Exciting inheritance! How to hold it?

[Lionessadmirer]

My lovely uncle has left me and my two brothers £450k each after inheritance tax (we have just sent off IHT400).

For my brothers this is life changing. And it means I won’t have to support them financially.

My husband and I have a specific long term financial ambition to do with our house. But until the time comes to action that, we don’t need the money. We are both busy working full time.

my uncle self-invested nearly all his money via hsbc and ii. Given what I say above, is the sensible thing to do the same?

lastly, how should isas be used here please?

thank you and please raise a glass to our uncle who lived well and died content.

Unexpected, unforseen, generous, may have been more appropriate.

So one mustn't be excited or pleased to be on the receiving end?

You're going to get a hell of a shock when you find out about VAT, CGT and council tax...

Hi. I saw there were a lot of personal comments for the investment board. For anyone still interested:

I’ve always known that my brothers and I were my uncle’s heirs. But I’ve never had a chance to be excited about it before now for the reasons below:

until his 60s/70s, my uncle always hoped to find the right life partner. I wanted that for him too. I’d rather have had an auntie and cousins than money any day

his money was none of my business. He would send me statements of his affairs just in case but I never read them. As my husband said « he can leave it all to the cats home ». Plus also nowadays all the money goes on care home fees for many families

then he got ill and I had the duty to support him in his short final illness. This was a very positive but also intense experience, he was inspirational. There was no time to think about money. It was very hands on and I basically moved in.

then he died and there was the funeral to arrange

then the work of gathering details of all assets and debts. This wasn’t simple.

then the first Christmas without him

Then new year came and my brother and I finally got iht400 sent off.

so now, 5 months after he died, there’s a break, and we can think about what we will do with our inheritances! It will change one brother’s life completely-I no longer have to plan to support him (secondary progressive MS). I can use the money to fix a « blight » on our property that otherwise my children will have to deal with as it isn’t saleable till fixed.

So yes, now I’m excited.

@Lionessadmirer You are not being sensible to handle sales and acquisitions yourself. I assume you have no idea of markets and what should be sold and when, never mind ISAs and shielding from CGT? I’d honestly use a professional company to oversee all of this. Yes they charge but they will probably make you money and of course they have access to global markets! Every decent investment company has these options but to be honest we let them get on with it based on our risk setting. You can stipulate no tobacco, no oil etc if you wish. They will ask you. But picking and selling when you have no idea is not sensible.

I think the OP is being perfectly sensible. I understand from posts in the Higher Education section that you have a strong background in economics, which means I am at a loss to understand your arguments. For many people low risk is good. Trackers track the market. If you get a great advisor they might beat the market, but overall their performance will also be average, because, well average is average. Unless you really know your onions and who to select, a low risk low cost tracker (or a bunch covering more than just the UK) together with some immediately accessible funds in high interest accounts seems fine. (And safe.)

If the OP is moving from individual stocks to passive trackers, I don't think that's good advice.

"what should be sold and when"

What does that even mean?

never mind ISAs and shielding from CGT

What is complicated about putting £20k into a stocks and shares ISA?

Yes they charge but they will probably make you money and of course they have access to global markets!

How much do they charge?

How much money will they probably make? Is it more than a global tracker?

Everybody has access to global markets via online platforms such as AJ Bell, Interactive Investor, etc.

But picking and selling when you have no idea is not sensible.

The OP has stated that she plans to sell all the individual shares and adopt a hands-off approach, so it doesn't matter what she sells, so long as each sale is followed by an immediate buy to avoid the markets moving in between.

@ThisOldThang I don’t know what size your portfolio is, but the op seems to want a DIY approach but knows nothing. How does she know what to keep and what to sell? We have had a substantial portfolio for 30 years and don’t pretend to know what’s best! We just indicate my risk attitude. It’s just so much easier and very successful!

Do you think the op honestly knows about trackers? Or would she be better advised to have a mixed portfolio? No one should just have one type of investment in my view. Then there’s CGT. Does she know about this? She’s way more than £20k, so what’s the plan? What about income or growing the portfolio? What are her needs?

Our investments show very good growth overall and we ask for release of money for other things when it’s gone up a lot. We don’t take regular income though. We can relax because we have experts making the decisions! Not us.

