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Investing to pay mum's care home fees

Our reader needs to cover a £23,000 annual shortfall in his 92-year-old mother's care home fees
February 19, 2015

Chris is in his 60s and needs to fund a shortfall in care home expenses for his 92-year-old mother who is frail and suffers from Alzheimer's. In 2015 her fees and personal expenses will total £48,000 but her after tax income from pensions and Attendance Allowance is only £25,000. However, his mother has inherited a substantial investment portfolio from her husband who died recently at the age of 95 and was a devoted reader of Investors Chronicle until the end of his life. Combined with her own investments, she has just over £2m.

Chris says: "My father's last investment in Shire (SHP) was based on your tip late last year and the £553 gain it made in just a few weeks would have delighted him. His earliest investments date back to the 1960s as his philosophy was generally to buy and hold. The portfolio did not do too badly, given that he only had a modest income. However, you may feel it lacks diversification.

"My primary objective is to ensure that my mother's care costs are fully covered however long she may survive, quite possibly 10 years if not longer. In future years I expect care home costs to increase more rapidly than inflation. Initially, the shortfall should be covered by dividend income but fairly soon I will have to dip into capital as the gap widens. I am particularly concerned about potential volatility in dividend income.

"My secondary objective is to maximise the residual estate for the beneficiaries of her will."

Only £300,000 of the equity investments are held in individual savings accounts (Isa) so Chris intends to progressively transfer the individual shares into his mother's Isa wrapper, utilising the annual capital gains tax limit.

Reader Portfolio
Anonymous 92
Description

Objectives

CARE FEES PORTFOLIO

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