£500k gift......

xylophone

My Mum has been left £1m from a long lost uncle and giving me £500-600k to bypass the relevant tax issues with IHT in the future.

Is a Deed of Variation being used?

Some general information here

https://smithpartnership.co.uk/individuals/deed-of-variation-will#:~:text=A Deed of Variation is an agreement of changes to,their share of the estate.

Goliath64

MX5huggy said:

Pension Pension Pension. Your provision seems confused, so needs clarification but. Basically I would be putting both gross salaries into pensions this tax year and next. Presuming you’re not anywhere near Lifetime Allowance (just north of £1m).

£2880 for each child this tax year and next into Pensions (Fidelity don’t charge platform fee). £9000 each tax year for the kids Junior ISA’s. With consideration of stopping the £1k per year in the future.

Keep money available to pay off Mortgage when deal runs out but depending on what’s available then I would not be rushing to pay it off, mortgage money is cheap and investments in tax wrappers can outperform mortgage rates.

Invest in reducing running costs, Solar PV on the home, Electric Car. 

Book that holiday. 

RE pension, we (my wife and I) both pay in what we can monthly but aware we can/will be able to top this up. In terms of parents, we are named on the family business pension so in short this will be inherited by my brother and I and this will be more than enough for our future pension (alongside our own 'work' pensions and state pension).

Junior ISA's is one way to send some cash on a regular basis. Will keep an eye on mortgage deals as and when; this seemed like a good way to improve our 'daily life'.

Running costs, our house is 300yrs old and solar wouldn't 'suit' the structure or angles etc. Electric car is an interesting one. We bought a new car (21 plate) in December just gone with cash I'd received from a grandmothers death. We needed a 7 seater so the electric wasn't an option and at the time, this windfall mentioned above wasn't known about at all. Alas!

'Book that holiday'. Thanks very much - will absolutely do this as this is key for us! All advise massively appreciated.

enthusiasticsaver

I would pay off the mortgage and do your extension.  Keep a decent amount in emergency savings and top up your pensions and isas.  Put the rest towards holidays, cars or whatever and up your annual isa and pension contributions.  But £300k at least will be used up on the house.  £40k this year and £40k next year on topping up isas.  Those holidays will cost at least £10k- £20k depending on how large your family is. 

ChilliBob

I'd be looking to max out the JISA contributions too - based on your children's ages that's 10 or 8 years of compounding until they can access it

If you like eating nicely you can always step up a grade food wise if applicable too! - Organic Corn Fed chicken vs the standard - although you probably do this already if you eat well at home. It was the sort of swaps we did when in a more fortunate position. 

You could also use a spreadsheet to figure out what you reckon you spend per year, how you'd use this year on year - e.g. 40k into ISAs for you and the wife, 9k for the children, perhaps plan if uni fees etc - to see how the money looks really - assume growth rates and inflation rates and play with some scenarios really - it's quite surprising how over a say 40-50 year horizon it makes a difference if you consume 30k a year vs 35, or if inflation is 2% (or gulp! 10!)

Steve_666_

Put as much into your pensions as to reduce your 40/20% tax liability to zero, save HMRC the hassle of collecting it

Band7

I would pay an IFA for professional, tailored advice, and not rely on opinions from strangers on the internet.

billy2shots

Hopefully I'm not speaking out of line here but.....

It sounds like the long lost uncle accomplished a great deal in his life, being able to leave behind £1m (possibly more if others also benefited)

It also sound like your parents have done exceedingly well being able to live a comfortable life without needing the pensions which will be 'more than enough ' for both you and your brother in the future to live on.


With that in mind. Could you use a portion of this gift to help you reach higher highs than may have been possible. 
Take time off to retrain to better yourself knowing cash isn't a problem for X number of years. 
Or start a business of your own?

Fast forwarding a few decades. Imagine the pride leaving your kids in a great position from your endeavours rather than giving them some of mum and uncles money. 

Just a different take on how to maximise this windfall, it's not all about £s

ChilliBob

Band7 said:

I would pay an IFA for professional, tailored advice, and not rely on opinions from strangers on the internet.

There's certainly no harm in discussing the situation with a few IFAs for sure. I did similar a couple of years back, which gave me some decent things to think about. I didn't end up using one in the end, however, everyone's circumstances are different, and I may well do so in later years. 

I would say the main focus of most IFAs (in intro discussions that is) will be to understand your yearly expenses, goals, assets and position - they'll then give you ideas as to how you could perhaps minimise tax, or make the most of certain circumstances. 

Ironically, as I found out, investments wasn't a huge focus besides asset allocation and risk appetite. 

ChilliBob

billy2shots said:

Hopefully I'm not speaking out of line here but.....

It sounds like the long lost uncle accomplished a great deal in his life, being able to leave behind £1m (possibly more if others also benefited)

It also sound like your parents have done exceedingly well being able to live a comfortable life without needing the pensions which will be 'more than enough ' for both you and your brother in the future to live on.


With that in mind. Could you use a portion of this gift to help you reach higher highs than may have been possible. 
Take time off to retrain to better yourself knowing cash isn't a problem for X number of years. 
Or start a business of your own?

Fast forwarding a few decades. Imagine the pride leaving your kids in a great position from your endeavours rather than giving them some of mum and uncles money. 

Just a different take on how to maximise this windfall, it's not all about £s

On a bit of a tangent to this - you can essentially use the cash to 'buy you time' - by figuring out what you do that takes time that you don't like doing!.... For some that might be cleaning, general work etc.

I do spend time doing decorating, which yes, I could pay somebody to do, but I enjoy it (yeah I know, sad some may say!). 

Sarahspangles

You might want a separate pot specifically earmarked for University costs.  You could help your children avoid loans completely, or if you are happy with them repaying loans via the new ‘tax tomorrow’ repayment method, you would still need to make up the difference between their maintenance needs and the reduced amount that they will be loaned due to parental income.