even so, with charges running at up to around 2400 per week, if you have assets you can end up paying through the nose.

Having savings also affects the over 70s medical card means test, that test is just related to income but assets such as savings are assumed to generate income so affect eligibility.

Meanwhile, Jimmy down the road has a bundle of cash stuffed under the mattress and "feck all assets" and....of course Jimmy is a terrible person isn't he.

Yep. Acutely aware, and that's the angle I'd be asking them to carefully consider.

There is a family member who works in eldercare and would be willing to provide care in-home as far as practicable, to the point of full-time, but there would inevitably be a time when even that might not be enough.

Thanks for the reminder on the 5 year limit - something I'd forgotten.

BrianD3

How about investing in their house in terms of energy efficiency etc. External insulation (expensive), attic insulation, new windows, solar panels. They won't make back the cost in lower energy bills but that may not be so important. They could end up with a very comfortable warm house which pleases them. Pay tradesmen in cash as much as possible although that may mean no SEAI grants. In terms of any Fair Deal assessment, if they spend x on the house it's unlikely to increase in value by that amount. And in any case, the persons primary residence is treated more favourably under the Fair Deal assessment than other assets due to the 3 year cap.

Based on my experience of the elderly that would be a much easier sell than suggesting they spend money on something frivolous. Plenty of elderly people end up with "too much money" and nothing to spend it on for various reasons and/or refuse to spend it as they have been frugal saver all their lives and/or have hangups about banks and people knowing their business etc.

elperello

Fair play to them they have obviously been good savers.

There are studies that show that people like them face a problem in changing their mindset from being savers to being spenders.

It's not that they are misers or mean it's just a common issue that affects a lot of people.

Is the total in accounts and cash 100k? If so they don't really need to worry.

I am assuming they already have medical cards.

They will need to bring the total down to the threshold for Fair Deal savings.

They are better off not keeping large cash sums in the house for security reasons.

BorneTobyWilde

Deleted User wrote: »

bank deposits up to 100k are protected under the deposit guarantee scheme.
European banks e.g. Danske have similar schemes.
If more than 100k then spread across multiple bank accounts.

So a billionaire could have his bank account emptied, but they protect 100k of it.

ax530

I understood if you lodge anything more than 3k bank will notify revenue. Best option may be lodge small amounts frequently and spend it any chance they get.
If for tax or means testing purposes back statements are reviewed I would expected questions be asked about lots lodgements.
Not sure how explain 100k cash no way to prove tax paid on it already.
Can gift 3k a year tax free to family members. So if they wanted to distribute it without forms could start giving out big cash Christmas/birthday presents

gogo

BorneTobyWilde wrote: »

So a billionaire could have his bank account emptied, but they protect 100k of it.

Essentially yes, but no one with substantial money, in their right mind, keeps all their funds in one bank, let alone one bank account. Banking 101... investment diversification, doesn’t guarantee against loss but certainly reduces risk

zell12

All I can think of is 'what if the house burnt down?'

zell12

zell12 wrote: »

All I can think of is 'what if the house burnt down?'

They die entering the burning house like elderly neighbour of mine did 30 years ago

madmaggie

State savings with the post office. Interest is dirt free, your investment never loses value, access whenever you want it.

elperello

zell12 wrote: »

All I can think of is 'what if the house burnt down?'

That is one of the dangers of keeping cash in the house. A fireproof safe is an option.

Robbery is obviously another.

There is also the danger that person who hides the money passes away or suffers from dementia.

zinfandel

give the kids / grandkids 3000 a year tax free , they will appreciate it alot more now and it will reduce the inheritance tax when the time comes.. and start taking some nice holidays after lockdown while still fit and healthy

FromADistance

BrianD3 wrote: »

Have they considered the cost of nursing homes and the Fair Deal rules. Nursing homes cost anywhere from about 800-2400 euro PER WEEK. Under the Fair Deal you pay 80% of your income and 7.5% of the value of your savings and other assets towards your care per year. Assets transferred to others up to 5 years before applying for the Fair Deal count as though the applicant still has those assets.

You never pay more than the cost of your care but even so, with charges running at up to around 2400 per week, if you have assets you can end up paying through the nose.

Having savings also affects the over 70s medical card means test, that test is just related to income but assets such as savings are assumed to generate income so affect eligibility.

Meanwhile, Jimmy down the road has a bundle of cash stuffed under the mattress and "feck all assets" and....of course Jimmy is a terrible person isn't he.

