£200k Investment Advice.
Discussion
My wife and I are executors for my Sister-In-Law who sadly passed away last year at 45 leaving a 6 and 8 year old without their mom. Dad (not married but together for many years) will look after the the kids but we're responsible for the bulk of the money plus the house the dad / kids are living in.
We have a pot of £200k to take care of with the aim of having something for the kids when they're 21 plus looking after stuff like holidays, one off purchases (broken washing machine etc) on an ongoing basis. Dad was a house husband and is good at looking after the kids but will struggle with earning much money going forward.
The money / house will be in trust with my wife / me as trustees. My current preference for the money is to buy a house and rent it out using the rental income to help support the dad / kids. Any other suggestions / ideas greatly appreciated.
We have a pot of £200k to take care of with the aim of having something for the kids when they're 21 plus looking after stuff like holidays, one off purchases (broken washing machine etc) on an ongoing basis. Dad was a house husband and is good at looking after the kids but will struggle with earning much money going forward.
The money / house will be in trust with my wife / me as trustees. My current preference for the money is to buy a house and rent it out using the rental income to help support the dad / kids. Any other suggestions / ideas greatly appreciated.
wow, cant imagine how difficult that must be....
I dont really know what you can legally do/not do with a trust, and what investment vehicles you can use. Probably be good to get some advice id guess. Id hazard a guess that maybe ISA's cant be used?
Some ideas, if the normal routes are open.
Junior ISA - 4k pa limit. Start topping it up. Kids get control at 16 IIRC.
Junior SIPP - Stick a few K for each child in. Gives them a good kick start for much later in life.
BTL? 100k £500 p/m 7-8% yield. If your not leveraging it, then the new tax changes shouldnt be an issue.
Commercial Holiday Let? Might be able to combine the holidays youd like to provide with something which actually pays a return whilst not being used. Also doesnt suffer from all the new tax changes etc on BTL.
P2P Lending? 3-5% return. useful for fairly liquid savings.
I dont really know what you can legally do/not do with a trust, and what investment vehicles you can use. Probably be good to get some advice id guess. Id hazard a guess that maybe ISA's cant be used?
Some ideas, if the normal routes are open.
Junior ISA - 4k pa limit. Start topping it up. Kids get control at 16 IIRC.
Junior SIPP - Stick a few K for each child in. Gives them a good kick start for much later in life.
BTL? 100k £500 p/m 7-8% yield. If your not leveraging it, then the new tax changes shouldnt be an issue.
Commercial Holiday Let? Might be able to combine the holidays youd like to provide with something which actually pays a return whilst not being used. Also doesnt suffer from all the new tax changes etc on BTL.
P2P Lending? 3-5% return. useful for fairly liquid savings.
I thought a lot of the BTL benefits had been eroded due to the change in tax treatment. Also, do you or the dad want to be spending time managing a BTL ? Although you can get agents, invariably the agent comes to you with issues; and there is the paperwork. Something to consider.
Over that timescales, shares are worth considering, Junior ISA as mentioned above is a good idea.
Good overview article here : https://www.telegraph.co.uk/investing/jisa/seven-t...
Although shares are volatile at the moment, if you invest monthly over next 11-15 years this will get smoothed out. And 4000(Junior ISA limit) invested over 12 years would give them £48000 each at 18(plus any growth in shares). I'd suggest someone like F&C or Fidelity for the Junior ISA as they've been around for a while so will still be here in 12 years(I've used F&C and using them now for nieces)
For the rest of the money , invest some of it in fixed rate savings as you can get to it if needed (but lose the interest).
Also, worth checking the impact on any benefits the Dad will receive; as not sure how the money being in trust will impact that; and any income might reduce benefits.
Over that timescales, shares are worth considering, Junior ISA as mentioned above is a good idea.
Good overview article here : https://www.telegraph.co.uk/investing/jisa/seven-t...
Although shares are volatile at the moment, if you invest monthly over next 11-15 years this will get smoothed out. And 4000(Junior ISA limit) invested over 12 years would give them £48000 each at 18(plus any growth in shares). I'd suggest someone like F&C or Fidelity for the Junior ISA as they've been around for a while so will still be here in 12 years(I've used F&C and using them now for nieces)
For the rest of the money , invest some of it in fixed rate savings as you can get to it if needed (but lose the interest).
Also, worth checking the impact on any benefits the Dad will receive; as not sure how the money being in trust will impact that; and any income might reduce benefits.
BTL and Holiday rentals are something we've considered. We'll set up a trust so I'm not certain at the moment what the tax situation will be; some research required I think. The point about the effort involved in managing these over the next 15 years is a good one.
How about long term investments that provide decent returns?
How about long term investments that provide decent returns?
pointedstarman said:
How about long term investments that provide decent returns?
