Advice for me & my sisters inheritance money

jimofwales

Hi everyone, I don't know if it is appropriate to wade into this forum and ask for advice straight away, but I would really appreciate some help!

My father died several months ago, as he was unmarried, everything was left to me & my sister. It has taken a long time, but the probate is through & now is the time for me to start to work out what to do with the money and his house (i'm doing everything on behalf of my younger sister, so for a few years the money will be kept together)

To start with there is roughly £100,000 in cash, I will have full access to this within a few weeks. There is also a house valued at £400,000. My dads partner has a (50k) share in it also, but the house is too big & expensive to run without his income, so we decided it would be sold in 12 months once I finished my Masters. (I live with my other parent at the moment but will be moving out in 12months also)

I have been to my bank and had some advice, I have seen 2 IFAs so I know some options but I don't know how good the advice is as I have obviously never had to deal with such a large amount of money. Basically I have a v.small family so all the decisions and research have to be done by me, and i don't want to make bad decisions.

I know that I will want to buy a small flat for myself in 12months and I know it makes sense not to have a mortgage if possible...other than that...help!

isofa

My first advice would be to carefully consider the house, it's a massive asset, and if it's in a good area for rental, the tenants would look after it, you'd get a decent income from it (providing you and your sister agree to buy your Dad's partner's 50K share out,) which could easily contribute, or even effectively pay for a mortgage you'd take out on a flat. So you and your sister would also own an appreciating asset, property long term always increases.

Then the remainder of the 50K/25K split with your sister - you could use as a deposit for a flat, or if you aren't ready for that, 3K into an ISA each, and the rest either into a high rate instant access savings account (best versions are online), or if you don't want access for a year or more, lock it away in a 1,2,3 year bond. Also have a look at NS&I saving certs too, but these are for at least one year.

Hope that helps!

CLAPTON

you dont say how old you are or your sister.

Leighthal

What does your Mum think? Does she live comfortably? Some more details might be helpful.

benood

I would certainly sell the house to diversify when convenient and wouldn't consider letting it.

I'd probably put 100 of the proceeds into a smaller property and the rest into a spread of unit trusts and high interest earning cash, I'd certainly max out on my ISAs and possibly make a one off big pension contribution. I'd still consider taking out a mortgage on whatever property I bought.

jimofwales

CLAPTON wrote: »

you dont say how old you are or your sister.

Sorry, i knew there would be facts I left out. I am 23 and my sister is 18.

@Leighthal - my Mum lives comfortably, but to be honest the relationship between them wasn't good, and she's not great with money, I don't know how her finance situation would affect what I should do with the inheritance.

Thanks to the guys who have replied so far, i'm taking it all on board.

isofa

Personally I wouldn't sell the house, it's a key asset, especially if it is in a good area that you know well - if there are good companies, hospitals (or maybe air-bases) in the area, you won't have a problem letting to a professional family, but then I believe property to be a great investment - each to their own

The rental would easily pay your mortgage, so effectively someone is buying you a small house or flat for nothing, and after 15-20 years (or maybe a lot less depending on the rental/mortgage) you have an asset which will be worth much more than it is today.

However if you do sell it you need to protect the money and make it work well for you, you might as well invest it in a good property for yourself (and the other half left for your sister), 200k+ should get you something and you'll have money left over and no-mortgage.

Jonbvn

You have not mentioned inheritance tax. It is due on an estate of approx 500k. This will likely force you to sell the house.

FBThree

Jonbvn wrote: »

You have not mentioned inheritance tax. It is due on an estate of approx 500k. This will likely force you to sell the house.

He has said that probate is through. That means any inheritance tax must have been paid already, or it would not have been possible for probate to have been granted.

And in my experience, it's due on estates much less than 500K, especially if no money is being passed to the spouse. The IHT threshold for 2007-2008 is £300,000, so anything over that would have been due for the tax.

FBThree

jimofwales wrote: »

(i'm doing everything on behalf of my younger sister, so for a few years the money will be kept together)

Not to be too morbid about it, but whatever you do, make sure that if either your sister or you die or become incapacitated, that the other one can access the money.

isofa

It depends how everything is set-out in the Will, if a good solicitor has helped minimise that hideous tax.

If the estate is valued at over £300K (not 500K) you'll have to pay 40% inheritance tax (IHT) on everything above 300K.

Find a good solicitor and accountant to help you.

If your Dad's will had left everything to your Mum or his civil partner, with smaller gifts to others, it would be exempt.

You potentially can change Wills after death, and set-up a trust, but there are lots of legal issues, and only a solicitor/lawyer can properly advise.

Could get quite complex, IHT is the most unfair tax in the UK, should be abolished.