Unsure how to use inheritance

[Moonshine76]

Hi wise Finance Forum followers,
I’ve named changed due to amounts involved but I am a semi regular poster.
My dear aunt sadly passed about 6 months ago, after a long and happy life. She was unmarried and did not have any children and has left me circa £300k, her entire estate. I am gobsmacked to be in possession of such a large sum and am unsure of how best to use it.
I have 2 DC at (state) primary and I was planning on keeping the amount as substantial house deposit money for them when they grow up. My husband thinks we should use the money for private education for secondary as we live near a great private school, which costs £20k a year. His reasoning is that at some point his parents will pass and the children can have his inheritance for a house deposit. The amount is unlikely to be as high as 300k though. We are aware that there are ‘extras’ associated with private school and would make minor cut backs to our lifestyle to accommodate these.
We have middle of the road jobs and live a fairly simple (happy!) life so don’t need the money for ourselves, we have final salary pension schemes so won’t need it for our retirement.
I wondered what others views would be on the best use (we were both state educated so have no experience of the private system) and what you would do in our situation ? Thanks for reading to the end!

Have you paid off your mortgage?

If the dc are in state school, £300k buys a lot of school trips, top up tutoring, music lessons.
If they are in independent school it will go down quite fast and there will be associated pressures from being less well off at an Indy.

I inherited a similar amount. Whether or not you have a big mortgage is the main thing to consider. If you paid it off now you'd be instantly free of that expense, own the whole asset that is your home and potentially still be able to afford private education(or tutoring) based on not paying a mortgage.

See an IFA. They can show you the long term impacts of different options.

I prioritised :
paying off mortgage.
Household improvements.
Invested rest for the long term 15 yrs +

I personally think private education isn't as valuable as the long term security that having no mortgage and investments gives you.

Don't leave it as cash! Interest rates are almost nothing right now. Get as much of it into Isas as possible over the coming years, an IFA can plan this for you.

I would 100% do private school, but maybe look at various options to see if any are slighlty cheaper. For me private was the best thing as it enabled me to be me, i was a bit of a geek and academic and i would have been bullied in state school. You know your kids best.

If you spend it on private schooling, the money is gone with nothing to show for it but an education that was available for free anyway at state. What a huge waste. Whereas saving it for house deposits (or paying off your mortgage) is an actual outcome for the money that you wouldn’t otherwise achieve, plus it’s more than likely to increase in value.

I’d throw some at your pension too, with your children as beneficiaries, so you’re in a good position to help them out when retired too.

Don’t forget to spend a bit of it on you. I have no kids and if I don’t use it for care when I’m elderly I’m leaving it to kids of friends who have brought me a lot of joy. They don’t get it until they are 25 but there is an instruction in my Will to do something extraordinary with some of it. You should do something with some of it to remind you of her - art, jewellery, a holiday, class in something different that you’ve always wanted to learn.

Personally I would consider private but I’d want to weight up the following:

• mortgage size and length and whether you might want to pay off
• existing savings
• stability of your jobs
• how your feel emotionally using the whole sum on education and whether your aunt had any particular wishes for its use.

The other thing to consider is you may not yet such a large sum again and money makes money. It may be that you could invest the capital and use earnings as a way to partially fund private school but that only works if you can afford some fees from your salary as well.

Thank you all for taking the time to reply and share your opinions/experiences. We do have a mortgage but the payments are manageable. A very good point re potential care home fees for DH parents. I’m not sure how we would feel if we spent the lot on private school fees and DC were stuck unable to afford a property until well into their 30s or 40s. I will definitely seek out an IFA and discuss our options.

@skeemee

Buy them a flat each now (I presume will need to be in your names or possibly some sort of trust)? Rent them out and sell them when it’s time for them to get on the housing ladder. The rent received plus uplift in house prices will be fairly substantial (if you pick the right area).

I was going to suggest something along those lines.

My DSS was left a £40k trust fund when he was 5. The money was invested in property and rented out.

By the time he was 21, the fund was worth over £120k and gave him a 50% deposit on a house.

I was in a similar position with a large inheritance.

I live in a mortgage free house. The freedom this gives us is phenomenal.

We have decided to invest the money for the dc rather than sending to private school (I boarded from age 7-18, it wasn't always a happy experience).

Because we're mortgage free, have money coming in from rental properties, etc we can afford lovely holidays, the dc go to a really wide variety of after school activities (were finding as they get older these are becoming more expensive with club training 2-3 times a week, equipment, competition fees, etc). But we can easily afford for them to sign up to any extra lessons they want to try. So they've had various music lessons, tennis, trampolining, gymnastics, riding, football, etc.

May I suggest you take a small amount of the money and buy something beautiful for your home to remember your aunt by? It could be a beautiful painting, a sculpture, historic artifact, whatever. But it's nice to have something in the home that brings you joy and reminds you of her.

Get some independent financial advice and don't rush into anything yet.

I see a lot of people are saying private schools are not a good investment and I have to disagree. Typically private schools have smaller class sizes, better pastoral care, more varied extracurricular activities and more knowledge of higher paying jobs. That does give you advantages in life, I wish I had knowledge of different job routes and how to get there, just that I would have benefitted a lot more from and I will be sending my child to a (good) private school.

