How can I get my nest egg to work a bit harder?

htrj

Seasons greetings everyone. 

Currently I'm in the process of financially preparing myself for a reasonably hefty inheritance tax bill. Who knows when the day will come, but one way or another on top of having the bereavement to deal with I'm looking down the barrel of well into a 6 figure IHT bill. I've spoken with various solicitors, tax advisors and independent financial advisors and their suggestions given our families situation is either to sell the property now and divide the equity or pay the bill. As my aging parent wants to continue living in the property for the last years of their life, just as much as I want the property after their gone, one way or another it seems i'm going to have to pay the bill.  

To date I seem to have saved quite well. I have no debt, an above average income, no mortgage or rent to worry about and what I have saved is currently held in cash ISA's earning 4% before tax, which is better than nothing.

Does anyone have any ideas for what else I can do with my savings as they accumulate, in order to maximise them? At the moment I'm thinking I should be using these trading apps like Etoro and Trading 212 etc, I did have a go at matched betting a while ago with mixed results, or maybe I should just be buying "gold and a shovel". Having built extensions and renovated houses in the passed ive proved that I am immensely practical so should I speculatively buy a project property? Where was that £1 terrace in Liverpool again?................ or maybe I should just knuckle down and keep squirreling every penny into the bank.

Would be glad to read any suggestions for making my challenge a little more interesting. This is pretty serious stuff so im not really in a position to be taking any crazy risks. My back up plan is to use a bridging loan followed by a mortgage to settle the debt....... but that sounds defeatist to me. I'm sure I can raise the money so i'd be grateful to read any suggestions of how to "jolly it all along" a bit. 
 

MeteredOut

I'm not clear what the inheritance is to do with your nest egg. Do you want to offset the payment of the IHT from your own funds rather than from the inheritance?

You'll need to provide more details if you want advice, but I can't see how it will be any different to what the advisors you've spoken to (and presumably paid for) have said.

eg, what is the value of the property. Are both your parents still alive and living there, and will you get the Residence Nil-Rate Band? Is the estate expected to be worth more than £2m? Does the inheritance include other assets that could cover the IHT due that would allow you to keep the property? How many beneficiaries are there? Do you know how their will splits things?

Some other thoughts:

Could your parent(s) need a care home at some point in their life and do they have the assets to cover this or might the house be required?

What age are your parents? Is this long term planning, or are their health issues at play that mean the inevitable may happen sooner?

Cash held in your ISAs is earning 4%, not 4% before tax. You don't pay tax on gains in ISAs.

Do you have any investments, either in Stocks & Shares ISAs or general investment accounts?

Have you looked into index trackers, index funds, global funds etc. These are much safer than individual assets. Your cash ISAs are just keeping up with inflation. But, investments are long term. 5+ (some would say 10+) years.

Do you have any pensions? Are the DB or DC schemes?

As soon as you mentioned matched betting, I was expecting to read about crypto too...

Property: are you wanting to be a landlord, or buy, do-up and flip. Both are much harder to make money on than they were even a few years ago.

Albermarle

Currently I'm in the process of financially preparing myself for a reasonably hefty inheritance tax bill. Who knows when the day will come, but one way or another on top of having the bereavement to deal with I'm looking down the barrel of well into a 6 figure IHT bill.

It might seem a bit pedantic but it avoids confusion.
You will not pay any IHT bills, the estate of your parent will pay any IHT tax due.
If you are the only beneficiary ? it might feel like you will pay it, but legally it is the estate that is liable.

Regarding finances what is your pension situation? Will there be a tax free lump sum available at some point

As mentioned above you will not find many on these forums trading. Most are 'Buy and hold' long term investors, but that might not suit your timescale ( which is not really clear) 

Linton

There is a good chance you will lose money with trading.  If your timescale is say 5 years or less you would be foolish to do anything other than savings accounts or similar.  To achieve better returns you would need to invest for > 5 years. Otherwise there is a  chance that in the short term you will be left with less than when you started. 10-15 years would be a better time frame for higher return investments.

Are you sure that there will be a hefty IHT bill?  Inheritance from a married couple could be about £1M with no IHT due.

I am somehwat confused by your situation.  It would seem that both your parents are still alive and living happily in their home.  How could you sell and divide the property and split the money?  If your parents gifted you the proceeds it would still be taxed as part of their estate if theuy died during the following 7 years.  Plus of course there is also the possibility the house being sold to pay for for care home fees.

MeteredOut

Linton said:

There is a good chance you will lose money with trading.  If your timescale is say 5 years or less you would be foolish to do anything other than savings accounts or similar.  To achieve better returns you would need to invest for > 5 years. Otherwise there is a  chance that in the short term you will be left with less than when you started. 10-15 years would be a better time frame for higher return investments.

Are you sure that there will be a hefty IHT bill?  Inheritance from a married couple could be about £1M with no IHT due.

I am somehwat confused by your situation.  It would seem that both your parents are still alive and living happily in their home.  How could you sell and divide the property and split the money?  If your parents gifted you the proceeds it would still be taxed as part of their estate if theuy died during the following 7 years.  Plus of course there is also the possibility the house being sold to pay for for care home fees.

I think the OP means selling to who will eventually be the beneficiaries, so the parent(s) can still live there.

