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Serious question here, my mum and dad have just given me a cheque for £50,000, aside from share it out to every mumsnetter, what should I do with it and do I need to pay tax/declare it??(30 Posts)
Basically it is my parents 50th wedding anniversarry and to celebrate they have given e and my brothers £50,000 each . Yes I know it is shedloads, and although I always knew some money would come my way I am in shock.
However to put it into context my mum is dying, she will probably live another 6 months to year (hopefully) and so I do understand why they have done this. My parents have been very careful with money and now they are in their late 70s this is something they want to do for us.
My current situ - and I am NOT BOASTING or trying to make any feel bad - I earn really good money as a recruitment consultant (I work hard, but earn around £50K pa) Dh is an actor and earns £10 - £20k MAX pa. We have 2 kids 7 and 9, we have a nice house with a £90k mortgage (again yes I know I am lucky, I bought 12 years ago) and we have always said we won't move.
SO WHAT DO I DO WITH THE ££
We are just getting an amazing bathroom fitted and will need to find £8 - £10k (I was planning on upping the mortgage slightly) We are managing to save around £400 - £500 a month (offsetting mortgage) as well as pension, ISA for kids etc.
DO I KEEP £10,000 for the bathroom and next years ski-ing holiday??? and put £40,000 away for school fees (basically this money means we can consider private school for dd1)
OR DO WE PAY OFF £50,000 of mortgage, and then save loads everymonth? or overpay for a few years and be mortgage free in a few years??
At the moment I feel our earnings are at the max they are every going to be, for the first time EVER I am not spending what I earn (until 2 years ago we had a family income of aroud £35,000) and I have been splashing out a little - nice new sofa, new TV, new bathroom!! Ski-ing holidays etc
IF I SAVE THE £££ WHERE????? Do I earmark ir for school fees or for deposits on houses for my kids?? or simply for our retirement in 20 years? I also assume (not arrogantly) that there is likely to be at least a similar amount if they die, as they own their own house and it is worth around £400,000. This ££ did not come from that.
OMG I am simply in schock tbh, I haven't posted for a while, but I couldn't say a word to RL frinds, and DH and I ae simply sitting here gawping at a cheque for £50,000!!!!!
Pay for the bathroom, and put the rest on your mortgage, if you don't have to pay early redemption fees. Hopefully what you save from that will pay for school fees, if that makes sense? (But private school for just one kid = an error.)
You may have to pay inheritance tax on it, it depends on the size of your mother's estate.
oh sorry I wish I could say "this happened to me and I did...." but sadly I can't
Sorry to hear about your mum being ill.
FWIW If it was me I would use it for the bathroom and then put the rest away for the DCs education or a rainy day.
I think that the first thing that you need to do is have a chat with your parents and understand how their will operates and what they have done in terms of inheritance tax planning. Otherwise, depending on the size of estate and arrangements made, if your mother does die within the year you may have to fund IHT of up to £20k from it.
If you are thinking of school fees, then there are a number of different ways of doing things - you really have to get some professional advice to make sure that you do something tax efficient, esp as you are a higher rate tax payer. According to the IFA we saw today (to talk about school fees as parents have offered to pay some and want to make it tax efficient), paying money off your mortgage is actually one of the less effective things to do.
Good advice doesn't cost a lot, and can make/save you a fortune
Is there a gift tax here in the UK? I know in the US you can give someone one $10,000 before they have to pay tax. If this is the case here as well, you might be a lot better off if you mum gives you £10k, your DH £10k, each kid £10k, and pays directly for the bathroom work or something similar.
I would save most of the money for future years of credit crunch struggles, especially as work as a recruiter might get a bit rough when there aren't so many jobs out there.
I can say this of course because sadly I don't have anyone dangling 50k in front of me.
Sorry your mum is dying.
Since you've got an offsetting mortgage I would put it into a savings account linked to your mortgage - that way your mortgage is reducing significantly every month but if you decide to use some of it for school fees, bathrooms, holidays etc. (or if you end up having to pay inheritance tax on it) it is still available.
