I've inherited a considerable amount of money

[Back2Black]

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?

You also need to proper financial advice.

Planning for your own retirement.
Possible care home costs (would you need to sell your home?)
Pension in excess of the state pension.
Private health insurance premiums?

Only after doing this can you afford to pass the money on.

I too had a sizeable inheritance. I used it to make life easier for my children ie to get on the housing ladder.

Ive not read the full thread, but I have read all the OP's posts.

I'm in a similar situation- I'm about to inherit soem money and intend to pass it all on to my DCs now(ish).

It looks like I'm going to inherit around £120k from my mum's estate. I have two DCs - both in their mid 20s and both unable to get on the property ladder- partly because they would be looking for a mortgage on a single income.

I have a great pension for when I retire, which I intend to spend seeing the world and then ensuring the last part of my life is as comfortable as possible. I dont want to be worried about going into care eating up their inhertiance, so I want them to have what I can give them now.

Having nursed my mum through the last awful months, I don't want my kids to carry the same weight as I have (not that I have any regret or resentment). I've made it clear to the DCs that when the time comes, I'll be using any money available to me to ensure I have the best care I can afford and its likely there wont be an inheritance from me. Giving them this money now, goes some way to assuage the guilt I feel in potentailly not leaving them anything from me! However, we've all agreed that the money is to be used as a deposit.

So, going back to the OP, yes I think its a great idea and putting somethign in place so they recieve the money at a time in their lives that will help them ensure security and stability is a good idea too.

Have not read all 9 pages but not knowing that they have this money might place them in an awkward position, e.g. if applying for benefits, or divorcing. Anywhere they are required to make financial disclosure

I think that’s a great idea and very generous of you to be putting your children at the forefront of the inheritance.
only thing I’d consider is making sure it’s invested so it’s gaining money - in other words make the 400k work for you until it’s time for the children to get it. 30 is a good age as it gives them time to find their own feet and usually they would have gained some experience.

It's not clear @Back2Black how much financial knowledge you have.

For example, trusts are complicated. (We looked into this with our FA.) There are implications around the growth of funds and taxation. There has to be someone to manage the trust in the child's interests, outside of the financial set-up. We were advised that there are better ways to put money aside and that trusts are not worth the considerable admin and costs they incur if for less than £1M.

A lot comes down to how much you trust your children to do the right thing.

Ours have had early inheritances from us and their grandparents, of a similar amount, and they have not touched it other than for house deposits. We stipulated it was either for higher ed (like PhDs) or houses.

You could consider investing the £300K yourself, with advice, and it being there are as a carrot once your DCs settle down and find a house to buy.

Being realistic, unless you die very soon (god forbid) your children could want to buy within the next 5 years when they are late 20s.

Yes this is the best thing to do

Most people massively underestimate the amount of money they need in a private pension to be comfortable in retirement. Some think they are rich because they have a £100k pot at 60! Spoiler - that will pay for an austere retirement.

I don’t know how much you earn but let’s say you wanted a £40k income in retirement, 10ish of that would come from the state pension (only at state retirement age) so you need another 30k.

The usual advice is to plan to draw up to about 4% per year from the fund to maintain the balance of the fund considering inflation, growth etc (but in any given year the fund might go up or down and also depends on your investments). Let’s say you followed that advice then drawing 30k would require a pension pot of £750k (not adjusting for future inflation, so in reality it would need to be higher, to get 30k adjusted for inflation).

Thinking about the above will your pension be sufficient?

Even if it is, I would consider paying off the student loans now as the interest on those is outrageous. But this also depends on how much your children expect to earn - in some but not all cases it might be beneficial paying them off.

You definitely need professional financial advice to consider your personal situation and provide tailored advice, not speculation from the mums that have very little context on your situation.

I think this is brilliant advice. Don't rush into anything and get some professional advice.

I don’t think there is such a thing as a trust where you can withhold till their 30…if instead you’re meaning a discretionary trust and that you wouldn’t want anything paid out till their 30 that makes sense. I’d recommend getting a STEP accredited solicitor and IFA to create trust and advise on investment of the money.