But selling would lose any residence nil rate band, so probably not recommended, and that depends on the property value and the value of the remainder of the estate.

If the parent(s) gifted the house, but continued to live in it (which is what the OP stated needs to happen), that would be a gift with reservation so the house would still be included in the estate for IHT calculations (adding this as its often mentioned as a possible workaround)

htrj

Blimey that was quick. Thankyou, 

Mum and I are living in the same property which is probably worth £1250000ish. Mum owns the proeprty and I will be the sole inheritor. I am not married.  What I referred to as a "nest egg" is the money I've currently saved in anticipation of being presented with with an inheritance tax bill and to use the "nest egg" to settle that bill when it comes. There isn't much by way of cash or other assets in the estate, the property is what they're going to sting for.   

Currently all I have is cash ISAs. No other investments and no pension. 

The care cost conundrum has also crossed my mind, but my thinking is that if the cost of care eats into the value of the estate im still going to need a sensible amount of cash just to get myself back on my feet afterwards.  

How can any of us tell how long we will be here for but lets hope mums got at least 5 years maybe 10 left which is why its in my mind to start preparing now. So hopefully there is at least enough time for investments on the 5+ year terms that you have suggested. Matched betting was something my partner and I tried a few years ago, but I didnt really get into it and we didnt try crypto at all. 

If I was to go into property again id be thinking of renovating and selling for a profit, but as you say, that was easier a few years back. The only reason I mentioned doing it was because it would play to my strengths of being able to add value to something manually, but perhaps its time I invested in something less hands on....... as you can tell im just looking for ideas

MeteredOut

You need to work out what the whole estate might be worth, and then find out what residence nil rate band might apply, eg, did your father previously live there and pass on any residence nil rate band (assuming he passed and they've not just separated).

But you've spoken to solicitors, tax advisors and IFAs, so you should already know this and we have to assume they have advised you well on the IHT aspect.

So, is it the case that you have been told the estate cannot pay the IHT that will be due without selling the property? Have one of those 3 advisors given an estimate of what the IHT bill will be, and have you confirmed your mother does not have other assets in the estate that will cover that?

For how long have you lived in the property, and can you evidence that?

On the wider point, immerse yourself on the posts on this board, and that'll give you some ideas for an approach for investments over a 5+ year timeframe. There's no get-rich-quick scheme without very high risk and you really need to be clear on your goals for people to point you in the right direction.

htrj

Currently the estate could not pay the bill without the property being sold. 
As it stands today the IHT bill will be about £300,000.
There are no other assets in the estate that will settle that bill. 
Mother and Father Divorced 30+ years ago. Father has never been involved in this property. I assume he is still alive but I do not know that for certain.
I have lived here since 2011 and i'm sure there's enough by way of bank statements and tax returns, that would support that. Ive certainly been on the electoral register for that length of time. 
My goal is reach at least £200,000 in savings in the next 5 years any way I can. Currently I'm just working and saving to achieve that.
Any difference between what I've saved and what bill the estate has received will have to be borrowed. 
If the bill for either IHT or care  is too great I will at least have a healthy amount of cash with which to start again some where else. 

MeteredOut

htrj said:

Currently the estate can not pay the bill without the property being sold. 
As it stands today the IHT bill will be about £300,000.
There are no other assets in the estate that will settle that bill. 
Mother and Father Divorced 30+ years ago. Father has never been involved in this property. I assume he is still alive but I do not know that for certain.
I have lived here since 2011 and i'm sure there's enough by way of bank statements and tax returns, that would support that. Ive certainly been on the electoral register for that length of time. 
My goal is reach £200,000 in the next 5 years any way I can. Currently I'm working and saving to achieve that. 

Have you looked into mortgage options? ie. for you to take out a mortgage which would offset the IHT due so you could keep the property.

Your £200K goal means nothing without knowing if you have £50K or £150K today. A bit easier if you have £500K.

Since living there in 2011, have you paid anything towards a mortgage on the house? ie, could you claim a beneficial interest?

htrj

Yes, as mentioned earlier my plan b is just to arrange a bridging loan to settle the bill and then raise a mortgage on the property to repay the bridging loan. Thats going to be expensive though which is why I think id rather get as much cash together as possible before then. I have probably paid off about £100,000 of the mortgage since 2011, which I could prove with bank statements. Currently I have £60,000 in cash ISAs

Vitor

Given OPs situation, the key is balancing growth with certainty. You’re saving to meet a large, property-driven IHT bill with uncertain timing, so keeping a substantial amount in cash ISAs makes sense. If part of the money genuinely won’t be needed for 5–10 years, you could start drip-feeding some into a stocks and shares ISA using low-cost global index funds, accepting short-term ups and downs. Avoid trading apps and speculative schemes. One clear gap is having no pension: even small contributions attract tax relief and add long-term flexibility alongside your IHT planning.

One theoretical option is that you buy a small flat in sheltered accommodation and your mum genuinely moves into it as her permanent home, with the main house sold or gifted. If she no longer benefits from the original property, it can become a potentially exempt transfer and fall outside her estate after seven years with tapered relief each year. This avoids the “gift with reservation” issue, but only if it’s a real move, not a paper exercise. Timing is critical, deprivation-of-assets rules for care still apply, and there are SDLT, CGT and control considerations. This needs proper specialist advice before doing anything.