Inheriting large sum of money. WWYD?

[Rainallnight]

My parents have both died and it has come to light that they had more money than we had ever thought.

The estimate is that I’ll inherit around £850,000. I recognise I’m extremely lucky and will of course give some to charity and to friends.

Our mortgage is massive (London) - around £400,000.

Should we pay it all off? And then what? Am clueless.

DON'T TELL ANYONE! It's a lot of money and will change your life but it's not enough for you to start changing everyone else's life. Just treat your friends to a meal and say you won £500 on a scratchcard or something.

@NeverYouMind123 totally this! It is not enough money to start helping other people with!!!

Pay off the mortgage but please don’t give money to friends, if you have kids invest in them, treat yourself to a few nice things and wisely invest the rest. Take a deep breath and enjoy your life. Sorry for your loss .

I’d old fire. Plan in your head. Feel excitement tinged with sadness but..whilst it may feel like an enormous amount (and is as a lump sum) it won’t go as far or be quite as much as you think.

Take out death duties, I’d suggest paying off mortgage - as being mortgage free is lovely. Then switch a financial advisor about best use.
We have no details about you but investing in your pensions might be wise, thinking about any works that need doing and putting some away for university and weddings might be sensible.

Before spending anything you need to understand how much it will be once estate is settled and duties paid. Certainly don’t imagine it is a truly life changing private jet and diamonds amount.

I inherited about 10th of that figure last year.
I had a small mortgage anyway & after discussing with a IFA it made sense to pay off my mortgage. I put the rest in a savings account & I now add my ‘would be’ mortgage payments to that account each month.
I still haven’t decided what to do with it. Apart from a family adventure!

I asked an accountant friend for an IFA recommendation & it was really helpful.

For me, the biggest freedom would be to retire earlier!

Pay off the mortgage.

Bung the rest in 5 different banks (making sure they really are different not part of the same group), so if one goes bust you get fully compensated.

Make sure at least half of what you save on not paying the mortgage is transferred to savings each month.

Then breathe and think about it.

What is your pension situation like?
Do you have kids, have you got money aside for uni costs / driving lessons help them with a deposit?
What are your savings like?

sorry for your loss.

always cynically amused by landlord-hating MN instantly saying 'go for a buy to let', but that's MN hypocrisy for you. BTL only makes even some sense without a mortgage, and the forthcoming changes will make it almost impossible to evict bad tenants. Be very careful.

savings accounts have been negative in real terms for a decade. Stock market is relatively low at the moment so depending on your age, that's a possible. Right now get it stashed in 10 separate institutions (or five if the accounts are in joint names) - make sure they have separate banking licences.

Second those saying don’t give any away (except perhaps to charity) and don’t tell anyone. You’ll be amazed what comes out of the woodwork if you do.

The one thing I would put ahead of paying off the mortgage is having a rainy day fund so you can survive for 6 months with no income. It looks like you will have enough to do both and of course the smaller the mortgage, the smaller the rainy day fund you need.

Just open an NS&I account that’s 100% covered for the lot. Don’t worry about 10 institutions, too much of a bloody hassle.

@mencken that's not hypocrisy, it's different people talking.

OP, looking at your family histories, how likely are you to need long-term care when you're older? Is it worth investigating a Care Annuity?

You need proper advice from an IFA. Posters have raised a lot of good points to consider, take these ideas to the IFA, and work through them properly.
I’m sorry you’ve lost your parents, I’m sure all they’ve wanted you to do is secure your future and that of your children.
Please don’t feel you “should” share with your friends, I’ve never heard of anyone doing that with inherited money

Yes, not sure I understand the comments regarding hypocrisy?!

Also, I don’t think anyone is suggesting a BTL immediately, nor in the current climate. Equally, I wouldn’t suggest investing any money in stocks, shares etc presently either! For what it’s worth, I have invested my money in property, and since the pandemic started, I offered to reduce rent to one tenant because I know they live week to week, whilst the other pays in full. Meanwhile, my sister, who has financial investments instead, has lost huge amounts of money and is panicking.

Pre-lockdown, my two small rental properties bring me approx £1400 per month (after tax & maintenance costs) and I do not have a mortgage on either. I would definitely only recommend doing it if you could be mortgage free.

I fully appreciate it’s not for everyone, but it’s been great for us. I no longer have to work as the rental income roughly equates to what my old salary was (when the cost of childcare was factored in), so it’s a win-win for us. Again, I know that’s not for everyone, but it’s been great for us.

Is it worth investigating a Care Annuity?

Well if you can find one, good luck with that. Can you suggest where?

Equally, I wouldn’t suggest investing any money in stocks, shares etc presently either!

Really? Why not, they are the best value they've been for 5 years. Unless you think this is Armageddon, now is a great time if you know what you are doing.

Is it worth investigating a Care Annuity?

Apologies I should have clarified, it's the 'future' aspect that doesn't apply here. Current annuities for care, yes. Future ones, ie insurance, well you show me where they are.