^This, in spades. 30 is far too late, and if they don't have common sense by 25 they're not going to have it a 30.
DP and I struggled financially throughout our 20's, finally scrimped and scraped together a big enough deposit for first property at 30 (with no help at all from parents who had inherited large sums and could easily have helped). But house prices doubled in the years we were renting and we are still paying the price financially. Having enough for a deposit in our early to mid 20's would have been life changing (and we would not have pissed it away on a range rover).
My grandparent's advice to members of extended family whose children were getting married / setting up house together in mid 20's was: give them as much as you can afford now, because now is when they need it.

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.

When I said put it into a pension funds for the children I meant invest in growth funds or similar so that it grows over the next 30 years. To make the most of it — making the maximum use of ISAs and SIPPs, for example — would require working with the children so that they knew about it. That may or may not be such a great idea. Some young people would like the idea that to a small extent their future in retirement was covered. Others would probably be trying to get access to it early. Only the OP will know.

The advice only to take 4% (or 3% or 5%) a year isn't based on that being what your investments yield. It's calculated on the basis that this is a safe amount to take, bearing in mind inflation, fees, crashes etc, using data from 1926 up to 1976 (essentially, if you started at any point in that period- even summer 1929- and took 4% a year you wouldn't run out of money).

Why do you need to "maintain the balance of the fund" though? I intend to actually spend my pension pot.

This is fine as long as you know exactly how long you're going to live and what is going to happen with the economy 😂

Have a look at https://www.which.co.uk/money/pensions-and-retirement/options-for-cashing-in-your-pensions/pension-income-drawdown/income-drawdown-calculator-making-your-money-last-ajWVD8L3bN92 It's interesting to play around with the different amounts and see how long your money would last.

My parents are in their 70s.my dad said he would like each granddaughter to get £100k each there are 5 of them. I told him to change his Will yo reflect this. He said he wants my brother and myself to just do this. We have both said we are not interested in our parents money. I think it will benefit the granddaughters more. My dad wants them to use it as a house deposit I understand this. I think age 30 is good.

After inflation.

To get 5% after inflation currently means needing a return of c16%. If you're getting more than that, let me know where!

Obviously I don't, and I know how it all works. But I will always have the state pension and I have a small final salary one too, so the minimum in today's money I'll always have is £16k pa.

But the £500k pot and £400k savings - I intend to reduce that to live on.

But if you invested your 500k + 400k you’d yield around 25k pa + your state pension. That would be comfortable.

Don’t spend your capital until you’re on your last legs.

It's OK thanks, I don't need you to tell me what to do.

Obviously the money is invested (did you think I had it in a suitcase under the bed?) but maybe I want to be more than just "comfortable".

What's the point of saving your money til you're on your "last legs" and can't enjoy it? I have noone to leave it to.

There are a lot of ways you can manage your pension pot depending on your objectives, attitude to risk etc, which IMO is so much better than before when you had to buy an annuity.

I think ideally (especially if you have nobody to inherit from you) you would pop your clogs as you spend the last penny in your pension pot having lived well. But then there’s the risk you live a lot longer than expected, having depleted your pension pot - some people prefer lifelong certainty, others are more willing to just live off the state pension. This is why some people like the idea of an annuity, but it’s better of course to have a pension pot at the end that can be inherited than just giving the whole lot to the annuity provider.

I probably fall somewhere in the middle, perhaps spending more when I’m younger and able to enjoy it and reducing spending as I get older, perhaps with a partially depleted pot. But then I probably won’t be going on big holidays when I’m near the end, so won’t need the money anyway!

I wouldn't give it all away - just yet. You mention life limiting illnesses - in years to come there could be advanced medication and/or treatment that's only available in another country. Also your own health. It shouldn't be this way, but it's so monetised it would be a shame if the funds where there but inaccessible.

You said the 400k was “savings” so no that didn’t sound invested, clearly the pension is.

Do what you like - you wouldn’t be the first person to fritter away their capital leaving insufficient funds for a comfortable old age.

I’d keep some myself and give them maybe £75k each

But I will always have the state pension

Unless you're in your 60s (at a push, 50s) already, I really don't think this is going to remain true for long.