What to do with inheritance?

justry4n

Hi there - In a few weeks I will be receiving my inheritance from my Mother's estate in the sum of 220k.

I already know what I'm doing with some of the money i.e -
Paying pay 45k to family member for mortgage deposit
49k to Help2Buy
15k overpayment to mortgage
10k all other debts

This still leaves me with 101k left? Where should I hold this? I was just thinking an ISA in my back account? What do you guys suggest?

Linton

We need to know a bit more about you. How old are you? Are you paying into a pension? Are you married? WIth children? What other significant amounts of money do you have?

If you dont have an emergency fund you should put aside about 6 months living expenses in a cash account. This will cover you in case you lose your job or have other major unexpected expenses.

Before you can decide where you should hold your £101K (minus emergency fund) you need to decide what you want it for, how much and when. For example:

1) spending in the near term (up to 5 years):Should be left in cash, perhaps in an NS&I account where there is no limit to the protection and moderate interest.
2) Major expenditure in medium term, 5-10 years say:Held in a mixture of shares, cash and other safer investments.
3) Long term >10 years. Early retirement perhaps: Should be invested in shares or preferable funds of shares.

justry4n

I'm 25, earning £42k a year and paying 3% into my pension. I'm single with no children and have no other savings available.

I will be paying off 10% of my mortgage every year, maybe do up the house etc.

What's an NS&I account?

Many thanks,
Ryan

Linton

justry4n wrote: »

I'm 25, earning £42k a year and paying 3% into my pension. I'm single with no children and have no other savings available.

I will be paying off 10% of my mortgage every year, maybe do up the house etc.

What's an NS&I account?

Many thanks,
Ryan

NS&I is the current name for National Savings. They are responsible for Premium Bonds but also offer savings accounts. As they are government backed they are able to offer a 100% guarantee for any amount of money. Look at www.nsandi.com. It would be a sensible place to park the money whilst you are working out what you want to do with it.

How much is your employer paying into your pension? Earning £42K, only paying 3% seems a very small contribution if you want a comfortable retirement.

With £100K available you may wish to consider consulting an IFA. That is the level of money at which this could be worthwhile.

justry4n

Thanks.

If I place it into an ISA, 100k straight away, 20k is tax free, however the other 80k is not. Is the tax free part on the interest I earn from the 100k or is the 100k taxable, if that makes sense?

masonic

justry4n wrote: »

If I place it into an ISA, 100k straight away, 20k is tax free, however the other 80k is not. Is the tax free part on the interest I earn from the 100k or is the 100k taxable, if that makes sense?

You'll only be able to pay £20k per tax year into an ISA. You'll need to find somewhere else to hold the rest. The tax free part is in regard to the interest. You can also earn up to £1000 interest outside the ISA (presuming you remain a basic rate taxpayer) without paying any tax.

jimjames

justry4n wrote: »

Thanks.

If I place it into an ISA, 100k straight away, 20k is tax free, however the other 80k is not. Is the tax free part on the interest I earn from the 100k or is the 100k taxable, if that makes sense?

You can't put £100k in an ISA immediately. The limit is £20k per year so you can feed it in over 5 years. But cash ISAs are completely pointless for most people so you're likely to be better using a taxable account that pays more interest or using a S&S ISA instead for part of it

kidmugsy

Premium bonds £50k. (Your winnings will be tax-free.)
S&S ISA £20k.
Savings accounts/interest-bearing current accounts/regular saver accounts £31k. (As said above, savings interest is tax-free up to £1k per tax year.)

Alternatives include buying equity outside a tax shelter: up to £2k of dividends per tax year are tax free. You would manage the investments to avoid Capital Gains Tax. (In your shoes I might instead wait until the new tax year, expecting to bung another £20k into an S&S ISA.) Another alternative would be to pop £10k (say) into Gold Sovereigns if you have somewhere safe to keep them e.g. a nearby safety deposit. (I write as someone who wishes he had a nearby safety deposit.)

Revisit the question at the beginning of next tax year (or when you become a higher rate taxpayer if sooner).

Choosing an ISA provider:
http://monevator.com/compare-uk-cheapest-online-brokers/

kinger101

justry4n wrote: »

Thanks.

If I place it into an ISA, 100k straight away, 20k is tax free, however the other 80k is not. Is the tax free part on the interest I earn from the 100k or is the 100k taxable, if that makes sense?

I'd like to re-iterate Linton's advice of speaking to a financial advisor. They'll concentrate your mind on your long term plans and assess your attitude to risk. Your likely future income, particularly with respect to whether you'll enter higher rate tax, is also pertinent.

My opinion, particularly with reference to your age, is that you should be putting the bulk of surplus into equities (and fairly aggressive at that) rather than the cash ISAs. But I'm just a random bloke on the internet.

atush

If you already own a house, can you take put a HTB Isa?

Why are you giving away 45K?

You are saving to little into your pension. I would put in up to your 40K allowance (from which you have to subtract how much you and your employer paid in this year).

I agree, I would put 20K PA into a S&Sisas for the next 5 years.

You want 6-12 months in cash to cover emergencies.

The rest can be invested outside a S&Sisa wrapper.

fhearn3333

Hi, i'm about to be inherited around £50k from my dad's house sell. I am currently 29 and married, with my own house now and mortgage. what would be the best place to put this money? I would be using it to pay off around £8k of debt initially and then i would like to keep the rest for a kind of 'as and when i need' fund, what bank accounts would be best for this kind of amount and use?