Why are you giving money to friends? Why do you even feel obliged to give it to charity?

I’d pay off mortgage - I know it’s theoretically possible to earn more by investing it, but being mortgage free is soooo liberating

Sorry to hear about your loss.

Financially, I would take some time and do some research.

Try not to listen to the "definitely pay off the mortgage" brigade, as it's not an automatic decision. Ensure you have appropriate emergency funds in place, pay off any more expensive debt first, and set aside savings to cover any foreseeable capital requirements over the next few years (house renovations, cars, major holidays etc).

Ensure that you're maximizing employer pension contributions. Consider whether you'd be better off making higher pension contributions or lump sums to take advantage of tax relief.

Then consider paying off some mortgage debt, or just remortgaging to a more advantageous rate, and whether you can beat the return with other investments (will be unlikely with savings at the moment).

There's a handy decision making flowchart here:

flowchart.ukpersonal.finance/

Good luck, and enjoy the significantly increased financial independence.

@mencken or maybe there is a vast amount of people with different opinions on MN and so you will get an array of ideas? I have no idea how this makes anyone hypocritical? We do BTL and find it works very well financially for us. All of our tenants are currently paying full rent as they say they can afford to do so. The OP asked for ideas so perhaps don’t judge other people’s opinions. No one died and made you God

Can I suggest taking advice on keeping your inheritance ringfenced versus making it marital funds? It's always prudent to consider life events such as divorce etc and you need to protect your interests. Of course it may not happen but ask a professional about this aspect too.

@silentpool I'm with you on this one.....although I'm not married yet, I do have a sort of "pre nup" in place as inherited a lot of money years ago and from the sale of my business

Sorry to sound so business like, I am really sorry your parents aren't here anymore .......it's incredibly hard x

Sorry for your loss x

I'd recommend you speak to an IFA. I did this fairly recently and the amount of money it has saved me is significantly more than I thought possible.

I'd pay off mortgage and put some aside for kids to pay for future deposit or more. Plus university fees, future weddings etc. Would spend some on doing up the house, a nice family holiday and save rest for retirement.

I am not sure why you would want to give some away. It's your inheritance, not a lottery win. Your parents would have wanted you to have it.

I'd agree with @silentpool. If it were me, at my time of life, I'd pay off my mortgage if I had one. But if I were much younger, I'd be cautious and make sure I had some sort of agreement drawn up that stated if I used X amount of money to pay off the mortgage then in the event of a divorce the money used would come back to me. In reality, you could pay off the mortgage and the next day your DH divorce you and be entitled to half of this money.
And yes, I know there are people who will say it's 'family' money, but in the case of inheritance it's not so simple. My MIL died and left a small sum to her DS, my DH. I didn't expect any of that money to be seen as shared, or to be spent in anything he didn't want to spend it on. In the event, he gave me half.

How old are you? If you're above about 40 and not workaholics/lovers of a high spending lifestyle, I'd retire and move somewhere cheap and sunny, when you are allowed to of course.

Aim to keep at least half a million for living expenses, leaving about £300k or so to buy somewhere to live - there's plenty of places where this will buy a spacious home.

If you're in such a position, you can spend the next few months putting the money into a combination of premium bonds, fixed term savings, probably some investment based pension options, etc - and it is probably worth getting professional advice for safety and growth, although that's going to be tough over the next few years due to the economic fallout from coronavirus. Plus preparing the house for sale and it's probably worth paying off the mortgage, although that depends on the interest rate, maybe not if your 'massive mortgage' is actually a low rate tracker that doesn't actually cost that much.

Then you can use some of the money to travel and find somewhere to settle that is 'you' to enjoy while you're still young and fit enough if you're into things like watersports or hiking etc.

You can even do this sort of thing for 'pocket money' as a diving instructor or hiking guide - hard to make an actual living from it, but enough to tip the balance from it being an expensive hobby to covering the costs of doing something that you enjoy.

That's what I would do with that sort of money. You can always visit London for holidays every once in a while.

Thanks for all the replies. To answer some questions...

I’m in my early 40s, DP late 40s. We have two very small DC. We both have pensions, mine on the small side, DP’s more substantial.

I’ve worked part time since having the DC. I don’t love my job and have thought for a long time that I’d like a chance. Neither DP nor I want to work forever but are fairly engaged in our professional lives and wouldn’t necessarily want to retire very early, if we were doing something we enjoyed.

The amount I stand to inherit is an estimate after inheritance tax, but it’s only an estimate. Probate not finished yet.

On the friends thing, I’m really just taking about a grand or so to my best friends. One of my friends won a legal payout a few years ago and did the same - I thought it was a very nice and generous thing to do. I’m not under the illusion that I’m going to change anyone’s life - more a present so they can cheer themselves up with a posh hand bag or something!

I clearly do need financial advice, definitely. And DP and I got engaged recently so there is something to think about there re marital assets, as PP have said. Awkward.

I am so sad and devastated that my parents died relatively young and didn’t get to enjoy this money for themselves.