Imminent life-changing inheritance. What to do first?

WishIHadKnownBetter

Thank you, that’s very helpful.

Albermarle

WishIHadKnownBetter said:

Brie said:

eskbanker said:

WishIHadKnownBetter said:

Do we then look at splitting into savings accounts to start earning some interest, but be sure we are under £85k in each bank?

Take your time to pick an IFA.  I've chatted with a number and some you know immediately you won't like.  Others seem to want to get you to do what they want rather than what you want.  Don't be shy about asking any friends, family or work colleagues for recommendations.  

Thank you. We come from a modest background so do not really know anyone to ask, but there is an IFA on our high street as a starting point. All financial advisors work under strict regulation and will probably come up with a similar (ish ) plan. So it boils down to some extent on if you get on with them OK and charges.
Be aware they have to ask you quite a lot of personal info, before making any recommendations, so they do not make any wrong ones. 

We have had a couple of suggestions about buying property but we don’t want to become landlords. Good decision .So beyond that we are not really sure what we want. 
When/if you see an IFA they will certainly want to know what you want to get from the money, as decisions about what to do with it will be at least partly based on what your plans are and the approx time scales.

Ideally we would like to continue working but part-time, so a way to replace the income would be our thinking. And to bablw
to help our kids out if/when they go to university and a house deposit.

Other than that we have no plans! 

See some comments above.

WishIHadKnownBetter

Thank you. Once the ISAs are maxed out, it seems an immediate plan would be to put the balance into a savings account at least, with that 6 months breathing space. At least it will generate some interest even though it isn’t the most tax efficient.

I will know whether my job is safe within 6 months and whether I have a redundancy cushion too. That gives some time for us to think about what we really want, alongside gathering details about our pension forecasts etc. I’ve remembered DW has a small Prudential pot of £50k which we haven’t done anything with except file away the statements each year (oops).

We will then have a better idea to speak to an advisor. 

Thank you all. We are still processing the bereavement and hadn’t expected any money and certainly not this soon so you have helped me clarify somethings things. It is an amazing situation but still tinged with sadness. It doesn’t really feel like my money so I can’t quite get to grips with what to do with it. 

ShinyStarlight1

WishIHadKnownBetter said:

… We are still processing the bereavement and hadn’t expected any money and certainly not this soon so you have helped me clarify somethings things. It is an amazing situation but still tinged with sadness. It doesn’t really feel like my money so I can’t quite get to grips with what to do with it. 

I really relate to this. Like you, I was from a modest background and never expected to receive the large inheritance I did. The best advice I got was to recognise I was in shock and grieving, and to give myself time before making any major decisions.

SiliconChip

EthicsGradient said:

WishIHadKnownBetter said:

Linton said:

Only when you have a rough idea of what you want would it be sensible to consult an IFA as to how to achieve it.  Best to use a small local Independent Financial Advisor rather than one of the nationals who would likely be much more expensive.  Avoid anyone who is not independent (eg your bank advisor) who would not be able to say they are an IFA and would be restricted to only selling you their employer's  products.

A local high street IFA should be well used to dealing with lump sums of £500K.  A good way to find one is from family and friends or by Googling  for say 3 in your nearest town and then fixing up a free half hour meeting with each for you to explain what you want and they to explain what they can do for you and the cost. You can then chose the one you would feel most comfortable working with.

Thank you. Yes, as above we need to decide what we want, but have some breathing space to do so.

As an aside, and having never been in this situation before, I assume we will be paying tax on the interest next year if we simply have in savings accounts for a while. We already complete self-assessments for our self-employment (they are simple returns). We can presumably account for this ourselves or does it require specialist accounting knowledge?

But there wouldn’t be any tax to pay as the lump sum hits our account if I understand correctly?

No, it doesn't need any specialist knowledge - it's just adding up the interest from each account, and each bank etc. will give you their figure, either as a yearly summary or recorded on the account as it's added.

While I think it's a good idea to do that so that you know how much interest has been earned it shouldn't be necessary for tax purposes as all banks have to report interest to HMRC and they will calculate how much tax is due and inform you how it will be collected (often through a change to your tax code). Keeping your own records will allow you to check that HMRC have used the same figure in their calculation.

kimwp

Personally I would look to plonk as much as possible in pensions (as on the pensions board) and ISAs this and next tax year as a first step. You talk about helping your kids. If you are happy to give them the money to do what they want with, there are various options for tax sheltering money for them too.

https://www.moneysavingexpert.com/savings/junior-isa/

Then have a read of investing demystified by Lars kroijer and ask questions on the investing boards. HSBC all world accumulation fund with iweb is where I ended up. If you are under 40, then LISAs are worth looking at.

kimwp

SiliconChip said:

EthicsGradient said:

WishIHadKnownBetter said:

Linton said:

Only when you have a rough idea of what you want would it be sensible to consult an IFA as to how to achieve it.  Best to use a small local Independent Financial Advisor rather than one of the nationals who would likely be much more expensive.  Avoid anyone who is not independent (eg your bank advisor) who would not be able to say they are an IFA and would be restricted to only selling you their employer's  products.

