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Original poster

DC inheriting £200k, what to do with it?

26 replies

tinkerbellvspredator · 30/12/2023 14:05

DC are 14 and 10 and directly inheriting around £100k each.

They have some investments already - around £10k each in stocks and shares JISA (split between Evelyn ready made portfolio and HSBC FTSE 100 Index C) and £5k in Virgin stakeholder pension.

I will be setting the expectation that their relative wanted them to use the money for a house deposit, so hopefully the bulk of it will not be touched for 10-20 years. I'll put a small amount into pensions for the tax relief and to protect it for the long term though.

I've had advice to avoid investing over the next year at least, so will be keeping mainly as cash savings to start with. Thinking of a cautious approach, aiming for a balance of about 50% as cash savings, 5% into the pensions and 45% into a ready made portfolio and FTSE tracker (probably a global one this time).

What would you do with it?

OP posts:
NoBinturongsHereMate · 30/12/2023 14:16

I've had advice to avoid investing over the next year at least

Who from, and for what reason?

MissHavershamReturns · 30/12/2023 14:19

Why avoid investing now?

Original poster
tinkerbellvspredator · 30/12/2023 14:25

Friend who is a financial advisor, I believe the thinking is that the market is quite uncertain at the moment and not seeing very good returns so might as well stick with the security of cash savings. This was a few months back though, as probate has gone on for longer than we thought so things might have changed? I see my current investments are now showing some gains where before they were mostly flat lining.

OP posts:
aramox1 · 30/12/2023 14:30

I wouldn't put any into pensions - it is theirs so they should be able to access it theoretically at 18. Assuming you are the trustee of the money you have certain obligations to them. Personally I'd invest most of it in a global tracker or Vanguard LS80, putting 9k into Junior ISAs each year if they don't have them already. You may have to invest some of it in your name which will have tax implications when it's cashed in or transferred to them eventually. A few building societies do highish interest trust accounts for under18s- Leeds for example.

123sunshine · 30/12/2023 15:05

The money will be held in Trust due to their ages (almost certainly a bare Trust) and there are different tax regimes to different types of Trusts, so be cautious you are using right investment structure for the type of Trust if you are investing in stocks and shares. It’s likely an investment bond would be the night option, but take professional advice, it is a complex area dealing with funds held in Trust. Dependent on the wording of the will they maybe eligible for the money when they turn 18, you can’t just be investing the money into their pensions etc. There are Trust rules to follow.

OwlWeiwei · 30/12/2023 15:09

I can't advise on what to do with the money as DC are now adult and financial situations have changed so much since they inherited at a similar age.

But I do strongly agree with your idea of talking about the money as earmarked for specific things. We split theirs into 2 funds each and called the smaller one their 'education' fund which was to help them through uni. The bigger one was their 'house deposit fund'.

Because we did this for years they simply never questioned that the money was for anything else and neither of them have wasted it on partying or shopping even though they could have done, legally. Both of them are using the funds for exactly what we said they were for.

AdaColeman · 30/12/2023 15:49

I'd consider investing some of it in Premium Bonds.

guineverehadgreeneyes · 30/12/2023 15:52

https://robsols.co.uk/can-a-child-under-18-inherit-heres-how-it-works-a-guide/

Can A Child Under 18 Inherit? A Guide To What You Need To Know

RubySkies · 30/12/2023 15:56

Junior Isa.

SleepingisanArt · 30/12/2023 16:03

I'm confused by the advice from the financial advisor. As interest rates fall people (banks and fund managers) move their money into the markets as the rate of return is better. Next year looks to be a great one for the stock markets around the world (friend is a trader).

aramox1 · 30/12/2023 16:07

@123sunshine can you explain investment bonds please?

Original poster
tinkerbellvspredator · 30/12/2023 16:52

I won't go into the legalities but most of the money is a direct pension payout which is not technically treated as part of the estate. There is a solicitor involved and there doesn't seem to be any particular restrictions or complications.

OP posts:
GreatGateauxsby · 30/12/2023 16:57

Quite surprised at that advice.
And by surprised I mean I know three people (1 x black rock and 2 X jp Morgan) who say differently. Now is a good / great time to buy.