You may have a good pension but what if you have to stop work before pension age due to ill health , accident or burnout or simply want to go part time. I would strongly advise against allocating money to a certain purpose and then you can't access it if you need it, it would be difficult if you had moved money into your children's names or accounts and then suddenly one of you can't work again and you are struggling on one salary for several years till you get pension. While you might save for your children leave money in accounts in your own names so if you need the money you can access it, or if you feel your child at 18 isn't responsible enough well it's not in their name so they have no entitlement it is very hard to stop a sonorous daughter getting access to money in their name at 18. This amount of money needs an IFA and investing there is no need to do anything with it at all apart from investing until the time is right, that could be, 2, or even 5 years from now

Just a thought but if your children are exceptionally academic could you see if the private school offered scholarships? We put our DD through the private system from when she was 4 and made sacrifices along the way to do this. Would we do it again? Yes in a heartbeat as she thrived. However in the scheme of things at fees of £20k x 2 ( unless I’ve misunderstood) £300k will soon be eaten up and your children may do just as well at your local state school. I would invest it and have it there as a backup to help them get on the housing ladder and be able to help them with Uni costs.

Sorry for the loss of your aunt.

I would definitely invest it first and foremost - a conservative 5% return will do very nicely for that £300K over the next 5-10 years. Consult a financial advisor if you’re not confident about navigating index funds, funnelling into ISAs etc.

You’ll have to seriously consider whether “just scraping by” at a private school without being able to afford the wider extra-curricular opportunities is better?

Rather than automatically investing in private school, have you considered instead using the money to provide your children with a broader education - lots of activities and clubs, and holidays to expand their cultural experience. You can also get tutoring if needed to top up any academic deficits.

Then they’ll still have a decent house deposit waiting for them to set them up nicely.

Sorry to be morbid but relying on inheritance not yet received is risky, it could all be eaten up by care fees; or you could end up like me with one (grand)parent still quite happily pottering about at 90 with no signs of stopping - after I’ve already bought a house as I’m in my 30s (which of course I’m thrilled about and wouldn’t want to have any other way!).

I would buy 3 properties put down £75k on each property and rent them out. it'll cost around £5k to purchase each property and then using the £60k left put it away for using on really decent family holidays over the next 5 years and extra curriculum activities for the family, hobbies etc

That way your building something yourselves to creat an income for your family now and you're also using the money for you all as a family to do things together and apart.

Thats just my perspective on the money.

At a later date you can look at placing the properties into trust for your dc, if obviously you own them outright by that time. Don't necessarily but property in your home town but look to places that are building apartments for rent - for example Liverpool, Manchester

Rather than automatically investing in private school, have you considered instead using the money to provide your children with a broader education - lots of activities and clubs, and holidays to expand their cultural experience. You can also get tutoring if needed to top up any academic deficits.

^this

OP, I really would pay off my mortgage if I had inherited that sort of money, or at least put a sizeable chunk of it. I know that lots of people will say that with manageable mortgage payments and low interest rates, that is not a sensible use of the money, but the freedom it will give you will be immense and allow you options that being tied to a mortgage don't.

In respect of private schools, two of my DC got scholarships which didn't wipe out the fees cost but greatly reduced them; one a sporting scholarship and the other an academic one. It's an option definitely worth investigating. The academic DC absolutely thrived after being taunted as a geek and 'weirdo' and isolated by some of his classmates in his previous state school; the sporty one was desperate to follow him to the school and was lucky enough to get the scholarship. But I agree absolutely that bullying isn't confined to one sector of education from experience with my own DC and those of friends.What I do know is that we have never regretted sending them although it was a real stretch financially as we paid out of earned income and also had (have!) a big mortgage.

I also think the option of investing in a property for each of your DC is a sensible one albeit as accidental landlords ourselves due to the nature of our jobs, I recommend without reservation that you have them managed by a good agent rather than trying to do it yourself unless you have time and energy to spare. And being a landlord isn't for the faint-hearted; we've had some amazing tenants who are still friends but some who didn't pay their rent, ran up thousands in unpaid utilities, sub-letted etc.

As suggested by a pp, placing some of the money in trust for them is also very wise and will protect it should you and your DH go your separate ways.If it's your aunt's money, is it you who gets the deciding vote, or does your husband get a say? No judgement there, I'm just interested. My DH, sadly, will soon be inheriting a small amount of money, a couple of thousand, from his DM who is in the last stages of a terminal illness - no property as she has always lived in local authority housing. He intends to put it towards a first car for our youngest DC but I think if it was the sort of sum of money you are inheriting, then I would think - and hope - that it would be a joint decision on where it went.

I think that you should consider paying off the mortgage. No-ones job is 100%secure but a mortgage free house means that you always have a roof over your head. Anything leftover should be invested for the future, either for you or the DC.

I paid off the mortgage, not a lot left on it anyway, and invested the rest over several years in my name so I can top up my NHS pension and retire comfortably at 55. DH is a high earner and already has a good pension.
Will gift to the DC as and when they need it, although they're 16 and 18 so older.
Seek financial advice.

i was a bit of a geek and academic and i would have been bullied in state school.

There are academic geeks in pretty much all state schools you know, and they are no more bullied than any other child, in either a private or a state school. Grrrrr.

But to the OP, consider what other posters have said about helping your children financially as they get older. I think children with loving and interested parents will do well at any school.

My son is very academic (he got 9 x 9’s in his GCSE’s) and has never been bullied in state school. We didn’t even consider private but it wouldn’t have made a difference, he’s a lovely kind caring child too as well as very clever, so not sure what bonus a private school would have given him. I’d much rather see that money help my kids get a step up in their adult life. If things change and your children aren’t happy in school then I’d consider it but if you’ve got good state schools I think it’s crazy to spend it all on that

I would consider paying off your mortgage, and as someone else said don’t forget to spend some on yourself.

Bullying is rife in private school

I would buy a house local to yourself and rent it out so that you had an income towards private school cost if needed. Although personally I’d start them in the state school and move them if things are shit

I would invest in property. I got a substantial amount of money as my family did this for me, and I was able to buy my home at 18.