You'd be better off with nothing at your old age in this country as the Government will be waiting to rob you when the time comes. Sad but true. OP - It could be time for the couple to seek to transfer assets and wealth now, downsize etc. I'm not sure if setting up a trust for a number of years could be an option to overcome the risk of Fair deal clawback. A competent financial advisor / solicitor should be able to provide advice.

dublin49

they should gift most of their cash to their kids and see the benefits it brings while they are alive,it doesnt make sense for 80 + year olds sitting on 100's of thousands while their offspring struggle with college fees for kids etc.They hold onto to it until the end of their life and the state might take it off them in Nursing home fees instead of them taking advantage of the Fair Deal.Not an easy conversation to convince parents to divest themselves of the hard earned cash but it is the right thing to do.

Das Reich

ax530 wrote: »

I understood if you lodge anything more than 3k bank will notify revenue. Best option may be lodge small amounts frequently and spend it any chance they get.
If for tax or means testing purposes back statements are reviewed I would expected questions be asked about lots lodgements.
Not sure how explain 100k cash no way to prove tax paid on it already.
Can gift 3k a year tax free to family members. So if they wanted to distribute it without forms could start giving out big cash Christmas/birthday presents

Its not the revenue that have to prove that they didn't pay the tax at least is how its work when you accuse somebody you are the one that needs to prove.

athlone573

The fair deal contributions aren't excessively onerous and there is a relatively large amount you're allowed that's disregarded. Bank staff also take confidentiality seriously.

I would be strongly encouraging them to lodge it in the bank /post office ASAP. If word gets out that cash is being held at home, that to me is more risky than the impact of a Revenue/money laundering investigation.

Hibernicis

madmaggie wrote: »

State savings with the post office. Interest is dirt free, your investment never loses value, access whenever you want it.

Keeping that amount of cash in a house is a recipe for disaster. If anybody outside got a whiff of it their lives would be in immediate danger. If there is a fire/flood/whatever it is gone. And it is almost certainly exclude from any household insurance policy.

Given the age profile, their likely extremely low appetite for risk and probably nervousness about the stability of financial institutions l would strongly endorse madmaggie's suggestion that the whole lot goes to state savings as soon as possible. If necessary treat this as an interim solution and put it in a Demand Deposit account while the search for better opportunities goes on. Or treat it as a longer term solution and spread it between Demand Deposit, Prize Bonds and Certs/Bonds. They get government backed capital security, a return (growth) of some sort and on-demand availability on the whole lot (with some loss of interest in the case of certs/bonds if it proves necessary to withdraw the money early).

One way or another the process of legitimising this money will have to be undertaken at some point. They are better off doing this now rather than kicking the can down the road and having to deal with it further down the road and having sleepless nights fretting about it in the meantime. They will need reassurance and support in doing this, but the sooner it's done the better.

meep

Thanks all. I think the risk of having ‘ cash in the house’ is one of the primary motivating factors here for all concerned.

BrianD3

athlone573 wrote: »

The fair deal contributions aren't excessively onerous and there is a relatively large amount you're allowed that's disregarded. Bank staff also take confidentiality seriously.

72k is the amount that is disregarded for a couple. For a couple in their 70s who have saved well that is a small amount. Also they may well have hangups about spending money/divesting themselves of assets to get down to 72k.

Anything above 72k, 7.5% of the capital has to be paid per year under the Fair Deal. You don't think that is onerous? Try introducing a wealth tax of 7.5% per year on assets over 72k to pay for public services and see the reaction to that.

There are of course dangers associated with cash in the house. Fires, water, rodents. However this idea of word getting out that an individual has cash putting them in danger is IMO overstated. First of all, don't let word get out. Secondly, aggravated burglary is not that common and when it does happen was it really because someone had knowledge of cash being in someone's house or were they just chancing their arm.

A fair proportion of older people would have cash in the house. The sort of people who target older people know this. The odds are good that Jimmy (75 year old farmer who uses baling twine for a belt and drives a 1992 VW Vento) has cash hidden. In an aggravated burglary situation such as this, having at least some cash to handover might be safer than not having cash.

athlone573

BrianD3 wrote: »

72k is the amount that is disregarded for a couple. For a couple in their 70s who have saved well that is a small amount. Also they may well have hangups about spending money/divesting themselves of assets to get down to 72k.

Anything above 72k, 7.5% of the capital has to be paid per year under the Fair Deal. You don't think that is onerous? Try introducing a wealth tax of 7.5% per year on assets over 72k to pay for public services and see the reaction to that.

There are of course dangers associated with cash in the house. Fires, water, rodents. However this idea of word getting out that an individual has cash putting them in danger is IMO overstated. First of all, don't let word get out. Secondly, aggravated burglary is not that common and when it does happen was it really because someone had knowledge of cash being in someone's house or were they just chancing their arm.

