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What to do with inheritance received early

kmas2020
Posts: 5 Forumite

Hello, I'm 39 and married with a 2.5 yr old and new baby on the way. I lost 2 immediate relatives in the last 2 years which means I will be receiving inheritance quite early. On top of that the business I have run with my sister for the last 10 years is looking like we wont survive the damage caused by coronavirus. In total I may soon receive between 250 - 300k made up of inheritance and what ever we can pull out the company. I have no private pension, isa's, investment/ savings accounts. I want to think about our childrens future and hopefully own future retirement. My only financial ties are the mortgage on our family home and a smaller mortgage on a rented out flat which I previously lived in before living with husband. Would appreciate any advice on how best to manage this money thank you!
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Pension...2
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I'd suggest a meeting with your bank's financial advisor.Now a gainfully employed bassist again - WooHoo!1
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burner03 said:Pension...1
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I would keep it in cash for now until you know how the business ends up and have a clearer idea of the future. You haven't mentioned your husband's situation - is his job looking secure for example. Looking at your family / household situation holistically helps to see where the overall strengths and weaknesses are.
Pension has benefits of tax relief but can't be accessed until late 50s so not a lot of help keeping the wolf from the door in the next couple of years,1 -
RobM99 said:I'd suggest a meeting with your bank's financial advisor.Don't. See an Independent Financial Advisor.There are a lot of variables here and while people can reel off things you could invest in, you need a sit-down with an IFA to help you find the right balance of short-term and long-term needs.4
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Alistair31 said:burner03 said:Pension...Given the limits on tax relief, it's unlikely the OP could shovel enough of the £300k into a pension to leave them with too little to tide them over until they find another job.As we're three months into the new tax year and it sounds like they have had very little income thanks to lockdown, the lack of earned income is probably the main obstacle to a pension contribution, not short-term loss of income.2
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Given how quickly your business has been put in jeopardy, I would urge you to reduce the mortgage. That will be a solid risk free asset for you and your family to go forward with.
Then consider if you really need the rental, could you not clear all the mortgage if you offloaded the flat, especially considering that you might have to start again from a new ground zero.
You may go through a period not being as flush as you have been, but with that roof secure your all in a good place. Any thoughts of the future should be left for a short time whilst you do a balance sheet.
Keep calm and pause a while. Best of fortune..._1 -
kmas2020 said:Hello, I'm 39 and married with a 2.5 yr old and new baby on the way. I lost 2 immediate relatives in the last 2 years which means I will be receiving inheritance quite early. On top of that the business I have run with my sister for the last 10 years is looking like we wont survive the damage caused by coronavirus. In total I may soon receive between 250 - 300k made up of inheritance and what ever we can pull out the company. I have no private pension, isa's, investment/ savings accounts. I want to think about our childrens future and hopefully own future retirement. My only financial ties are the mortgage on our family home and a smaller mortgage on a rented out flat which I previously lived in before living with husband. Would appreciate any advice on how best to manage this money thank you!
I would suggest the first priority if working out how 'much cash you want to hold as cash. Do you want enough cash to cover 3 months of expenses, 2 years etc and when you might need to use any of rest of the money. If <5 years investments are probably not suitable.
In terms of managing your money best it is likely paying into a pension will give you the best return but obviously this is not available for minimum of 16 years. You are limited in the amount you can pay into a pension per year anyway. As you are 39 you are still eligible for a lifetime ISA (until 40) so if you don't already have one I would suggest opening with £1 today - if saving for retirement stocks and Shares lifetime ISA likely better.
https://www.moneysavingexpert.com/savings/lifetime-isas/
You could also look at Stocks and shares ISAs, although less beneficial for tax purposes, do allow access before pension.
Obviously these are investment - capital at risk - and you could see your money fall quite sharply at times, you have to decide if you are willing to take that risk and if so how much you are willing to risk.
Paying off the mortgage offers a guaranteed return (saving interest) but will likely over the long term return less than pension/SandS ISAs although there is of course the physiological benefit of being mortgage free (worth different amounts to different people).
How much the mortgage(s) and what is the interest rate(s)? What are the early repayment charges?
Rather than clearing the mortgage immediately you pay want to pay off some of it and keep the rest in cash, depending on your interest rate you may be able to get close to the mortgage rate in savings accounts.
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AlanP_2 said:I would keep it in cash for now until you know how the business ends up and have a clearer idea of the future. You haven't mentioned your husband's situation - is his job looking secure for example. Looking at your family / household situation holistically helps to see where the overall strengths and weaknesses are.
Pension has benefits of tax relief but can't be accessed until late 50s so not a lot of help keeping the wolf from the door in the next couple of years,
Whether you go to see an IFA or not , you would be well advised to gain some more knowledge about personal finance anyway.
Here are some links to basic info and scrolling through this forum from time to time can be informative. There are a lot of threads where people ask what do with an inheritance .
https://www.moneysavingexpert.com/banking/
https://www.moneyadviceservice.org.uk/en
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