No investment advisory service will ever say do one type of investment! Plus which tracker? There’s loads! She needs an overall view taken by an investment advisory company that understands her needs which she can discuss in depth with them instead of randoms on here who don't have extensive portfolios.

I have no background in economics and if anyone knows anything about investment companies, high risk is not very high risk at all. What we do is spread risk and we don’t decide when to sell and when to buy because we are not the experts. We use Schroeders and they are.

Sadly no shock, we’ve done our homework.

If you are totally new to investing then follow some of the advice here about where to learn more. You probably will want to employ a financial advisor but trackers are not a bad idea.

Can you sort the blight on the property now or is there a reason to wait?

One bit of advice from some investors is that if a stock falls 7-8 % sell it.

One bit of advice from some investors is that if a stock falls 7-8 % sell it.

And lock in the loss? Not good advice. (Edit: at least not good advice in isolation; there will be some.circumstqnces where it's the right thing to do but there would be a lot of caveats about prospect of recovery and what the rest of the market is doing at the time.)

CGT won’t initially be an issue as the entire inheritance will be revalued for IHT purposes. Unless the investment grows significantly before OP sells, there will be minimal CGT to pay. There will however be IHT to pay.

Re: your point about trackers, a global low fee tracker (like the FTSE Global All Cap) provides more than enough diversification. It means you hold shares in thousands of companies worldwide across a range of sectors. Unless you a) need easy access money or b) are a few years away from retirement, you don’t really need any other type of investment.

Lots of people regretted being invested in stock markets worldwide in 2008, surely?

If they were invested in a global tracker, sat tight and didn’t liquidate their investment, then no, they would have had no reason to regret anything because their money would have probably doubled or tripled in value since.

Fine of you are certain you don't want to touch it for years.

Which is what I said in my post.

So why do you think inheritance tax is the most unfair?

@TeenagersAngst We have various investments and one product (which is what it is) isn’t a great idea.

Yes, there are difficulties at times with stock market based investing but a variety of products evens out risk. That means losses are reduced and investment companies move the investments in the portfolio to shield investors from the worst.

If you mean it’s one product as in it’s just equities, yes that’s true. But it’s not one investment like a single stock. Far from it. A global tracker is an investment in thousands of companies worldwide and since it’s tracking an index which is regularly rebalanced to weed out poorly performing sectors or countries, it evens out risk in that way.

That doesn’t mean it’s suitable for everyone, of course. For people who want low to medium risk or to hold their cash in the shorter term, they might look at bonds, property or cash. But with that comes lower returns and the chance that inflation will reduce any real gains. Fine if you understand that.

But if you have money you are happy to tie up for 10 years plus, you can’t go far wrong with a low fee global index tracker. They generally out perform the market which means they are achieving a better ROI than the likes of Schroders et al (after you account for their high fees).

The money’s been taxed already. People who work to be financially independent in their old age so as not to be a drain on the NHS to pay for their own care? Where’s the incentive if you cant pass it to your children? Easy to be generous with other people’s money but I’d rather my children had it.

So if I pay my window cleaner out of my income that's been taxed already, should they not pay tax on it?

You didn't talk about certainty, and how many people inheriting half a million in mid-life can be absolutely certain that nothing is going to happen that will need them to put their hands on that money for 10 years?

How ridiculous. You’re using that to buy a service.

Very few investments which will allow you to grow a decent pension pot provide certainty. If OP wants certainty, she should put her money in a savings account, with the knowledge that the growth will be pretty small especially if the BoE base rate goes down further.

The stock market doubles on average every 8-10 years. Yes, there will be volatility during that time but my point stands that if you can leave your money invested for 10 years your pot will almost certainly grow. Even after 2008, the market had recovered in about 5 years.

Of course, shit happens and if you need your investment pot in a hurry, you are at the whim of the market. That's life.

Why is it ridiculous? In the case of the window cleaner they are working for that money and get taxed on it. In the case of an inheritance the person who gets the money isn't working for it at all, it's unearned income, and yet you expect them not to pay tax on that.

I agree that is ridiculous.

If we continue with the current situation with inheritance, with each generation enriching the next, generation after generation, then we are going to cement an underclass of people who simply have no hope of dragging themselves out of the mire.