A local high street IFA should be well used to dealing with lump sums of £500K.  A good way to find one is from family and friends or by Googling  for say 3 in your nearest town and then fixing up a free half hour meeting with each for you to explain what you want and they to explain what they can do for you and the cost. You can then chose the one you would feel most comfortable working with.

Thank you. Yes, as above we need to decide what we want, but have some breathing space to do so.

As an aside, and having never been in this situation before, I assume we will be paying tax on the interest next year if we simply have in savings accounts for a while. We already complete self-assessments for our self-employment (they are simple returns). We can presumably account for this ourselves or does it require specialist accounting knowledge?

But there wouldn’t be any tax to pay as the lump sum hits our account if I understand correctly?

No, it doesn't need any specialist knowledge - it's just adding up the interest from each account, and each bank etc. will give you their figure, either as a yearly summary or recorded on the account as it's added.

While I think it's a good idea to do that so that you know how much interest has been earned it shouldn't be necessary for tax purposes as all banks have to report interest to HMRC and they will calculate how much tax is due and inform you how it will be collected (often through a change to your tax code). Keeping your own records will allow you to check that HMRC have used the same figure in their calculation.

I think the individual has to report their savings interest if they fill a tax return. And needs to do a tax return, regardless of any other need, if the interest is over £10k. (Though check this!)

EthicsGradient

kimwp said:

SiliconChip said:

EthicsGradient said:

WishIHadKnownBetter said:

Linton said:

Only when you have a rough idea of what you want would it be sensible to consult an IFA as to how to achieve it.  Best to use a small local Independent Financial Advisor rather than one of the nationals who would likely be much more expensive.  Avoid anyone who is not independent (eg your bank advisor) who would not be able to say they are an IFA and would be restricted to only selling you their employer's  products.

A local high street IFA should be well used to dealing with lump sums of £500K.  A good way to find one is from family and friends or by Googling  for say 3 in your nearest town and then fixing up a free half hour meeting with each for you to explain what you want and they to explain what they can do for you and the cost. You can then chose the one you would feel most comfortable working with.

Thank you. Yes, as above we need to decide what we want, but have some breathing space to do so.

As an aside, and having never been in this situation before, I assume we will be paying tax on the interest next year if we simply have in savings accounts for a while. We already complete self-assessments for our self-employment (they are simple returns). We can presumably account for this ourselves or does it require specialist accounting knowledge?

But there wouldn’t be any tax to pay as the lump sum hits our account if I understand correctly?

No, it doesn't need any specialist knowledge - it's just adding up the interest from each account, and each bank etc. will give you their figure, either as a yearly summary or recorded on the account as it's added.

While I think it's a good idea to do that so that you know how much interest has been earned it shouldn't be necessary for tax purposes as all banks have to report interest to HMRC and they will calculate how much tax is due and inform you how it will be collected (often through a change to your tax code). Keeping your own records will allow you to check that HMRC have used the same figure in their calculation.

I think the individual has to report their savings interest if they fill a tax return. And needs to do a tax return, regardless of any other need, if the interest is over £10k. (Though check this!)

Yes, since they already self-assess, they will have to give their interest figure on the self-assessment return.

handful

I had a smaller (£285k) but equally unexpected windfall about 18 months ago, the main difference being age! I was 61 and the OH 3 years younger. It allowed us to retire earlier than planned but with regard to what we did with the money, we paid off the last of our mortgage, traded our motorhome in for a newer one without finance, maxed out both of our pension contributions for the year, maxed out remaining ISA allowances, bought £50k premium bonds and also put some into NSand I savings bonds in the OHs name to ensure my savings didn't hit the saving threshold. We also gifted a healthy sum to our adult kids and did a couple of jobs on our house. Congratulations on your windfall, like you say it will be life changing for you and it's incredibly exciting when it happens. We still thank our lucky stars and the feeling of gratefulness hasn't really faded yet. We have just returned from an 8 week jaunt in our motorhome, down to the Algarve and Costas. This wouldn't have been possible, at least for a few more years without the windfall. FWIW I didn't go to an IFA but did a lot of research both here and elsewhere online and I also have the benefit of one of our kids being in finance. good luck and most of all, enjoy it!!

Albermarle

WishIHadKnownBetter said:

Thank you. Once the ISAs are maxed out, it seems an immediate plan would be to put the balance into a savings account at least, with that 6 months breathing space. At least it will generate some interest even though it isn’t the most tax efficient.

I will know whether my job is safe within 6 months and whether I have a redundancy cushion too. That gives some time for us to think about what we really want, alongside gathering details about our pension forecasts etc. I’ve remembered DW has a small Prudential pot of £50k which we haven’t done anything with except file away the statements each year (oops).

We will then have a better idea to speak to an advisor. 

Thank you all. We are still processing the bereavement and hadn’t expected any money and certainly not this soon so you have helped me clarify somethings things. It is an amazing situation but still tinged with sadness. It doesn’t really feel like my money so I can’t quite get to grips with what to do with it. 

Sounds like a plan.
In the short term, I would not worry too much about paying some tax on interest.
Often we see on the forum, people seeing paying less tax as the priority, when the overall picture, which may well include paying some tax, is more important.