What to "do" with inheritance

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I have a query about investments.

It looks like I will be coming into something like £180k, following the death of my wonderful mother. I (obviously) have very mixed feelings about this money, as I'd rather I wasn't getting it and - perhaps for that reason - have been having difficulties making sense of what to do with it. Can I pick your wonderful minds, please?

This is a brief summary of our financial position - and I do realise how lucky I am, and how "lucky" I am to be getting this money, but as I say very mixed feelings about it.

Married, 53, 2 kids (1 at uni, 1 mid-GCSEs). We have a mortgage free house (thanks to another inheritance on my dh's side 😢) and a buy-t0-let property on a repayment-only mortgage of £140k. We have what used to be good work-pensions, and have been buying AVCs over the past 5 years or so. But our pension scheme has undergone changes, so maybe these aren't so good anymore. We have about £40k in savings (cash ISAs). Both kids have about £10k in savings (and we recently handed over eldest's to him to manage). Our combined incomes are £135k. Our biggest outgoing has been private school fees, but we only have another year of that for one child.

My sense is that I would like part of my mum's money to go to educational costs for my kids, so they leave Uni without debt. I also want to use some of the money for "treats", which for us means travel. I can't decide if I should be using the money to pay off the BTL mortgage, or leave that and buy another BTL property, or invest all of it (where?) so that we have an income from it, or investing part of it and putting some aside for said "treats". I really don't know where to start, or how to decide.

Many thanks in advance for any advice...

I am so sorry you lost your lovely mum.

I would put the money you are setting aside for your children into stocks and shares for 10 years or so. I would only give it to them to use as a deposit on a property and to be honest I don't think I'd tell them about it unless they were really sensible.

Agree with this. Stocks are ‘cheap’ at the moment. Would maybe put some aside for yourself as well if you are uncertain about your pension.

I would put a good amount in a lifetime ISA for the kids with the ones that have to be used to buy first homes. Though this would have to be done yearly as there are limits.
I would then buy a small holiday home so you can go and make some memories with the family. Top up the pension pots and then if anything left a lovely holiday.
I'm so sorry for your loss, but I'm sure your mum would want you to use money for maki g further positive memories.

Cash is worst thing to hold right now...inflation will just eat it up and banks still paying nothing on deposits...i wouldnt risk shares....could lose the lot...try premium bonds and property....choose whatever works best for you. and have a holiday also....!!...i had a smaller inheritance off an aunt....used most of it as deposit on a btl...repayment...the rest is going on new roof, solar panels, dentistry and a few holidays and maybe if poss a better car as current one is 21 years old....aim to keep about 20 back in bonds for rainy day fund.

most stocks have decreased recently into bear market territory , assuming a rebound(in line with historic benchmarks) in the next 12 -36 months would be excellent return on investment

Please don’t bring problems caused by your own decisions onto a thread that is not about you

Eh? My mortgage was paid off from mine and DH's earnings. No problems here.

@saltycrisps, person A having a btl as an investment does not stop person B buying a property as their home. There is no shortage of houses up for sale to buy. Just look on Rightmove. I think you will find it is the lack of a deposit in most cases that prevents person B buying a home. Person C might buy a home too, are you also blaming them for person B not earning enough to save a deposit or just like picking on Person A? They are independent events. Person B might never be able to afford to buy a home but it is not Person A or person C fault. Person B needs to increase their incomings/reduce their outgoings or both. You can dislike it as much as you want but it's not fair to blame a person with 2 houses just because another has not got 1, because even if person A only had 1 house it would not mean person B could earn more/spend less or save a deposit.

I’d wait to see where your DC decide to go to uni and buy a Btl property there that your DC can live in rent free during their studies. A couple of my friends have done this with their kids and then sold the property at the end of their studies and given the money to DC to help get them on the property ladder.

Agree with this, frankly.

I wouldn’t buy another BTL or pay off your BTL mortgage especially as it’s already repayment. As others have said, small scale BTL is getting trickier.

I’d also not allocate the money for your kid’s uni either for fees or accommodation. There can be advantages to slowly paying off student debt over the longer term.

First, you and your DH should get pension forecasts so you know how much you are on track to get. Then look at investing in SIPPs as they may be better than AVCs as you can access from 55 currently rather than waiting until you’re 67.

Also ISAs/LISAs/JISA for you both and the kids and keep adding as much as you can in each tax year. I’d also consider seeing a fee based financial planner rather than just an IFA. You don’t have to allocate all the inheritance in this tax year, you can ‘hold’ it in premium bonds and use the allowances available to your advantage.

Also agree with making a chunky donation to charity especially if you’re higher rate tax payers and have a great holiday. Sorry for the loss of your mum.

I am sorry about the source for the money, I'm in a similar situation myself. You don't need to immediately spilt it into £85k packages to be protected under the FSCS scheme. There is cover for temporary high balances that covers you for £1m for six months after receipt. It's designed for inheritence, compensation payouts and the like. You do have time to plan and take advice rather than immediately moving it about.

Everyone's situation is different, for me I decided that it was the right time to have investments rather than savings. Up to now I never had enough "spare" money to do that. Inheritence aside, if you have concerns that your pension scheme has had changes that you don't understand then you need to be looking at that. I decided that I wasn't paying an IFA to tell me what I already knew but your situation is more complex than mine and it might well be worth paying for some advice, not just on the lump sum but pensions, wills - the lot.

I have a defined benefit pension so never had a need to look at SIPPs. I hadn't realised that you can leave the pension pot to named beneficiaries and it's outside of your estate. You can pay in until you are 75 or when you start drawing from it. I really wish I'd looked at it earlier.

You sound relatively well off. I would be thinking about my own inheritance tax planning and passing the inheritance directly onto my children via a deed of variation to take out of my own estate. You can do this into a trust so they cant touch the capital.

Then i would investigage how best to invest it.

I'm not aware that there are shortages of properties for sale?

where have you been, there has been a severe lack of supply the last yr which has pushed prices to record levels 😆

I hadn't realised that you can leave the pension pot to named beneficiaries and it's outside of your estate An IFA would have told you that !

Buy another BTL outright, use the rent as a nest egg/uni funds?

Oh the irony 😂

Wonder why the OP hasn't been back to engage with replies.

Thank you all for your answers - really appreciate it.

To answer the last question first. I hadn't been back as I've been away for a few days clearing my mum's house. I found it all much more upsetting than I had expected, and came back shattered and emotional. Just trying to sort out piles of tea-towels made me weep. It is really hard.

Thank you to all those who gave advice and thoughts with kindness and without judgement. The main things I take away is the need to get a financial advisor.

There are clearly very mixed views about BTL, but also mixed views about student loans. On the latter, I simply don't trust the government who I fear will raise rates on these, and change the terms retrospectively.

But lots to think about - so thank you again.