Wwyd if you came into large sum of money

[sulasuka]

NC for this.

We are in the next year or so about to come into a large sum of money. About £400,000.

I am feeling completely out of my depth about this. I know we probably need a financial advisor, but just wondering what other people would do in this situation.

We have a small mortgage left of less than £40,000. On a tracker so probably would pay that off as obvs interest rates can only go up. House probably worth just over £400k.

We also have 2 separate loans which we are are repaying. One was for an extension which was £30,000. We have half left and due to repay in 2-3 years. Another is a car loan which re repay about £500 pcm.

I also have my student loan from years ago- about £8000 left and I pay just over £200 pcm for that.

My first thought is to pay off all debts. Would it be best to include student loan in this??

Then no idea what to do with the rest of the money. We sometimes think about moving but to get a nicer house than ours in a suitable area close to dc school would be a lot of money- around 600-700k which is silly and would cost a lot to run.

I’ve always worked FT and am now in a very demanding job, and whilst the joint of having more time and a better balance appeals to me, I think I also enjoy the level of control that my senior position gives me and atm am loathe to give that up. I do fantasise about doing more studying tho. Obviously I couldn’t give up work altogether.

My other thoughts are saving for dc for uni fees, a holiday cottage. A dog? DH would probably love a camper van.

Wwyd? Feel like I’m out of my depth as I said.

I would want accounting advice on a windfall like this if I wanted to make sure I was saving tax efficiently. The government has schemes in place that it has designed so that people can pay less tax but you can't take advantage of them if you don't know about them.

E.g if this is an inheritance there's no CGT to worry about, otherwise there could be other taxes, or different ways of distributing it. Sometimes with an inheritance if the estate is large then there needs to be tax planning there as well, if you want to take advantage of government tax reduction options.

Will depend on what the windfall is and where it's coming from - a fairly simple cash/property inheritance probably doesn't need advice if you do a good load of googling. Once shares or businesses or business land or farm land are involved the complexity starts to increase, or if it's not inheritance.

Bellbook - yes she may need advise on wills, but they may have them already and this money doesn't necessarily change that. But any solicitor can do that, so naming yours (when you dont know where she lives) seems pointless. Trusts, well I dont know, if she puts sufficient into pensions that may not be needed.

Op would probably benefit from general IFA advise - but given that Grant Thornton are top 5 accountants, then I would think they are out of most peoples reach. I am sure a good IFA can be useful, we just decided to do it ourselves, given my experience years before and when I tried to get advise of that personal pension in subsequent years.

We didn't have a huge wealth when we started investing ourselves, so slightly different to Ops experience, but have built up our experience so that now we do have money, and DC also have a reasonable inheritance, we have a better idea of how/where to invest.

We don't have financial backgrounds, although we do have STEM backgrounds, so very numerate. Interestingly, I have a close friend who has worked for a no of top corporates (but not on financial side) inc GT and a top 4 acc co, who didn't even know what a SIPP was in a recent conversation. And she does have wealth, having reached high corporate levels and had no children!

Etymology23 - but surely the tax advise needs to be obtained by whoever is leaving Op the money (assuming it is an inheritance of some kind).

Once the person has died, the money or property will just be distributed as per the will, and if this incurs IHT, then I am not sure it can be re-distributed after probate to change that.

Op may need to consider her and her DHs own wills, but a good solicitor should be able to advise whether they need trusts. It maybe that if one dies young, then the second can re-do their will to add a trust at that time.

You do need to get financial planning advice.

If this were me, I'd pay off the mortgage, fix up house (redecorate, new bathrooms and carpets), put money aside to replace cars within a couple of years, buy a cheap second-hand car for DCs, max out ISAs, have a nice holiday, give 20k to each of the DCs, and plan an exit strategy from work.

Neighbors of my father won a similar amount

They knee jerked into ‘using’ the money and consequently made some mistakes which saw probably around £25k wasted

I would let the money arrive and think long and hard about what you want the money to do for you.

There is no rush to spend any of it or any rush to invest the money.

My only piece of advice is let it bring you happiness

Pay off your debts and then either upgrade your home or buy a buy to let. Easily the best long term investment

If a living parent transfers a property, e.g a flat that is rented out, to their child as a gift, does stamp duty have to be paid?