For long term , I'd say shares again. My preference would be Investment trusts as they invest in a range of shares, so spreading the risk. There is a massive range of investment trusts, so you'd need to decide where you want to invest. For what your needing I'd be sticking to establish providers like F&C and Fidelity, but take a look at Trustnet for a list of all the available investment trust and providers. I invest in a few trusts and just monitor their performance every 3-6 months using the Trustnet data, and if needed swap to another trust.Having said shares, I'd be cautious putting in a large lump sum now, as the markets are volatile at the moment; so again drip feed money into shares.
I'm sure others will be along with different opinions
I wouldn't say you need to do something adventurous with the entire £200k.
This is quite a good read about the power of compounding if you start early enough and don't want to be especially risky with the childrens money https://theescapeartist.me/2015/10/20/downton-abbe...
This is quite a good read about the power of compounding if you start early enough and don't want to be especially risky with the childrens money https://theescapeartist.me/2015/10/20/downton-abbe...
As per most investment advice, spread it around to a certain degree to mitigate long term risks.
On the advice of the specialist who has successfully invested for me for many years, I invested last year on behalf of my daughter in a Bailie Gifford fund. I chose the managed fund because it has low management costs and I wanted a balanced actively managed investment. It has returned well so far.
There are several BG funds to chose from allowing you to spread the risk. BG have been around for many years and come high up in most reviews.
https://www.bailliegifford.com/en/uk/individual-in...
On the advice of the specialist who has successfully invested for me for many years, I invested last year on behalf of my daughter in a Bailie Gifford fund. I chose the managed fund because it has low management costs and I wanted a balanced actively managed investment. It has returned well so far.
There are several BG funds to chose from allowing you to spread the risk. BG have been around for many years and come high up in most reviews.
https://www.bailliegifford.com/en/uk/individual-in...
anonymous said:
[redacted]
The partner doesn't have an income and will need to get a part time job to supplement any benefits he can get. We want to make sure there are funds available to cover stuff he may not otherwise be able to afford such as replacement white goods / computers / holidays.AFAIK this can be treated as the trust looking after the boys essential needs and needent be treated as taxable income for the dad but will investigate this.
We do plan to speak to an IFA but always prefer to get as much info as I can rather blindly follow third party advice.
I suspect we'll place the bulk of the money into a long term investment be it property, managed funds, ISA etc but want to keep an amount somewhere that we can draw upon more easily.
pointedstarman said:
My wife and I are executors for my Sister-In-Law who sadly passed away last year at 45 leaving a 6 and 8 year old without their mom. Dad (not married but together for many years) will look after the the kids but we're responsible for the bulk of the money plus the house the dad / kids are living in.
That all sounds a bit odd! So the dad is your brother? The sister in law left him nothing? As someone who’s unfortunately been through this - I lost my wife just over 18 months ago leaving me with a 5 and 7 year old. One of the things that really helped practically was knowing I didn’t have to worry about money. Make sure the Dad doesn’t have to go out and work all hours, the kids will need their dad now. Having money set aside for the future is no good if he’s not there now.
The children already have heavy exposure to the property market via the home they are currently living in? As such you wouldn’t then go and invest the £200k into the property market as well. Plus, you have to consider the liquidity issues of that also.
A trust that small probably wouldn’t be allowed to make what would be a high risk investment for it anyway.
Also, I suspect things like ISAs are not an option or even needed as the money is already within a trust which should have the same if not better tax benefits and you’re not likely to be able to remove money to invest into another trust structure that is much easier for the trustees to steal from.
Any professional advisor is going to lead you down the path of liquidable, income and growth blended investment plans based around the stock market. The income element to produce the annual yield needed for the living costs while the growth element is to ensure the fund keeps pace with inflation.
The trust is there for essentials. Holidays aren’t essentials so you need to check that you’re allowed to spend on that sort of thing.
Plus, let’s say the yield/income element of the portfolio is £100k that’s going to deliver between £2-£5k in gross income per annum realistically. Once you’ve deducted the running costs of the trust just how much money each year do you think there will be to splash around on holidays and other non and not so essential expenditures? Would a washing machine be an essential? The father would be responsible for replacing white goods out of his work income.
It’s also important to recognise that the cost of the children will rise as they grow so you don’t want to be spending per annum all that much now as much of the income today will be needed for higher costs tomorrow.
I’d also guess that you have an issue looming with the father. A non worker who the mother deemed not suitable to be responsible for the finances. You need to set out from the very beginning that this money is not to help him afford things. That’s what work is for.
A trust that small probably wouldn’t be allowed to make what would be a high risk investment for it anyway.
Also, I suspect things like ISAs are not an option or even needed as the money is already within a trust which should have the same if not better tax benefits and you’re not likely to be able to remove money to invest into another trust structure that is much easier for the trustees to steal from.
