Inheritance etiquette - am I missing something here?

[ihavenamechanged123]

I have name changed for this as have been outed on here previously.

I have just inherited £12k from my late fathers estate - he died suddenly and tragically 8 years ago. Prior to his death, myself, DSis & DM had not seen or spoken to him for 8.5 years. He enabled and allowed the abuse of both my DSis and I throughout our childhood until I plucked up the courage to tell my DM. She then divorced him and moved us to a different city nearer her family.

When news of the money came to light, I originally said I didn't want it. To me, it felt like dirty money. I feel really uncomfortable about having it and being in contact with solicitors etc has brought on flashbacks & nightmares. DM & DSis convinced me to accept on behalf of my DD, who is due next month.

Bar mortgage and car, we have no CCs/debts etc and yes, money will be tight with me on mat leave but we have no looming worries so decided to put 10k in a trust fund for DD when she gets here, 1k will go to the charity that helped my DSis and I and 1k go towards our "mat leave pot". DH is completely on board with all of this and feels similarly to me about accepting it.

MIL has just popped over with something for DH. She asked if the money had gone in yet and "how excited I must be." She knows the back story. I reiterated that I felt reluctant to accept and that I will be keeping the majority aside for DD. Roll on a 10 minute rant about how if she inherited that money, she would ensure all of her family are looked after and would treat everyone to a holiday of a lifetime and how no one knew the money was there so technically it's not really mine

So my question is, AIBU to keep this money for DD or considering I didn't want it in the first place, should I be donating to family members (ie her) or spending it on a family holiday for example not that I'd want to go on holiday with MIL, a 15 min coffee is long enough?
In a nutshell, WWYD in this situation?

Thank you for all the lovely posts.

After discussing it this evening, DH and I have agreed to put the money into an ISA, in my name, and split it between the saving accounts of our DCs once we've decided we're definitely done having them.

MIL is privy to this information as FIL is an ex-solicitor and he has advised me on the legalities of this all. He is really lovely and has been very sensitive.

I was in exactly the same position when I was 5 months pregnant with DD1. Once I got over the initial "dirtiness" of it I decided to use it to extend my maternity leave and be the mother I always wanted to be.

@ABCDE12344 I'm sorry you were also in this position