Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials HomeFP AnswersPersonal FinanceShould Peter put most of his 88-year-old dad’s money into a fixed-income fund?FP Answers: If a pension covers his needs, why not invest in something that will grow his money, expert asksLast updated 1 hour ago You can save this article by registering for free here. Or sign-in if you have an account.The big risk with taking a capital preservation-only mindset is inflation. But inflation is normally a long-term risk and as a person ages, inflation risk reduces. Photo by Sakchai Vongsasiripat/Getty ImagesReviews and recommendations are unbiased and products are independently selected. Postmedia may earn an affiliate commission from purchases made through links on this page.Q. My dad recently moved into assisted living and is about to sell his paid-off house. He has a long-term care plan and a generous company pension, so for now he will have about half a million dollars and growing at age 88. He’s in fairly good health, other than his body failing. I have power of attorney. Dad doesn’t need the money now, but if something goes sideways, he might at some point.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorI’m thinking of putting most of the money in a solid fixed-income fund and keeping $30,000 in cash for an emergency. Seeing that he’s 88 years old, I’d like to focus more on preservation of capital and less on growth. But I was wondering if there’s something else that might be a better place to stash it for now. Most of the money will be in a trust. —Thanks, PeterGet the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againFP Answers: Hi Peter, I am sure you appreciate the confidence your dad has placed in you to be his power of attorney. It is an honour that comes with a lot of responsibility and work to make sure your dad, and his wishes, are looked after. At the same time, you and possibly your siblings may have differing thoughts and needs which can make the role of a power of attorney a little more challenging.If your dad’s future needs will be looked after with his generous pension, why not invest in something that will grow his money rather than something designed for capital preservation? Assuming you are going to receive the money when your dad dies, invest it the way you would invest your own money. Of course, it may lose value and if you have siblings they may complain it’s down, but they also may complain that you didn’t try to grow it and they could have had more. Plus, who knows what the future holds: Your dad may need the money.What if you gift the money to yourself? If you are going to get the money anyway, why not take it and use it today, especially if you are having some financial difficulty? It will save your dad some tax, avoid probate, and besides, if the money goes through the estate, who knows how long it will take before it gets to you? If your dad needs more money in the future you can always help him out, assuming you haven’t spent it all.Those are a couple of thoughts I sometimes hear, but they come with risks. It sounds like you want to be prudent with your dad’s money and ensure it is safe and available to him if it is ever needed. That is one reason why you are in the role of the power of attorney.The big risk with taking a capital preservation-only mindset is inflation. But inflation is normally a long-term risk and as a person ages, inflation risk reduces. Your dad also has Canada Pension Plan (CPP), Old Age Security (OAS) and a company pension, which are all indexed to inflation.The first investment decision to make is which type of account this money should go in and for your dad that will be either a non-registered account or a tax-free savings account (TFSA). Maximize the TFSA first and the rest can go to a non-registered account.Don’t discount guaranteed investment certificates (GICs).. If you are just looking to preserve capital, then a GIC works. Yes, you may pay a little more in tax on the amount earned, but the G in GIC stands for “guaranteed.” Whenever you move your investments away from a GIC, you are taking some risk. How far do you want to step away from a guarantee in order to increase the rate of return? There are good high-income investment funds available, but the downside is that they can lose value.You mentioned a trust and that tells me your dad, or both you and your dad, have been giving this some thought. I assume it is an alter ego trust the money is going to go into but I am curious to know why you are adding the money to a trust.The two main reasons I can think of are to add more safeguards to the money and avoid it passing through the estate. Avoiding the estate means no probate fee and the beneficiaries get the money right away.Your dad will know that once the money is in the trust he is the only beneficiary until he dies. In some ways this reduces pressure on you, Peter, if you have siblings that need or want the money. It is in a trust and they can’t get at it.If you are in a high-probate province such as British Columbia, Ontario or Nova Scotia, you will save probate fees, which on $500,000 range from about $6,500 to $7,800.Have you balanced out those benefits with the costs of setting up the trust? There are legal fees to set it up and then ongoing annual tax returns, which is more work for you.Peter, it sounds like you want the best for your dad and you have a very good handle on things. I wish your dad well.Allan Norman, M.Sc., CFP, CIM, provides fee-only certified financial planning services and insurance products through Atlantis Financial Inc. and provides investment advisory services through Aligned Capital Partners Inc., which is regulated by the Canadian Investment Regulatory Organization. He can be reached at alnorman@atlantisfinancial.ca. Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.