I would just put it in an account off-setting the mortgage. The advantages of this are:
1. You still have ready access to the cash should you decide to spend it on education etc at a later state
2. The effective rate of interest is very high, as you are a higher rate tax payer.
3. Because you will be offsetting a very large part of the mortgage, your mortgage payments will be almost all capital and so will rapidly reduce the term of the mortgage.
4. If you are already saving a healthy amount each month, then this can be used to pay for the ski holiday rather than eating into your windfall
Wow , what a bonus!! Mortgage first (although you might want to stash it away short term to avoid any early redemption penalties). Then your monthly disposable income can go up, so you can save to help fund other things. For tax you need to declare any interest and hope your dad survives 7 years (to avoid it being taken fully into account for IHT purposes) - sorry about your mum not sure if that might complicate the IHT liability or not.
what a great problem - bitter sweet i know but how lovley.
i would pay off the mortgage and have nothing but disposable income
btw the cheque came from my dad!! I know about the IHT lawa a little and obviously hope he will live 7 years or more - althoiugh he may die of a broken heart over my mum
Also as far as school fees for one child, DD2 is really really bright and we have a grammer school system here, so I am hopeful that she will get in there. It would be the best place for her, she loves shcool and loves learning. DD1 is average, needs confidence boosting and doesn't enjoy school in a same way as DD2, hence private school for her may help her achieve what she is able too and it will not be bed for DD2 who will be at a fantastic school anyway IYWKIM
I am just not sure if payoff the mortgage is better right now or if shares are still better long term. I will pay it in tomorrow and it will start to offset anyway whilst I decide. But I am not 100% sure it is the best place. What is the effective rate of interest doing this??
I can't offer you any better advice than what has already been said.
But if this was to happen to me I think I would die of shock!
Good luck to you
whether you buy shares will depend entirely on your own attitude to risk. i personally would not want to risk that kind of special money in shares in this kind of economic climte but other people may well take another completely different viewpoint. I sold my flat last year and put all the money straight into paying down our mortgage. it means we can be mortgage free in just a small number of years and that will buy lots of financial freedom for eg school fees in the long run. I personally would use this money for something big like mortgge and save for the bathroom. but we are all different eh. i would at the veyr least pay to see an independent financial consultant. Where do you live i know one- not anything to do with me just someone i know and trust.
If you want someone who is a GENIUS with money, our IFA has saved and made us a bomb...
soapy thanks for that article, I have a first direct mortgage, and I am already slight;y overpaying I believe. Obviously his will not pay off all the mortgage, but if I am disiplined and use it to offset now, keep paying the same repayments too, then the 11% looks pretty good.
Has anyone else got a genius IFA living in the house!!
OMG I have just looked at a mortgage calulator and if paid off my mortgage with teh full 50,000, I would (if I kept my repayments exactly the same) be able to pay off the remaining amount in approx 7 years!!! Which would be fab, BUT I look at those years as possibly quite pricey, so mayneed to get some £ back, which I can, for stuff, but it would be amazing to be mortgaage free by 46 - 47!!!
OMG I am still shaking
I'd pay most off it on my mortgage but keep a few k to spend. How lovely for you to be able to do this, but I am sorry about your mum.
I'd see if you could get some advice from an IFA first - some do free consultations.
It might be more worth your while paying off the bathroom, and with the remaining 40k - put it into various ISA's and savings schemes and making the money work harder for you.
I'd imagine savings rates are on the up to tempt more folk to invest. It could mean that in 7 years time - you could have more money put away to slap on to the mortgage and pay it off, and still have plenty of money left, and, of course disposable income.
I'm so sorry to hear about your Mum, definitely a bittersweet gift. Hope it's a peaceful end for her
Before you decide anything go and get some advice from an IFA, preferably a recommended one.
At current rates I don't think you're going to do better than offsetting the mortgage, as you'd have to pay 40% tax on any savings/investment income. The effective rate of interest is whatever the interest rate on your mortgage is, and likely to be more than most savings accounts, but you don't pay that tax. For now you'll pay less than half your current interest on the mortgage and you can take some back for bathroom when you need it. It would also be available if you do find you have to pay IHT or if you decide to go for fee paying education.
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