I'd buy a property and rent it out and use the rental money to pay debts off quicker.
The property will increase in value.

In similar circumstances, I paid off mortgage £120k, bought new car £25k, invested in stocks and shares isas and premium bonds, increased pension contributions and kept the rental property which is generating about £12k per annum (no mortgage). We also had some nice holidays.

If parents transfer an asset eg rental property there would probably be Capital gains tax to be paid, not sure about stamp duty. If the parent did not live for 7 years then there could also be inheritance tax.

kath yes, ideally that's true. If not, recipients can collectively vary the will as long as they all (or possibly in majority - can't remember which) agree to do so, and go through the court.

One thing you might want to consider, is whether you want the DC to have access to money saved eg ISAs, when 18 or put money into trusts for access at say 25.

There are often threads on here about whether kids should get access to money at 18. Its not as simple as 'hiding the book or statement' as some suggest, as the financial institution writes directly to the DC as they approach their 18th and any parental logins are closed down on their birthday.

My two already had money in ISAs from us, although not the max they could have. DS then got an inheritance just after his 18th, a surprise from a cousin of mine.

We went down the route of advising both (DD turns 18 next year) that this would be their house deposit, not to blow it, there would be no more from us if they did etc, as soon as we got the probate estimate and knew approx what they would get.

DS took that advice on board and is topping up his ISA. Yes he could withdraw and blow it all at any time, but that is not looking likely. DD seems to have a similar attitude so hopefully will not blow hers either!

So I would say go down the route of advise and open discussion/involvement in investments, but it is something to think about.

Just to chip in with the student loan discussion. It’s currently 6.1% which is a lot more than most personal loans! It’s been designed to keep on fleecing people for decades. Effectively to be an extra few percent of tax on graduates. I would pay it off unless it’s about to get written off.

Thank you, lots of good advice on here. I think one of the most useful things I’ve read is to not rush into anything!

I'd pay off the debts (except student loan), and give up work. Invest the money and live off the interest/returns.

A neighbour (who is also a client, hence I know their finances), had a small business which they sold for around £300k. They'd already paid off their mortgage and had no other debt. The interest/returns from investing the £300k gives them a comfortable lifestyle.

Without debt/mortgage repayments, you don't need a high income, as not only don't you have the repayments, you don't need mortgage protection insurance, life insurance, etc., which can save a lot too!

Without a job, you don't need to waste money on commuting, clothes for work, lunches, coffees en route, etc., again which saves a small fortune.

Good advice from kath6144 , we have done much the same.
Do your homework on tax efficient investments, SIPPs and IHT.
It's not as easy as just plonking the lot in the bank, that won't get you the best return, some effort is required.
A new will is almost certainly a good idea. We were advised to re-visit the wills every five years or if our circumstances changed.
Good point about not needing life insurance.

If I had that, I'd clear the mortgage. I don't have any other debt other than my credit card which I clear in full each month.

I'd then put some aside for DS, some for our retirement. As morbid as it sounds, I'd also organise and pay for my funeral. I'd also give DH and I some money to blow on whatever we liked and would buy DS the Lego set he's lusting after!

Oh I looove hearing about people coming into large sums of money. Defo pay off debts. Make a trust fund for the kids. A fancy international holiday with first class travel, a dog is always a great addition to any family. A new sofa. Consider investing in a second property to rent ‘Homes Under the Hammer’ style.

@Kazzyhoward

Without a job, you don't need to waste money on commuting, clothes for work, lunches, coffees en route, etc., again which saves a small fortune.

See I actually worry about the opposite happening- that I’d spend much more money if I wasn’t at work because I’d have much more time to spend it! Not sure what else I’d do all day!

I spent less money on every day stuff while I was on maternity leave but I did treat myself to a new kitchen! Swings and roundabouts.

Enjoy your money.

Pay off all debts.
Sort/add to pension
Sort out savings/investments for children for University/house deposits
Pay for funerals
Have a fantastic holiday
50K rainy day fund
If there's anything left over I'd buy a holiday lodge in the Lake District or a little flat in a seaside place