What options should my children consider to make the most of their inheritance?

05 October 2021

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Question by Malcolm

My son and daughter who are in their early twenties are each due to receive a sizeable inheritance over £120k and possibly quite a bit more. Both are currently living away from home (not together) and renting and are employed at recent graduate level jobs. (less than £30k). What options could they each consider to make the most of the sums due soon? How can they invest but also ensure sums are available easily if they wish to purchase a property. Given that they are both living in the London area neither would be able to make an outright purchase and would not necessarily be able to make such a move now.

Answered by Dale Kirkpatrick

Hi Malcolm

That's good news for your son and daughter, but with more money, sometimes people think it adds more problems.

They should definitely speak to a financial planner about this. There is so much to consider for them and their future that even an initial chat with someone would help them out.

The first thing they need to consider is how soon they might buy a house? If they are in graduate jobs, then I'm guessing they are at the beginning of the career ladder and so they won't know where they will want to settle down, so perhaps buying a property isn't even on their radar yet. If they are going to buy soon, then the money should be held in cash and not take any risk of it going down in value before buying.

The second question is have they got a Help to Buy ISA or a Lifetime ISA? By using their full allowances in this, the government gives them the bonuses which all helps towards the deposit on the first house.

Long term, putting all of the money into a house might not be what they want to do which we need to explore. Also, if they are planning on getting married down the line, they might be wary about putting all of the money into a house, in case the marriage doesn't work out and the money gets "lost" in divorce proceedings etc.

They should keep some of it in cash as their emergency fund, and also to enjoy some of it. If they are getting an inheritance, I'd always be an advocate of enjoying some of the money on things they've always wanted to have/do. Whoever they are inheriting the money from would have wanted to see them enjoy some of it,

Investment wise, the simplest idea is a mix of a Lifetime ISA for the house deposit, a Stocks & Shares ISA for accessible tax free savings, and the remainder into a General Investment Account, with the idea of moving it into their ISAs each tax year. You can only invest £20k into ISAs each year, so it will take a few years to get completely tax free, but as accessibility is a must, I'd suggest this is the way to do it. Assuming their salaries will only grow, I don't think there's any need to try anything else for now.

Speak with a financial planner to iron out some of the questions and plans for the future, and one who believes in a low cost, passive investment which is widely diversified to spread the risk and minimise costs.

I've had this exact situation earlier this year, where I spoke to two sisters and their mum who received an inheritance, and after the initial excitement of receiving the money, the majority of it is invested for their futures.

There really is a lot to think about! Let me know if you have any other questions or if it's worth a proper chat.

Good luck!

Answered by

Dale Kirkpatrick

Director & Chartered Financial Planner

I’ve been working in Financial Planning since I graduated in 2012. I’ve worked my way up from shadowing a financial planner, working in the admin and paraplanning roles, to being a planner in 2014. After taking a break from exams and starting to work on everything else which is needed to be a financial planner, I then restarted my studies and achieved Chartered Financial Planner status in 2018.