A fair proportion of older people would have cash in the house. The sort of people who target older people know this. The odds are good that Jimmy (75 year old farmer who uses baling twine for a belt and drives a 1992 VW Vento) has cash hidden. In an aggravated burglary situation such as this, having at least some cash to handover might be safer than not having cash.

How the country finances social care with an aging population isn't an easy question but the current setup seems reasonably fair to me and I don't think we should be encouraging, directly or indirectly, people to keep cash at home, for various reasons not just personal security.

jimmycrackcorm

BrianD3 wrote:

Anything above 72k, 7.5% of the capital has to be paid per year under the Fair Deal. You don't think that is onerous? Try introducing a wealth tax of 7.5% per year on assets over 72k to pay for public services and see the reaction to that.

Your comparing apples to oranges. For your 7.5% contribution in the fair deal, you directly and personally get back multiples in home care.

A 7.5% general wealth tax gives you back nada.

Hibernicis

BrianD3 wrote: »

Anything above 72k, 7.5% of the capital has to be paid per year under the Fair Deal. You don't think that is onerous? Try introducing a wealth tax of 7.5% per year on assets over 72k to pay for public services and see the reaction to that.

Just to note that the rate is 3.75% if the applicant is part of a couple, and the principal residence will only be included in the financial assessment for the first 3 years. The actual cost of the the fair deal to the applicant is often misunderstood and feared unnecessarily. I've worked this out for a number of people and it is always very good value in view of the cost of healthcare.

AndrewJRenko

Hibernicis wrote: »

Keeping that amount of cash in a house is a recipe for disaster. If anybody outside got a whiff of it their lives would be in immediate danger. If there is a fire/flood/whatever it is gone. And it is almost certainly exclude from any household insurance policy.

The missus told me about an older couple in her extended family, both in poor health in the 60s, who gave out gifts of €3k cash to each of about 15 relatives recently. They live in a rough enough part of Dublin, with no obvious security measures on the house. The family understand that there is lots more cash where that came from stashed around the house, most likely cash earnings for himself.

I couldn't sleep if I had anything near that amount of cash in the house.

Hibernicis

AndrewJRenko wrote: »

I couldn't sleep if I had anything near that amount of cash in the house.

And frankly I'd sleep even less if I thought it was stashed around my elderly parent's house, especially if they lived in a rural area.

Henry Ford III

madmaggie wrote: »

State savings with the post office. Interest is dirt free, your investment never loses value, access whenever you want it.

Loses value every year in real terms (adjusted for inflation).

The J Stands for Jay

BorneTobyWilde wrote: »

So a billionaire could have his bank account emptied, but they protect 100k of it.

A billionaire wouldn't have that much money in a bank account

The J Stands for Jay

madmaggie wrote: »

State savings with the post office. Interest is dirt free, your investment never loses value, access whenever you want it.

It does lose value because it doesn't keep up with inflation.

JPup

Well there’s been no inflation in Ireland since 2008 (quite a remarkable fact!) but that is a risk alright.

It’s sounds like this couple has a reasonable amount of cash set by without being outlandish for their stage in life. As others have said, they can give €6k (i.e. €3k each) to any individual in any year with no tax implications at all. No forms to fill out for Revenue or anyone else. For family members there are higher lifetime exemptions too.

One nice thing they could do would be to open a savings account for each grandchild and put some money aside each month to cover college fees for example. Obviously many charities would love to get a donation from a couple like that also!

I’m sure they’ll know themselves what the best thing is for their money. But they needn’t feel like there will be a lot of questions or form filling if they want to put it in a bank account. If they really want to avoid raising any eyebrows then keep lodgements below €10k at a time but really there is no need.

DubLad69

JPup wrote: »

Well there’s been no inflation in Ireland since 2008 (quite a remarkable fact!) but that is a risk alright.

Of course there has been inflation since 2008. It has to been above 2%, but there has been inflation

Frozen Veg

Bitcoin.

JPup

DubLad69 wrote: »

Of course there has been inflation since 2008. It has to been above 2%, but there has been inflation

Not as far as I know. Average has been zero for last 12 years. Minus 1% over last year.

athlone573

JPup wrote: »

Not as far as I know. Average has been zero for last 12 years. Minus 1% over last year.

Not to be a bald man arguing over a comb, it's been low alright, 3% in total over the last 10 years

Prices fell slightly after the crash but inflation starting to kick off again the last 2 years as the ECB are printing money.

It's all there on the CSO website if you really care.