Looking for a little help on what I should do with an inheritance Please

slacko2

Hi All,

I am quite new to this so thought I might ask you guys for a little guidance please /

A little background,
I have been on ESA and receive PIP for health problems. The majority of this will now cease as I am about to receive an inheritance and I have no problem with that at all but now have to figure out how to proceed.

My pension age comes about in august 2029 so I have to make the numbers work until then.

The figure I have is £110k (I need to look after 60k of that as it earmarked for my son)

Given that interest rates appear to be increasing for all savings at the moment how is this best distributed to give max potential. I am looking at a 12k allowance to live year to year all things considered on my end.

Any help greatly appreciated

slacko2

Apologies I should of said.  I can use the £60k but can not spend it

sorry

eskbanker

slacko2 said:

The figure I have is £110k (I need to look after 60k of that as it earmarked for my son)

Given that interest rates appear to be increasing for all savings at the moment how is this best distributed to give max potential. I am looking at a 12k allowance to live year to year all things considered on my end.

Interest rates are generally considered to have peaked, but are you effectively saying that you wish to give away £60K out of your £110K inheritance and then to live off the remaining £50K at £12K per year for five years until your state pension kicks in?

Are you choosing to pass the majority to your son, and when would that happen?

You ought to be able to earn about 4-5% on that money, which would come fairly close to making that work, and the longer you have the full £110K earning interest (prior to gifting), the more chance you have.

slacko2

eskbanker said:

slacko2 said:

The figure I have is £110k (I need to look after 60k of that as it earmarked for my son)

Given that interest rates appear to be increasing for all savings at the moment how is this best distributed to give max potential. I am looking at a 12k allowance to live year to year all things considered on my end.

Interest rates are generally considered to have peaked, but are you effectively saying that you wish to give away £60K out of your £110K inheritance and then to live off the remaining £50K at £12K per year for five years until your state pension kicks in?

Yes that is about the size of it 60k is his the 110k figure could go over slightly but not a great deal

Are you choosing to pass the majority to your son, and when would that happen?

Currently there is no fixed time but I would think not until my pension

You ought to be able to earn about 4-5% on that money, which would come fairly close to making that work, and the longer you have the full £110K earning interest (prior to gifting), the more chance you have.

With my limited knowledge I have kind of discovered that but its just working off the random percentages from various sources. What I am grasping for is how. For example do I use up money on ISA i will have this years and next or am I better off dumping it into fixed savings or is there something else I could should be doing.

Thank you for your reply

Please see above I hope this is ok

ChesterDog

PIP isn't means-tested, so you should be able to continue with that.

slacko2

ChesterDog said:

PIP isn't means-tested, so you should be able to continue with that.

Yes thank you I figured that in to come up with the £12k a year although I am not entirely sure how it will pan out thank you again though

eskbanker

There's no magic about ISAs but they do shelter interest from taxation - whether you'd actually need that will depend on your total income from all sources, in that if you earn less than £12,570 from non-savings income you're unlikely to be paying any tax even outside ISAs.

The best approach is likely to be to open a sequence of fixes of different durations, i.e. some easy access, some for one year, some for two and so on.  This 'laddering' approach should maximise interest potential while allowing for access to some money each year.  Make sure you don't exceed £85K in any one institution....

In terms of identifying specific accounts, the two best places to start are:
https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/
https://www.moneysavingexpert.com/savings/best-cash-isa/

p00hsticks

slacko2 said:

eskbanker said:

slacko2 said:

The figure I have is £110k (I need to look after 60k of that as it earmarked for my son)

Given that interest rates appear to be increasing for all savings at the moment how is this best distributed to give max potential. I am looking at a 12k allowance to live year to year all things considered on my end.

Yes that is about the size of it 60k is his the 110k figure could go over slightly but not a great deal

Can you clarify - was the £60k left to your son in the will but you are being given it to look after because (for example) he is not yet 18 ? Or were you given the whole £110k but have just decided of your own free will that you wish to give him £60k of it ?

In the first case, where you are effectively a trustee of someone elses money, there may be less investment options open to you.  

slacko2

There will be no other income just than PIP and that will not amount to anything like 12,570. 

So are you saying I would not have to pay tax on any interest over £1,000 I thought I would oops.

If the above is the case then it would mean putting 20k into an Isa is not gaining me anything at this point in time if I could fix on savings accounts for the 1st year anyway. Is that correct or not.  Not sure of my footing here now

slacko2

Can you clarify - was the £60k left to your son in the will but you are being given it to look after because (for example) he is not yet 18 ? Or were you given the whole £110k but have just decided of your own free will that you wish to give him £60k of it ?

No it is a promise I made him £110 I receive £60 is his

eskbanker

slacko2 said:

There will be no other income just than PIP and that will not amount to anything like 12,570. 

So are you saying I would not have to pay tax on any interest over £1,000 I thought I would oops.

Yes, there's a starting rate for savings, which effectively gives low earners another £5K worth of interest income that doesn't attract tax, over and above the £1K personal savings allowance:

https://www.moneysavingexpert.com/savings/tax-free-savings/

slacko2 said:

If the above is the case then it would mean putting 20k into an Isa is not gaining me anything at this point in time if I could fix on savings accounts for the 1st year anyway. Is that correct or not.  Not sure of my footing here now

Yes, it's usually possible to find better rates outside ISAs so if they're not needed for tax purposes then there's little reason to use them, although one differentiator is that you can always access money in fixed term ISAs (usually with an early access penalty) whereas fixed term non-ISA accounts are generally unbreakable.