What to do with unexpected inheritance?

[KidzKidding]

We are already in an incredibly fortunate position: from a combination of good luck, bad luck, hard work and good timing we have a good but not huge household income of £80k but we own our house outright, have no debt or credit, own two cars, low childcare costs, low outgoings etc so we are pretty well off already. We are soon to receive an inheritance from a distant relative (soon = in the next month) of £200k. We are a bit blindsided tbh.

Is it worth seeing a financial advisor for this amount? Seems like too small a figure to warrant paying for advice but I'm not sure what to do with it either. It's not a 'life changing' can do anything we want amount but it's also a huge amount of money.

If anyone has specific suggestions for me to look into here are some details of our life: 2 adults, 2 school age kids. We comfortably meet our lifestyle costs out of month income, we save a small amount for the kids every month and a larger amount for ourselves. We have pensions - not huge but in line with what we feel will be a comfortable retirement. We already holiday every year and have hobbies etc - we feel incredibly fortunate. Trying to think about what we would prioritise: well being able to retire early is a lovely idea, we are both early 40s. Helping the kids through uni and maybe onto the housing ladder?

I would have said these are exactly the circumstances in which a Financial Adviser would be worth every penny.

As a start point who has inherited, you or your partner?

Are you married?

Do you have wills and does the acquisition of this sum affect what you both want on death?

financial advisor is your best bet. Something I would do, if I were in your position, would be to look at pension products for children. e.g. https://www.sjp.co.uk/individuals/news/should-you-start-a-pension-for-your-child

I would just save it somewhere reasonably easy to get at (cash, stocks and shares, etfs, that type of thing), for extra "rainy day" cash, such as needing private medical treatment, which is becoming a necessity these days. And for kids' uni costs.

Yep definitely get pensions going for your kids. 60+ years of interest 👌👌

Also we had maxed out premium bonds for a time (£50k each me and DH) and was surprised how much and how often we won! So that might be a fun option - grow savings (better than interest rates) but also very easily accessible cash. The rest I would probably get an FA to tell me how to invest.

I saw a financial advisor in similar circumstances. Mine doesn't charge for just consulting him, he would only charge a small commission on money he actually invested for me, which wasn't all of it. He discussed my approach to risk, current lifestyle, existing pension plan, and future goals, then advised me how to divide up the money. He probably gets a better return on the portion I've invested than I would have done, so the commission pays for itself.

Exellent, thank you. Will start looking T FAs.

To answer the question upthread it is my husband who has inherited - married nearly 20 years - but I'm in charge of our finances 😅. We do have fairly wills but they are fairly basic - all money goes to the kids equally and we name who we would like to care for them if they are underage, so wills not affected by this.

I'd definitely take financial advice in your position. I would also set aside something for fun.

Financial advisor is a good starting point. make sure they are not trying to sell you a complicated product with high charges. you should be looking to

• max out your ISA allowance in a stocks-and-shares ISA that tracks the market
• put more into pensions
• invest in a mixture of bonds and ETFs with a long-term outlook and a diverse group of holdings.

Look carefully at the fees for any funds the advisor recommends. Something that has a fee of 2% may not sounds like much but when the growth is 4% per year, the fee is eating up half of the growth. try to keep fees below 1% and to go for long-term investments (5 years +)

There’s no rush max out isa put rest in ns&i fixed bonds take your time

I would think about your priorities. Do you want to be able to retire early? You say you’re saving a small amount for you and kids. Will this be enough to pay for university and help them with housing? Do you have enough saved for job loss or illness?

If it were me I would put some towards early retirement (you will be glad to have the option to retire in early to mid, rather than late 60s) and some towards the kids’ future. Both invested in a tracker fund. I would also keep some aside for short term needs/emergencies, in a savings account or premium bonds.

Use up your ISA allowances for this tax year. if you already have premium bonds for all of you, stick up to the £50k max on each adult and child’s account for a short term. Spend three months at least looking for a financial advisor and researching investments if this isn’t something you’ve done before. It could take a year to finally decide but put a deadline of when you need to have made a decision.
Once you’ve got a better idea of what you feel comfortable with go for that. Things to consider is attitude to risk, what you want to pay for when ie uni for DCs, and when you’d ideally retire.
The premium bonds are a stop gap or could be part of the mix later on.