Original poster
tinkerbellvspredator · 30/12/2023 17:02

Thanks for everyone's advice that this is a good time to be investing - money should be coming through any time now so I'll start looking into which funds to go for.

I wasn't overly impressed with the financial advice at the time for other reasons, but it was 4 months ago now when savings rates were still increasing.

OP posts:
GreatGateauxsby · 30/12/2023 17:20

I almost guarantee they were trying to sell you some crappy product of theirs.

i really recommend opening an AJ Bell and a vanguard account (you’ll be able to access different funds)

they show you past performance on all funds.

Also have a read up on MSE.

i’d pick some boring S&P500 type stuff and then put 30-50% in some of the more “fruity stuff” 😎
I am super conservative a lot of people would say go more like 50-80% into high risk

Both platforms are an absolute doddle and super cheap fees

Cottagecheeseisnotcheese · 30/12/2023 17:26

you will need to check but I don't think you can lock away money past their 18th birthday so pensions may not be an option but someone will advise on the legalities of that
keeping funds in cash is not sensible it needs investing any temporary blips in market don't matter as you are investing over 5+ years, it is better to pay an independent advisor by the hour ( £150-200) rather than commission etc than get bad advice

Silverbirchtwo · 30/12/2023 17:32

Save some for further education. How do they do at school, would some tutors be a good idea so they do as well as possible in exams. Then University fees and accommodation. High interest savings accounts for some of it rates are pretty good at the minute. Is there still a first time buyer ISA account they could put money into where the Government add funds?

Original poster
tinkerbellvspredator · 30/12/2023 18:08

I take the point about pensions. I get good size cash gifts from grandparents for them every year so I will probably use these for adding to their pension pots instead.

OP posts:
Scarletttulips · 30/12/2023 18:13

I wouldn't put any into pensions - it is theirs so they should be able to access it theoretically at 18

Thats not true. It’s true of work place pensions for not personal pensions.

facep · 30/12/2023 18:25

I didn't inherit that much but I inherited 10k when I was 11. I put the money towards travelling for 6 years and it was worth every single penny I spent. I'd have been disappointed if my parents had decided they knew better.

Cottagecheeseisnotcheese · 30/12/2023 18:46

@Scarletttulips I think it is more about the fact that as a trustee you are not meant to invest money so the person you are investing it for can not access it once they reach the age when they can legally manage money for themselves. Hence you can't invest it in a five year bond ( where you can't withdraw) when they are 16, the OP will need specific advise on this. It is not the same as you opening a pension for them and paying in to it with your own money which is perfectly legal
in some cases money can be accessed before 18 for educational or health purposes so it maybe possible to access money to say pay for them to go on an outward bound holiday if it could not be afforded out of parental income etc but that depends on the terms of the inheritance as it falls outside of the estate probably a pension / insurance payout

Sunseed · 30/12/2023 18:54

@tinkerbellvspredator If they are beneficiaries of a pension please take proper advice. There are tax advantages to retaining the pension wrapper that may be worth considering.

TheWillowTrees · 30/12/2023 18:56

I would ignore advice from anyone who suggests you try to time the market. Very odd.

In your shoes I’d do a combination of cheap global tracker and high interest savings account, with max going into their JISAs each year.

Original poster
tinkerbellvspredator · 30/12/2023 18:56

@facep they will legally be able to access the money at 18. If they decided to use some for travelling I would support that. Not 100k though! I would strongly advise that having the security of a roof over your head (or if that's not possible, investments that can be drawn on in future) would be more sensible. But I wouldn't be able to stop them blowing it, only advise, which is why ideally I wouldn't want them to think of it as something they can dip into.

OP posts:
messybutfun · 01/01/2024 18:17

If you are thinking of putting money into pensions for your kids, and your kids have just inherited a pension fund, please stop the transfer out of a pension wrapper and speak to a financial adviser.

Transferring funds into a beneficiary drawdown does not come with the same restrictions you get in a pension fund. And depending on the age of the deceased, could be entirely tax free.

Actually, @Sunseed has already said exactly that.