Unexpectedly inheriting 100k

[Polkadottablecloth]

I’m unexpectedly inheriting 100k in the next month or so and am ntinaire what to do with it. I’m mid 40’s, mortgage is paid off, there is the possibility of an extension which would use all this and more but we’re not sure whether we want to go that way or not. 2 DC at uni (one will start this year) both will get loans, am not considering paying for that (I don’t think?) but am aware that this money could help them on the property ladder soon. I pay £10k into an ISA annually and pension is DB, comparatively small due to lots of time out of the workforce but forecast to be ok when combined with DH’’s.

It’s so unexpected I had never considered it might be an option and am now slightly frozen in indecision! Where should I put it? If we decide to go for an extension it may be only for a year or so but I can’t even decide if that is a good idea or not!

Stick it somewhere safe where it will gain interest and take the time to think about what you want to do. It's probably good to get some financial advice before deciding anything.

Where is somewhere safe? It’s over the £85k FSCS limit, would it be best to split between 2 different bank’s savings accounts?

Stick some in premium bonds. You can get it out instantly. I would also stick £20,000 into an ISA. Again it can be an instant access one. Might be worth topping your pension up a bit?

Put the maximum in premium bonds, then split between pension top up and stocks and shares ISA.

Yes split it over 2 banks but check they aren't from the same "group" of banks. Can't remember which banks come under same umbrella but I know for example my savings are split over Lloyds and HSBC which aren't same group. Worth noting if it's in a joint account the amount is per person, so in effect the 85k is per person (£170k per couple)

NS & I income bonds are backed by the treasury so are safe above the 85k FSCS limit

Thanks all, I’m not so keen on NS&I as it’s literally a lottery in terms on whether or not you gain but I can see some positives as a holding place.
How do I find a reputable IFA? Googling doesn’t fill me with confidence! Is there a register like there are for some other professions?

Income bonds are different to premium bonds, no lottery/chance of winning anything big but you earn interest on however much you have saved

NS&I is more than premium bonds and they are protected for the full amount so no £85k limit.

Aah, I think I need to understand more about NS&I then. Will google… unless anyone can point me in the right direction!

Parking the money, or most of it, in NS&I Direct Saver (as that can take up to £2million and has Treasury protection, pays interest but not highest on market) or in a combination of FSCS protected savings accounts is a good idea.

Don’t make quick decisions. Consider what the benefactor would have liked you to do. Consider what is beneficial to you and your family.

Here you go www.nsandi.com/products

I’d probably put 20k in a cash isa in my name and 20k in DH name. The rest I’d do a mix of premium bonds, plus some other kind of bond. maybe a 1 year fixed rate. Basically places to stash the money while I thought about what I wanted. Split between me and DH for the tax benefits. I have an easy access savings account with 4.something % interest with raisin, which is very flexible.

Then longer term things to think about - house extension? private pension or avc if allowed to your current scheme? Money for the DC held in your name until you give it to them for house deposit/wedding/masters degree etc?

Which tax bracket do you fall into for tax on savings interest and capital gains?

Here's what I would do (not advice, just my own ideas)...
If basic rate tax payer, put £20K in a cash ISA. For the rest - open a GIA (general investment account) with a low cost provider such as Investengine, and put into a money market fund - rates are about 5.13%. Not completely risk free but considered a very stable and liquid investment. Gradually filter this into your ISA each new financial year.

If in a higher rate tax bracket, again maximise the cash ISA. For the rest, look into low coupon gilts with a favourable capital gain on maturity. Capital gains on gilts are tax exempt, plus you will know exactly how much you will receive on maturity. Gilts are backed by the UK government, and although the prices rise and fall with the bond markets, if you hold them until maturity the final redemption figure is guaranteed. There is a smaller range of platforms that sell gilts on the secondary market ( AJ Bell, Interactive Investor, Barclays Smart Investor, plus a few others).

Note that if you opt for an IFA, they will be selling you a financial product in return for a fee and usually an ongoing percentage commission. This will almost certainly be a stocks and shares investment with some bond fund exposure to balance the risk. This type of investment is really only suitable for longer term investing - at least 5 years or more usually 10 years plus.

Do consider inheritance tax implications if your assets are likely to fall into this bracket.

I would save it wisely until dividing it in two for my children's house deposits once they have their first secure job..

I know of two people who were given inheriances when young. One bought a motorbike which he crashed, uninsured. The other spent it on drugs.

I'm in a similar position OP. However it will be used for a deposit on a house. In this instance the amount is below inheritance tax threshold, so why are posters saying to consider that?

I'd do this too. I might keep back £5k for a family holiday then split the rest to give to DC for deposits should they wish to buy a house

Word of mouth but remember, they are selling you something and always negotiate the fees.
On 100k, they'll add up.

Personally, as 100k isn't a huge amount, i'd stick as much as you can in ISA's 40k between you both and the rest split between savings account and premium bonds, in 12months time, you could have 80k in an ISA paying approx 4% tax free, subject to any changes Reeves might do.

A IFA will want you invested in equities, thats what makes him/her their money....whether your investment goes up or down, they still get the % - sure markets are lower atm and may well go up but Trump could anything, anything at all and they could plunge again.

I'd defo put full allowance in premium bonds (although i am risk adverse), my relative wins something every month with full amount, only £100 this month but has been as much as three wins equalling £1000.

I would use it to fund stocks and share ISAs for you and DH for the new few years and have it in high interest savings in the meantime

Another one who says house deposits for children.

Because the OP also owns a house without a mortgage, so overall her assets might well exceed the inheritance tax threshold.

I agree with house deposits for children in the future. You'll know when the time is right.

If you trust them you could buy them each a £20k ISA, maybe a two or 5 year one if they are not likely to buy a place for a long time.

And the same next year. And £10k the year after that. Check access is possible in case they need to get it out for some reason.

I think the best way to think about this is to try and decide how much of the £100k you might want to access over what time frame(s). For example you might say to yourself that (eg) £40k you never intend to touch until at least retirement (which might be 20 years away??), and £60k you're not sure (but you could well end up using it or giving it away over the next 5 years).

In this example anything under 5 years you really ought to keep in something safe (could be bank account, NS&I, Money Market funds, etc), ideally in tax-free wrapper accounts like an ISA (or some combination).

For the £40k you really should consider either putting it into a pension or ISA and investing (eg global tracker fund). Over the long run (eg 10 years+) if you keep your assets in low-risk assets (ie like those above) you will at best break-even when accounting for inflation. Global equities for the last 100 years or so average about 4-5% over inflation.....but of course they have periods when they lose money.

But whatever you do you must be confident in your decisions.