What to do with inheritance money?

DarlyPaws · 30 January 2013 at 10:53AM

My husband and I have always had a decent amount of savings. However, my mother passed away just before Christmas and she left me quite a bit of money. It will be transferred to my UK bank account in the next couple of weeks and I am not sure what to do with it.

We are currently buying a new house (which we were planning to do before she suddenly passed away) as ours sold just after Christmas. We are using some of the money to increase our deposit on the new house and get an even better rate. We have also put some aside for those little things you find you need when you move to a new house.

However, we would like to put the rest in some sort of savings. I've debated putting a large sum directly into my company-sponsored pension. I'm still young (just turned 30) and I figure that could only be a good thing in the long term. The rest we want to leave it where it will grow.

I just need guidance because, not being from the UK originally, I'm not sure what to do with it and what would be considered safe. I want to be smart with it as my mom obviously wanted to make sure I didn't have any financial concerns if she passed. I want to honour that. I am very grateful that she thought of me but I am so overwhelmed by the day to day decisions regarding the money right now.

Any suggestions? Guidance? All are much appreciated.

cte1111 · 30 January 2013 at 10:57AM

How much money are we talking about? If it were me, I would put pretty much all of the money towards the house. You can then overpay the mortgage and get it cleared much sooner. This will then allow you to build up savings and pay into pensions if you choose in the future.

If you are a higher rate tax payer, then it might be worth putting money into a pension, but on the whole, at this stage of life, I think you would get more long term benefit by getting rid of your mortgage sooner.

DarlyPaws · 30 January 2013 at 11:12AM

cte1111 wrote: »

How much money are we talking about? If it were me, I would put pretty much all of the money towards the house. You can then overpay the mortgage and get it cleared much sooner. This will then allow you to build up savings and pay into pensions if you choose in the future.

If you are a higher rate tax payer, then it might be worth putting money into a pension, but on the whole, at this stage of life, I think you would get more long term benefit by getting rid of your mortgage sooner.

About £200,000. It could be more and my father has said to expect more because she has various savings accounts and investments and those will take a bit longer to sort out. Her will divides everything equally between the two of us. For the house, we will only have a small mortgage and it will be paid off in about 10 years.

DarlyPaws · 30 January 2013 at 11:15AM

Malcnascar wrote: »

Uncle Sam by any chance?

If you are a US citizen I would check what you can and cannot do with this money to satisfy the IRS

Our lawyer has already checked on that and the inheritance tax has already been paid by the estate. We know that there are still savings accounts/investments that we can't touch at the moment. We know the amount that is in them and so the estate was able to pay the tax as the will didn't require probate.

Once I receive the money, it is mine to do with as I wish. I just have to report it on 2013 taxes as inheritance received.

getmore4less · 30 January 2013 at 11:42AM

Why not look at an offset mortgage, then you are mortgage free untill you find something better for the money but can still access it for cash flow.

Is this the for life(long time) house, no point in moving again in a few years that just throws away a few £10Ks in fees/cost.

Pension only makes sense if matched by employer, or a high rate taxpayer, but you can probably do this from income.

ISA is the next obvious wrapper to look at.

DarlyPaws · 30 January 2013 at 11:52AM

getmore4less wrote: »

Why not look at an offset mortgage, then you are mortgage free untill you find something better for the money but can still access it for cash flow.

Is this the for life(long time) house, no point in moving again in a few years that just throws away a few £10Ks in fees/cost.

Pension only makes sense if matched by employer, or a high rate taxpayer, but you can probably do this from income.

ISA is the next obvious wrapper to look at.

Yes, this is for the life long house where we hope to start and raise a family. I'll look into an offset mortgage.

I do contribute to my pension and 3% is matched by my employer but I can contribute an unlimited amount. My pension at the moment is pretty slim and the projections are pathetic so I thought that investing a good amount of money would help ensure that I have a decent standard of living when I retire.

DarlyPaws · 30 January 2013 at 12:10PM

Malcnascar wrote: »

I like the suggestion of the offset mortgage

Review you will and ensure your worldwide assets are covered

I think on an amount of this size you should seek out an Independant Financial Adviser, they are better placed to advise than amateurs such as me and at least you will have the regulatory protection.

On a slightly sideways track, I would also suggest you ask yourself if you need to make decisions just yet. Following the sad loss of a parent can be challenging and decisions made during the greiving time can easily be regretted. Only you know how able you feel to make these decisions

Best of luck for the future

Those are very good points on all accounts. I don't want to make any fast decisions but by the end of the year, I would like the money sorted out and working for us, if possible. I need time to plan and process. For now, I just need some ideas. If I am going to sit down with a financial advisor, I don't want to go into the meeting completely clueless!

atush · 30 January 2013 at 4:25PM

I would certainly put some of it into pensions, and some of it in outside investments such as ISAs. Make use of obth of your allowances for both, if you are married.

DarlyPaws · 30 January 2013 at 4:45PM

Malcnascar wrote: »

Yes I fully understand that you need to learn more so that you are able to take an active role in the decisions you will be making.

Here may be a place to start

http://www.which.co.uk/money/savings-and-investments/guides/the-beginners-guide-to-investment/

and then on to

http://www.which.co.uk/money/savings-and-investments/guides/understanding-investment-risk/deciding-your-attitude-to-investment-risk/

Your Bank (often dismissed on here) may offer a premium service with the size of funds you have. These are sometimes styled "Private Banking" They can offer independant advice and tend to look at the big picture, ensuring that they dont miss out on the jam tomorrow by being unflexible today.

That is fantastic info! Thank you! I feel so odd not knowing these things but the system here is fairly different so I definitely feel out of my depth. Sad considering I've been here 6 years. I had a lot of reading to do.

BLB53 · 30 January 2013 at 4:56PM

Personally, I would avoid anything involving investment advice from banks - they will be more interested in making your money work for them!

Long term, you need to be looking at equities.

For starters, check out some of the articles on www.monevator.com also www.retirementinvestingtoday.com and finally www.miserlyinvestor.com

Good luck!

atush · 30 January 2013 at 5:01PM

I agree with the above/

Your Bank (often dismissed on here) may offer a premium service with the size of funds you have. These are sometimes styled "Private Banking" They can offer independant advice and tend to look at the big picture, ensuring that they dont miss out on the jam tomorrow by being unflexible today.

Being a member of Premier banking can be a good thing, but even though I am, I NEVER take investment advice from my bank. Unless it is to remind me to open another regular saver if mine has finished.

What to do with inheritance money?

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