Where to invest 100,000 pound inheritance?

Vered

HI all

This is a little complicated so please bear with me!

We're UK citizens living in another EU country and my Dad had moved to the US.

While my Dad was in the US, he opened an investment account in stocks, shares and bonds which he said was for my children. He added me as the joint account owner.

Sadly he passed away a couple years ago. I didn't bother doing anything with the joint account since because it was joint, it didn't form part of his estate. However, my Dad did specifically mention this account in his will and said that he wanted us to keep the account as it was and give each of my children their share as they reached the age of 21.

However, I did let the bank know my Dad had died and, as a result, the bank recently decided that because we are not US residents and, obviously, my Dad had been removed from the account, that they did not want to manage our account any longer. So we have had the stocks, shares and bonds liquidated and moved to our current country (on the advice of our bank manager who said it would be too complicated to manage US portfolios from where we are).

At the moment we have just over 100,000 pounds sitting in the bank. My oldest child is 15 so will need to give that share in about 6 years as stipulated in the will, the others are quite a bit younger. We have a house in the UK which we are renting out (and renting here but don't want to buy as only staying until oldest child finishes school). We could find oldest child's share from our own savings so could invest more longer-term if better returns plus may be more useful during uni years.

Any thoughts of what would be the best investment of this money, respecting my Dad's wishes as much as possible (although our hand was forced by the closing of the account so I'm sure he'd understand if we just try to do the best investment)?

I'm kind of scared of stocks and shares given the volatility of the market (and that's what we have our own savings in). I have been thinking of a buy to let in the UK although we will be slammed by the stamp duty because we have our own house there. I was considering if it's possible to put a property in the children's name and manage for them?

Any advice or thoughts?
(we have sought independent financial advice previously but, honestly, didn't find it too helpful)

BM5118

There are people on here with far more knowledge than me so don't listen to a word I'm saying. I'm waiting for someone to answer my thread and figured I'd spout my opinion on yours.


Personally, in order to respect your dads wishes I would go for something ultra safe like bonds. It will give you an inflation like result. Preventing your fathers funds being diminished, delivering what he has put in place to your children.


If you go for something more lucrative/appealing you may have less than you have now. (of course you may have more too.)
As your children aren't old enough to make the decision for themselves and your father politely removed that decision from yourself.... I'd play it as safe as possible.


Apologies if that comes across as rude, its not meant that way I promise!

Someone below this post will give you a much better answer explaining why my answer is flawed.

Ciao and best of luck with whatever you do.


Edit:
Just being a real debbie downer, I wonder if say you invested these funds and they lost 20%. If your children would have a legal claim against you for losing (part) of their inheritance.

Vered

Yeah, it's kind of safe in bonds but looking at what's just happened to the stock markets has made me nervous. We kind of inadvertently lucked out because the US stocks and shares were liquidated end of November so we were saved the worst of the decline! My Dad said he wanted us to keep the account but our hand was forced here by the investment bank not wanting to keep the account due to no longer having a US address.

I don't think the kids would have a legal case whatever we did. As a joint owner, the money is also considered mine and I could do with it whatever I wanted. The will is not binding in this case (and my Dad wrote that he advises, not requires) However, it's important to me to respect my Dad's wishes and do the best for my kids.

18cc

Buy to let is probably not an option unless you want to pay the 3% extra stamp duty (not large, about £3k on a £100k property). "A minor under the age of 18 cannot own land or property in the UK, so it would have to be owned in trust by trustees, e.g. parents". Also, by the time you pay management fees etc the return is likely to be only say 3-4% which you might consider not to be worth it when you can get say 2.5% on a long term bond. What you might get is capital growth though.

18cc

One option to consider - if only to reject! - is to buy 'n' bits of gold (where 'n' is number of children). Give them their 'bar' wen they come of age, but show it to them often as they grow up. It will have an emotional appeal (from my granddad), is unlikely to be sold and spent on silly things when they get it, and might even go up in value!

Vered

Thanks. Lots of things to consider.
Oldest child is very sensible with money - career dream is to be an accountant or actuary so figure will be OK when money is theirs.
If property is held in trust, is it theirs or ours? Just wondering if we can avoid the stamp duty. Also considering taking out (small) mortgage and using rent to pay back so that eventually they have a higher value property.

Aegis

Vered wrote: »

He added me as the joint account owner.

Sadly he passed away a couple years ago. I didn't bother doing anything with the joint account since because it was joint, it didn't form part of his estate.

I can't comment on the law in the US, but wanted to just highlight that this is certainly not true in the UK. If your father added you as a joint account holder and you became entitled to a beneficial interest in the stocks, then at that time it should have been documented as a gift from his estate and reported as part of his inheritance tax return if the transaction took place less than seven years before his death.


Upon his death, his remaining (presumably 50%) entitlement would then have been paid to you from his estate, which should have been reported on the IHT400 form if he was required to complete one (i.e. if he was still UK domiciled, which is much more difficult to shed than residence).


Be careful about this, as HMRC can audit accounts and could act to rectify the situation with penalties in future.

xylophone

because it was joint, it didn't form part of his estate.

This is not the case under UK law.

Aegis above is quite correct.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm15042

dunstonh

Yeah, it's kind of safe in bonds but looking at what's just happened to the stock markets has made me nervous.

Have I missed something? What has happened to the stockmarkets that is bad? I am only seeing normal volatility.

enthusiasticsaver

The market is no more volatile than usual so I would not take investing off the table. Buying in when prices are low is the best way to go and you can manage risk by buying low levels of equities and diversifying both in terms of geographies, asset classes and sectors. I would hazard that property is more volatile at the moment as it is not at all diversified and buy to let is particularly unattractive at the moment given the recent tax changes.

Vered

No worries regarding inheritance tax. No UK tax was paid and HMRC were not involved since my Dad had long left the UK and we ourselves don't live in the UK and left a few years before my Dad died. All relevant taxes were paid and lawyers had knowledge of this account so I have no concerns there.

US stocks and shares have plummeted! But, yes, fair point that now is good to buy.