I've inherited a considerable amount of money

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And decided to divide it between my DCs without their knowledge.
AIBU?

I'm a single parent. 3 are uni / just finished & one at senior school. The plan is to put the money in trust equally between the 4 DC until they each turn 30.

The reasoning is, my mum died when she was younger than I am now & my dad not much older than I am. So I thought my inheritance should skip a generation & go straight to my DCs.

Is this fair?

If you’re concerned you might not live very long you’d be better to do it via a deed of variation.

If you take the inheritance and then gift it to them it could be counted as part of your estate for inheritance tax purposes for seven years.

If this comes from a will, the OP could vary the will in her children's favour by a deed, which means the money goes directly to them and bypasses her estate, thus no inheritance tax on it when she dies. And not taken into account as gifts if she dies within the seven year taper relief period.

If the OP simply gifts now (regardless of whether a trust is set up or not) she herself has the (current) £325k inheritance tax nil band anyway, so inheritance tax would only be due on £75k, and only if she dies within seven years, which is statistically unlikely.

For those saying to put it on a pension for the kids - you can't just stick loads of money in pensions, you have to have earnings to match it. You can put £60k pa into your pension, or your annual earnings, whichever is lower. If no earnings the most you can put is £2,880pa.

Haven't read the whole thread but you might want to ring fence it in some way so it is their money and then perhaps their children's in case of death. Otherwise it would go to a spouse (which might be fine, but if you want it to go down rather than 'outside' the family). I mean should one of your kids die with kids but before they had the inheritance to spend, or die without children it could dictate that their share reverts back to your other surviving kids. Not nice to think about but a lawyer setting this up should go through all these with you.

500k invested would yield 15k a year @ 3%. Attendance allowance is max 4k. Pension max 10k. You’re still nowhere near 50k.

I’m not saying this ever be necessary but financial planning for retirement should always include planning for late life infirmity too, it’s a mistake that many people make.

I too always work on a 3% assumption, but I think it's reasonable now to use 4% or even 5% now.

Even so, it's not enough. But most people don't actually stay in care homes very long. My grandmother was in a nursing home for fifteen years, all funded by the NHS, but both those things are pretty exceptional.

If our investments were only yielding 5% we’d be gutted.

haha talk about living up to your username 😉

A seedcorn amount into a personal pension to start the habit could be very beneficial in the long-term. And you've kindly suggested what that amount could be.

My DF has been in a care home for the past 11 years, none of it funded by the NHS. I rather wish he had arranged his financial affairs a bit better, but that's a story for another day. Moral of the story; do seek advice!

You say that, but due to current financial circs it could feasibly be less.

I think the median stay in a care home is 3.5 years. But I know several people who were in much longer than that.

It can depend on finances. If you can afford carers in your own home then you stay there as long as possible. But for that you need funds well above your living expenses. Some people need to sell their property just to fund care, and once care at home reaches a certain point, a care home is actually cheaper.

Quite. 10 years in a care home is not unusual.

Attendance allowance is £68.10 or £101.75 a week- so more than £4000- but not much more!

Anyone reading this thread and with an elderly parent not claiming- have a look. It is very simple and in my experience the successful claim rate is very high.

It depends on so many factors - do you manage your portfolio yourself or do you have a wealth management firm - they take hefty fees. It also depends on your level of risk, and also on the economy.

Unless you are an IFA yourself, I would make an appointment with one and get some really good financial advice from them for your best course of action. I'm not saying you should or shouldn't give your entire inheritance away, it's up to you, but there are many aspects of financial services you won't be aware of and therefore don't take into account. Nobody here knows your personal circumstances but there's so much variance and there will be things that have an impact on what you might do.

I agree with PP that they are better off not knowing about the money until you choose to give them it.

This

I would do exactly the same. If the Op wants she can even divide the rent by 4 and put it in their accounts on a monthly basis, providing she has enough to pay for the upkeep of the house.

Thanks, my bad.

I’m sure your benefactor understood that once the money passed to you, it’s yours to do with as you wish. Not sure where ‘fairness’ comes in to this, you seem to be overthinking it.

My DSS inherited from one of his GPs when he was 4 or 5. The money was left in trust until he was 30, with a proviso that the trustees could let him have it earlier if they considered he would do something sensible with it. She set the age at 30 as she didn't want him getting a shedload of money at an age where he might be reckless and fritter it away.

He was allowed the money at 21, and put down a 60% deposit on a house. Twelve years on, his mortgage is small by current standards and he has shedloads of equity in the house.

You can do as you wish with the money, I would certainly make sure I had enough for future myself/pension. You could work out amount would help you and then split the rest.

30 is still quite young for a lump sum depending on how mature they are.

Why trust now ? Is it make tax efficient?
If no rush/tax reason could you not hold onto the money for a bit and work out what to do ?

finally ; the interest rates are so favourable at the moment you would get a nice return even whilst you think about what to do with it.

Passing it on to your kids, great if you can definitely afford it. But think long and hard before setting it all up as a trust. I've been involved in a trust that an older family member set up for my kids' generation. The cost and hassle is considerable. If you're talking about a fund of half a million plus, maybe it makes sense, but for smaller amounts there are a lot of annual overheads (ongoing financial advice and accountancy as well as legal set up costs) that eat into the final amount the kids will get. And don't get me started on how long it takes to administer.

Who else will be trustees? You may think the hassle is worth it, but if you die before your youngest is thirty, other people will have that hassle thrust upon them. My fellow trustees and I have really struggled since the family member died. We have different attitudes to finances and life in general, but are all tied to being responsible for this trust. In a toxic job, you can decide to leave, but it's not so easy with the trust. We have got to the point where relatives we used to be fond of are now people we will avoid at all costs as soon as the trust is wrapped up. You could pay lawyers or accountants to be trustees professionally, I believe, but that then eats even more into the pot.

Also, wouldn't it make sense to help your kids buy a home before they're thirty? If I was you, I'd gift them the money (not sure on the rules of how much you can gift though), invest it, get the kids to sign over responsibility, passwords etc to you, being very vague about how much cash there is, and sort it all out for them until you trust them to use the money to help buy somewhere to live. But outside any formal trust arrangement. Unless you have any particular reasons to think they'll go against your wishes and take the money out and spend it on drugs or fast cars?

Also, if a large amount, is it too late to amend the will so it's an inheritance for them rather than a gift from you? I believe there are advantages to doing that, but I'm not too clear - worth asking the probate lawyer?

There is no rush
You could take a year to think what you want to do with the money

If you look on money saving expert website they always recommend

Pay off debts
Have 3 to 6 month emergency savings
Put maximum into ISA
Pay into a pension
Spend some on yourself

It may be more tax efficient to put money into LISA'S for all your children ?

I am also concerned that if you give money to your children that it comes with strings attached- "you must spend it on X, Y,Z" . Should their be strings attached ?

Suggest get some financial advice before making big decisions

How much money is it?

I don't understand the skip a generation.

Your children would normally inherit from you, their parent.

How is what you plan 'skipping' something?

You aren't really skipping, you're just giving them an early inheritance.

We did this with my MIL's estate. The Will was changed (this was all legal and done shortly after she died- it's an accepted process) and DH gave a third to each child of we kept a third.

They put it towards house deposits.

I don't see why you think it's an issue.

OP you need to pay attention to the poster who pointed out that a trust can be dissolved by the beneficiary at any point when they are over 18. It's known as the rule in Saunders v Vautier. It's a waste of time to debate whether you put it in trust until they are 25 or 30, because the trust deed is ultimately overridden by their ability to access it at age 18. You need legal advice on your plans.