Also worth considering whether your pensions will cover a scenario where one of you dies early. MIL got a pittance from FIL's final salary pension when he died shortly after retirement and her provision was minimal after years of interrupted work and poorly paid at that. Very convenient for the scheme.

Also think about a potential sideways disinheritance situation if one of you dies early. Making trusts and being tenants in common rather than joint tenants will prevent this.

But not with SJP though.

I inherited a similar amount. I paid off mortgage, bought a small flat for my mum to live in (Scotland- much cheaper than England), had a fabulous holiday and went part time at work. Currently using the rest of this koney/savings to live on as I have terminal cancer.

As you already lead a contented life style, you won’t need to invest for a high return. You should go for low risk, steady yields for the money.

It is tax efficient to put money in to pensions and would do that first. You say you can live a comfortable retirement, but that is based on what you expect your older years to be like. Illness or disability can strike unexpectedly. You need to future proof your old age by maximising your pension. Expect to live up to 40 years in retirement with no knowing what inflation will do to your savings.

I would put the money into cash fixed rate ISA and fixed rate bonds. If you do 1,2,3 and 4 year bonds, you can have income maturing every year. This can be used for big expense sets. Education, weddings, home improvements, futher investments and holidays.

I'm not sure I'd pay for advice but as a general rule first max out your isas, put the rest into a savings account and do research into best returns moving it across, or premium bonds are a good idea for a year or two, using isa allowance each year. Consider putting money into pensions and definitely consider putting £20k aside for each dc for university though I would set it aside in an account you control rather than them getting it at 18 just in case they aren't sensible with money

Speak to an advisor. All of the advice above is valid - for the person giving the advice. Not necessarily you.

Max out your ISAs as a first step. You can get £80k in before the end of April, i.e. £20k each before 5/4/25 and £20k each after, so that's a fair chunk safely invested.

I'd also be looking at investing some for your children's university and/or a deposit for a house later on. Even better, if you don't "need" the money, then do a deed of variation of the will and get the £200k straight down to your children, in trust, so that they'll get the benefit of it. Far better to give them the money for Uni or a house when they need it, rather than making them struggle and wait until they inherit from you. No point them running up tens of thousands of student loan interest (often more than the debt itself), or struggling to pay rent to an investor landlord when they could be paying a mortgage for their own home.

I just gave that as an example, other children's pension products are available...

We're in a very similar situation to you. Although we've still got a small mortgage I know that I'm likely to inherit enough to pay it off from someone who is nearly 100 and in poor health... but we were then blindsided by inheriting nearly £250k very suddenly and unexpectedly.

Two adults and two DCs have a combined ISA allowance of £58k each tax year so you could have most of the £200k within ISAs in 15 months if you are happy for it to be accessible to the DCs when they turn 18. This is where we're starting, and it is all going into stocks and shares.

We're keeping about £20k back in cash as emergency funds, and we're spending a bit on furniture and glassware/crockery (we're still using IKEA stuff I bought for my first flat nearly 30 years ago as well as things I took to university from my grandparents' house!)

We splashed out on one mega-holiday that the now departed relative had planned to take us on and had already paid a hefty deposit for, and we'll have a Disney holiday this year while the kids are still young.

The rest will go into SIPPs. I am a SAHD and currently have no income, so £2880 (the maximum) each to SIPPs for me and the two DCs each year, a slightly larger amount in DW's. Again, all in stocks and shares for the time being. The attraction of SIPPs is the tax relief - even the DCs and I will get another £720 added by the tax man for each £2880 we put in. The DCs will have over 50 years of compounded growth in this SIPP money before they can access it, so I really think that is one of the best things we can do for them.

My suggestion might be to amend your will so that if the worst happens your children dont get the money until they are 26 and it is held in trust until then.

It's so hard to find a good advisor. It's like a needle in a haystack, and many won't deal with sums of less than £250,000. I need one but don't know where to start. My mother has had two , one of whom just disappeared, leaving her to lose £10,000 in a dodgy investment. The second one was part of a firm that went bust. So I am wary.

What is a SIPP?