Being given £200k

Grumpy_chap

Beccabees said:

This is going to sound ridiculously tone deaf and privileged, particularly at the moment but… my husband just called and said his parents want to give us £200k. He said no (we are doing fine financially and are in our 30s so a bit old to be taking hand outs we don’t need) but they are apparently adamant.

We had had some previous hints that they may be going to give us a gift but we had no idea it would be so much. I am really unsure how to feel about this. We are lucky to have good incomes so have been relatively unscathed by the current financial mess but we worrying a bit about money as I’m about to go on maternity leave and we will be depleting our emergency fund to make the nursery habitable and redo a mouldy bathroom. And like everyone we were stressing about our mortgage rate soaring when we come to remortgage our scarily massive mortgage. 

Weirdly I feel a bit deflated - obviously it’s a lovely problem to have but it kind of negates the saving and financial planning I’ve been trying to do for the past few years. I’m also a little worried about strings being attached - they say there are no conditions but I don’t want to feel like we have to justify (or even share) our financial decisions going forwards but it’s money they’ve earned not us so maybe they do have a right to have a say.

So when I get my head round this what should we do with the money? We haven’t earned it so don’t want to squander it. Some will be going to rebuild (and enlarge) the emergency fund but after that I have no idea what to do. There are other works that need doing to the house (it’s a fixer upper we’ve been gradually working on for the last few years) but I don’t want the in laws to think we are just going on a spending spree. So do we save or invest it?

We have ISAs set up so could drip feed into there but it would be a big change to be making decisions over so much money (at the moment there’s maybe £20k in total in the ISAs.

We are also hoping to move in 3-5 years to a more expensive property, though that plan is very much on hold until the property market looks more certain and we can get a mortgage with monthly repayments that won’t keep us awake at night.

Are there other things we should be thinking about? Tax implications? I have no idea where to start, this will be far more money than we’ve ever had.

Beccabees said:

RobM99 said:

£30,000 in emergency fund?    Seems a lot to me!

I know and I don’t like leaving the money sat there doing very little but our expenses are high (£3k monthly mortgage plus £1.5k nursery fees which will go up when we have two in nursery) plus as I’m off on maternity leave we’ll be losing my income for at least part of next year.

Does your mortgage have any offset facility or allow over-payment and draw-down?  The £200k could be used to reduce that debt and outgoing so increasing your financial resilience for the future (especially having in mind the forthcoming maternity leave - congratulations  )

I'd never have though of it, but the savings / pensions for the children seems a good idea.

As to what the in-laws think - have they made any noises in that context?
I ask because we were gifted some money (it was a tenth of what this gift is) a few years back from our FiL, but with the proviso that is was used "for something sensible and not just squandered".
We actually found it very restrictive as we had several things we were going to buy / do stopped because they were mentioned as "too frivolous and not what the money was intended for".  These things that we paused were a new car for my wife, new windows for the house, a cheap holiday to Spain (same as we did every year before), a new TV, back garden patio and shed, new sofa curtains and carpet in living room, new office furniture.
We found that the whole thing of having this money to be used "for something sensible" was stopping us doing anything as FiL thought everything we wanted to do was squandering his money and we could not prove it was just our money and not his gifted money that was being spent on these things.
In the end we gave the money back and then just spent our money on doing all the things that we had paused - with this having dragged out over a couple of years we did then feel like we were going on a right old spending splurge.
I am not sure what the gifted money could have been used on that would have met the "something sensible" criteria.

It is a trap and constraint I would never want to fall into again.
It has also influenced me in that any gifting I do is simply a gift and no comment on what it should be used on.  I like to think the money will be used on something sensible, but sensible is different for every person and every circumstance.

Good luck in navigating would could be a highly charged minefield.

Cornish_mum

Hi BeccaBee,

I too have received gifted family money (from my side) of a similar order of magnitude and it’s a huge privilege. In my case the money was self made and came from a huge amount of personal sacrifice, after a very difficult start in life. 

I was given to me in increasingly large lumps between the age of 23 and 35. During this period I also received an inheritance from another family member.  I have used all the money to buy a good house in a nice location, which we otherwise would not have been able to afford. This was the the intention of the gift-givers. 

The money has given me a huge amount of security (again this was the goal of the gift-givers) and has enabled me to make knock-on prudent financial choices. (High pension contributions and saving rate).

I have never felt it was my money, rather it’s family money which I am currently the steward of. I am working to build up similar pots for our kids to pass on to them in due course, in a similar manner. 

I would have a big think about what you would like to achieve with the gift long term and how you feel about it. Then you will be able to make a plan about what to do with it.  

CM

GDB2222

Normally, paying off the mortgage would be a great low risk way to invest £200k. However, someone on a fixed rate mortgage at the moment may only be paying say 1-2% interest on it. They can invest the £200k to earn more than that at the moment.

Albermarle

GDB2222 said:

Normally, paying off the mortgage would be a great low risk way to invest £200k. However, someone on a fixed rate mortgage at the moment may only be paying say 1-2% interest on it. They can invest the £200k to earn more than that at the moment.

Investing implies investments in financial markets, which may or may not earn more .

Probably I guess you actually meant putting the money into safe savings accounts, that are paying more than 2 %.

penners324

Dump a very chunk on the mortgage (avoiding ERC charges if feasible). Then top up your pensions with the rest.

GDB2222

Albermarle said:

GDB2222 said:

Normally, paying off the mortgage would be a great low risk way to invest £200k. However, someone on a fixed rate mortgage at the moment may only be paying say 1-2% interest on it. They can invest the £200k to earn more than that at the moment.

Investing implies investments in financial markets, which may or may not earn more .

Probably I guess you actually meant putting the money into safe savings accounts, that are paying more than 2 %.

Not necessarily just a simple savings account. A gilt matched to the mortgage term would be low risk, too. 

enthusiasticsaver

Gifting is the best way of avoiding IHT and as long as your PIL survive the 7 years there are no implications.  We have done this for our two children and my mum did it for us so you are very lucky.  Investing for your child/children sounds like a good idea. If you wish to retire early look into investing in your pension and keep some back for a new house/maternity leave or whatever or overpay your mortgage.  Lots of options. 

enthusiasticsaver

Beccabees said:

Pensions contributions are ok I think, everyone worries about having enough but we are contributing 10% each with employers paying 5%. We are both higher rate tax payers and 33 so have a way to go before retirement.

Our ISAs are stocks and shares ISAs, I understand the basics of investing but this would be on a whole different level. But I have a pipe dream of retiring in our 50s so we’d need to get comfortable with investing soon if we are going to make that a reality so maybe it’s time to do some proper reading rather than dabbling.

Having read the advice on here my current thinking is:

£30,000 on the house

£30,000 in an easy access savings account for an emergency fund

£40,000 into the stocks and shares ISAs

£100,000 into fixed rate savings accounts with as high interest as we can get to go towards the next property (with a possibility of feeding some of that into the stocks and shares ISAs in the next tax year if it looks like mortgage rates will be such that we can’t afford the move for a while yet). I think parents in law would be most keen on our spending the money to move to a safer area - we are in central London and this is our first property so while it’s not a bad area it’s also not somewhere that’s necessarily ideal for kids, especially as they get older.

That is a good plan but I would look into the moving now while your child is young so that you can get into a good school area.  £200k is a drop in the ocean when it comes to London and SE property prices. I would focus on the house first and not necessarily spend £30k on it if you intend moving.  Then pension and investing for retirement.