£25000 to put into savings.....

marctilling

Hi all,

I need your fountain of knowledge!

I have been given £25,000 by my uncle, but cannot spend it for 7 years, due to the fact that if he dies it needs to go back into his estate before being passed back out to us. He has given this amount to my mum, aunt, uncle and me, so its advice for all of us really.

What is the best and safest way I can invest this money in order to make interest on it. I ideally want a monthly/quarterly income from it and obviously want a good interest rate. It needs to be instant access incase I need to give it back to his estate to be taxed and then passed back out to us after it has had the dreaded inheritance tax taken off it.

Any advice is appreciated.

Thanks

Marc

Reaper

I suggest you start with Martin's instant access savings article on the main site - click here

IT_nerd

Seems a little odd to me. About the 7 years, and being passed back to his estate, then back to you.
Or is that some weird rule for the tax free gift?

Lokolo

Yes if someone gives you a gift and they die within 7 years it can count towards being taxed from inheritence.

However most of the time its hard to track, and I don't think they bother most of the time, but it could happen.

freddysmith

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/PlanningYourPersonalFinances/DG_10013916

opinions4u

1) He can make gifts of up to £3k a year that are exempt from IHT. In addition, there is no limit on gifts up to £250 per person. So encourage the nice chap to keep dishing it out to you!
2) Put the first £3,600 in to a cash ISA and build up your ISA amounts at the start of each tax year (shop round for rate etc at the time).
3) Put the rest in to a Halifax Fixed Rate Web Saver at 7% for 6 months and review the market again on maturity.
4) Keep reviewing exactly what you're doing at least once a year to ensure you get the best possible returns.

amcluesent

IIRC the amount payable to the taxman on death is a sliding scale from the moment of the gift to 7 years from that point.

There are life assurance policies covering the giver which are designed to taper in the same manner, covering the IHT liability until 7 years have elapsed. As he's given away £100,000, I expect you'd need a life policy to pay £40,000 tomorrow down to zero in 7 years.

You, mum, aunt, uncle could chip-in to buy such as policy, then you can use the money more fruitfully than having it sit in an instant access account for 7 years and know you are free of worries about IHT.