What to do with inheritance

It would appear that you and your wife are well provided for now and in the future.

How old are your children now?

Perhaps you should look into investing some of it in funds of shares. For large sums of cash you may not get sufficient interest to match inflation.


If you want to consider investments of some form with a pot of £400K it would be worthwhile talking to a local IFA.

cambb wrote: »

Just about to inherit approx 200k and was wondering what to do with the cash.

I'm currently 50 with a pension worth approx 650k + 15k annually going in and the wife with a final salary pension. We both will have max state pension credits by retirement. Looking at retiring in 7 years time ... We have no ISA's and approx 20k savings. Looking at maybe 100k long term ie 5 years and 100k easy access ish. Any ideas or advice please?

Pensions:
(i) if you are paying higher rate tax consider contributing enough so that you avoid it.
(ii) consider contributing to a personal pension of some sort for your wife. That way she might find herself able to retire early without any need to start her DB pension early with a corresponding actuarial reduction.

S&S ISAs: fill two and contemplate what to invest the money in. If your current pension is virtually all in equities I'd suggest you diversify. Commodities, maybe?

Gold Sovereigns: consider seriously - no VAT, no CGT, and no income tax (obviously). Read up about them on the Royal Mint website and then consider shopping around.

Cash: are you both using your annual savings interest allowance (£1,000 for basic rate taxpayers, £500 for higher rate)? If you have spare capacity use as much cash as you can to earn interest that beats CPI inflation. After that ... well, if your allowances become fully used consider Premium Bonds - they pay out prizes tax-free.

Children: read up on a Deed of Variation/Instrument of Variation. This lets you divert all or part of your inheritance to them while it is treated for IHT purposes as coming direct from the will of the deceased. In other words the diverted capital won't form part of your estate for IHT purposes. (Gov.uk provides what is virtually a template for such an instrument, so that you could write it yourself.) If you are loathe to trust the youngsters with any of the money you could alway direct it by IoV into a discretionary trust that you would set up. The beneficiaries would be yourself, your wife, your children, their children, ... You and your wife could be the trustees. The trust, however, would need managing, and it might have tax liabilities that a youngster wouldn't. There are ways round that for a smallish trust but then you are in the world of paying for expert advice. Anyway, you have two years from the death of the deceased to set up the IoV, which might give the youngsters a bit of time to grow up.

And once both are 18 such a trust could lend them money which they could save/invest tax-efficiently because they wouldn't be taxpayers.

Pay off any high interest debt,
Put 6 months to a year's cash spending in the bank for emergencies
Maybe pay down your mortgage
Maybe contribute more to the pension
Maybe use ISA allowance and buy a multi-asset fund or a diverse mixed of equity and bond funds.