Grandpa is very ill...sell his shares or Grandma's?

[bee12345]

Hi all,

My Grandpa and Grandma are both in their mid-90s. Grandpa is very poorly. Grandma (who has nothing wrong with her, other than being a bit wobbly) has just moved into a care home, which hopefully Grandpa will be able to join her in, but it's possible that he won't make it out of hospital.

Grandpa is no longer of sound mind, so my parents and my aunt have POA. Grandpa and Grandma jointly own a house worth c.£500k. They have held shares in listed companies worth £x (£x because I am not privy to that information). £x has been giving them their only income (other than the state pension) for the last 25 years, so it can't be insignificant because they have lived quite comfortably. The shares are held separately, not jointly - i.e. Grandpa has £y and Grandpa has £z. I think £y and £z are similar amounts.

So - from a completely practical point of view, based on the information I have given above, what will happen to Grandpa's shares when/if he dies before Grandma? Should my parents consider selling his shares before he dies so that his money can pay for Grandma's care?

Sorry if this is a bit vague. I'm an accountant, and I think my mum thought I might know the answer to these questions - but I don't. And they're not giving me any clues over the values concerned.

I hope you can help,

Bee

[patrickmacqueen]

The first point to note is that when acting under a listing power of attorney you must act in the best interests of the donor - i.e.. when considering whether to sell Grandpa's shares your parents must consider what is in Grandpa's best interests alone.

Strictly speaking this might imply that selling Grandpa's shares because that is the best way to ensure Grandma will be properly cared for would be forbidden, because it is done to benefit Grandma rather than Grandpa, even if that is exactly what Grandpa would have wanted to happen.

However it may be that in your parents' case this is an academic problem only. For one thing, selling the shares before Grandpa dies may trigger a CGT liability, whereas there is no CGT for "gains" accruing up to the date of someone's death. For another, if he dies first then either (depending on his will) all the shares go to Grandma (whereupon they can be sold and used if necessary to pay for her care), or some of the shares go to your parents, in which case they can if they wish use the proceeds to pay for Grandma's care, or alternatively the fact that Grandma has fewer assets may mean that the local authority has to step in and start funding her care earlier than otherwise.

A bit of a rambling response, but I hope it makes some kind of sense.

[DrBunsenHoneydew]

Why not sell the house and use the jointly owned proceeds for the care home fees?

[Clitheroekid]

So - from a completely practical point of view, based on the information I have given above, what will happen to Grandpa's shares when/if he dies before Grandma?

The shares will form part of his estate. What happens after his death will to some extent depend on whether the shares are held in certificated form or through a broker nominee account.

If they're held in a nominee account it's a fairly simple procedure, as there just needs to be one notification of death to the broker.

However, as he's elderly the chances are that he will hold in certificated form. Initially, his death needs to be registered with the registrar of each company. This will stop the nightmare of dividend cheques arriving (often elderly people have never requested payment direct to their bank account) and then having to be sent back and altered because they can't be paid into the account.

This is even worse where there is a DRIP / scrip arrangement, as you will often get share certificates for just one or two shares, accompanied by a cheque for £2.32 or some equally trivial sum that’s really not worth sending back.

Fortunately, there are only three major registrars, Capita, Equiniti and Computershare, so one letter to them can often cover several companies.

The letter will also often lead to a discovery that the number of shares owned is more than appears from the certificates. Share certificates are regularly lost, so this will mean having to get replacement certificates - or not, as sometimes they cost more than the value of the lost ones!

Assuming Grandpa's made a Will a grant of probate will need to be obtained. Once it's been issued the executors need to decide what to do with the shares. They can either be sold or transferred to Grandma or a combination of both.

If they are to be transferred a sealed copy of the grant (together with a completed stock transfer form in the case of a transfer) will need to be sent to the registrars, who will then issue new certificates in Grandma's name.

Selling them is also a pain, as you'll firstly have to find a stockbroker that will deal with certificated shares. You will then have to go through all the money laundering / identity checking rigmaroles to open an account with them.

Alternatively, you can sell through a bank, but their charges are usually excessive.

Whoever you choose to sell the shares will need the share certificates and one or more sealed (or certified) copies of the grant of probate. The shares can then finally be sold (and you can guarantee that the market will have dropped at least 10% in the meantime!)

Should my parents consider selling his shares before he dies so that his money can pay for Grandma's care?

It would be worth considering, but you would definitely need to check the CGT position, as has been pointed out.

If there's anything more than nominal CGT to be paid then it might be worth considering staged sales, so as to take advantage of Grandpa's annual allowance.

The first point to note is that when acting under a listing power of attorney you must act in the best interests of the donor

This is quite correct. However, if Grandpa's Will leaves all his estate to his wife anyway I can’t see any legal or ethical problems at all. In any case, from a common sense point of view who's going to query it?

[Dod1010]

If your parents have a POA for Grandpa have they also got one for Grandma or how come there is an option to sell her shares? My inclination would be to sell her shares or at least use her income to pay for her care. You at least do not know what the contents of the Wills are and it might be best to leave Grandpa's estate untouched in the meanwhile.

Friends of mine have had just the same dilemma and the parents both ended up in the same care home although not for very long. In their jurisdiction (darkest Scotland) each individual is responsible for their own costs, complicated by the fact of the jointly owned house.

I guess the lifeline to grasp is that in the nature of things, the situation will not go on for ever and things will work out. Very stressful in the meantime though.

Dod

[scrumpyjack]

From a CGT viewpoint:-

If they both leave their assets to each other and it seems likely that one will die sooner than the other, there may be some advantage in the healthier one (a) giving any shares showing a gain to the one with shorter life expectancy (b). Death will 'wash out' the gain tax free and (a) can then sell the shares without CGT having inherited them from (b)'s estate.

Conversely if (b) has shares showing a loss, these can be transferred to (a) thus preserving the potential loss for (a) to use subsequentially otherwise it will be lost when (b) dies.

Hard to think about sordid money in these circumstances and only worth doing if the figures are significant.

[bee12345]

Thank you everyone for your replies.

I've explained everything you've said to my parents, and they're considering whether the values involved are worth paying for some specialist advice re CGT. I have encouraged them to do so, because in the course of the conversation with them, it transpired that the dividends from these investments are worth around £20k p.a. to each of Grandpa and Grandma i.e. £40k p.a. in total.

The really sad thing in all of this is that Grandpa was an accountant - partner in a practice from the early 1950s, and then sole practitioner from the mid-80s (when the other partner died) until he sort-of-retired in the 90s. He would be mortified to know that his family (especially me!) aren't clear on what to do! The thing we do know is that everything is written up very neatly in ledger books, so it's unlikely that any records will be missing.

Thanks again everyone.

Cheers,
Bee