Any professional advisor is going to lead you down the path of liquidable, income and growth blended investment plans based around the stock market. The income element to produce the annual yield needed for the living costs while the growth element is to ensure the fund keeps pace with inflation.
The trust is there for essentials. Holidays aren’t essentials so you need to check that you’re allowed to spend on that sort of thing.
Plus, let’s say the yield/income element of the portfolio is £100k that’s going to deliver between £2-£5k in gross income per annum realistically. Once you’ve deducted the running costs of the trust just how much money each year do you think there will be to splash around on holidays and other non and not so essential expenditures? Would a washing machine be an essential? The father would be responsible for replacing white goods out of his work income.
It’s also important to recognise that the cost of the children will rise as they grow so you don’t want to be spending per annum all that much now as much of the income today will be needed for higher costs tomorrow.
I’d also guess that you have an issue looming with the father. A non worker who the mother deemed not suitable to be responsible for the finances. You need to set out from the very beginning that this money is not to help him afford things. That’s what work is for.
silent k said:
As someone who’s unfortunately been through this - I lost my wife just over 18 months ago leaving me with a 5 and 7 year old. One of the things that really helped practically was knowing I didn’t have to worry about money. Make sure the Dad doesn’t have to go out and work all hours, the kids will need their dad now. Having money set aside for the future is no good if he’s not there now.
That's one of our main concerns. The dad is not likely to earn more than minimum wage and being with the kids is the priority so a part time job is the consensus wrt the future.I have not as yet taken legal advice on how to set up the trust as we're finalising probate but that will be done and if we can we will look to fund those purchases a part time income plus benefits will not.
I'm looking for suggestions on how to best invest the money in the trust.
Sorry to hear about your loss.
Were there instructions in your sister-in-law's will about what the money should be used for? I know you say it is for things like holidays and an inheritance when they are older, but was that a specific instruction in the will or is it something you and your wife have decided?
Alternatively, is the aim of the money to ensure that the children have the same or close to the (financial) quality of childhood after the death of their mother as they would have had while she was alive? So it should help ensure that, while they are children, they have decent food on the table, a roof over their heads, new shoes when they need them, and so on. If there is money left over for holidays and an inheritance, that is more of a bonus than covering the essentials.
Personally, I don't think BTLs are a good idea in this case - I know many people have done well in the past from BTLs, but they are more of a speculative investment which requires management. As trustees, I think it would be more appropriate to have a lower-risk portfolio than concentrate risk in one or two individual assets.
Were there instructions in your sister-in-law's will about what the money should be used for? I know you say it is for things like holidays and an inheritance when they are older, but was that a specific instruction in the will or is it something you and your wife have decided?
Alternatively, is the aim of the money to ensure that the children have the same or close to the (financial) quality of childhood after the death of their mother as they would have had while she was alive? So it should help ensure that, while they are children, they have decent food on the table, a roof over their heads, new shoes when they need them, and so on. If there is money left over for holidays and an inheritance, that is more of a bonus than covering the essentials.
Personally, I don't think BTLs are a good idea in this case - I know many people have done well in the past from BTLs, but they are more of a speculative investment which requires management. As trustees, I think it would be more appropriate to have a lower-risk portfolio than concentrate risk in one or two individual assets.
I'm not qualified to give financial advice, but I've been investing personally for a few years now. This is what I would do:
Invest your full annual allowance in ISAs. The returns are tax-free, your money can be accessed when you need to and the returns can be good (20%+ p.a.).
Do this for yourself, your wife, your brother and your sister-in-law's kids.
I've put money away with M&G in the past, making good returns in Japanese funds, but am now in funds that are a mixture of equities and bonds my £60k is growing by about £1k a month (but obviously this can be up and down).
I've been putting a few quid away for the kids with F&C. Across a range of funds but the best performing, and most expensive in terms of ongoing charges is the ICG Enterprise Trust (formerly Graphite). Cheaper funds are Foreign & Colonial and European Assets. One aspect of the kids ISAs is that they can only gain access to them when they turn 18, but from then on they turn into adult ISAs and receive the same benefits.
This would allow you to put away about £50k this year, and £50k come April.
Consider Premium Bonds as a safe haven, but the returns are pitiful.
Invest your full annual allowance in ISAs. The returns are tax-free, your money can be accessed when you need to and the returns can be good (20%+ p.a.).
Do this for yourself, your wife, your brother and your sister-in-law's kids.
I've put money away with M&G in the past, making good returns in Japanese funds, but am now in funds that are a mixture of equities and bonds my £60k is growing by about £1k a month (but obviously this can be up and down).
I've been putting a few quid away for the kids with F&C. Across a range of funds but the best performing, and most expensive in terms of ongoing charges is the ICG Enterprise Trust (formerly Graphite). Cheaper funds are Foreign & Colonial and European Assets. One aspect of the kids ISAs is that they can only gain access to them when they turn 18, but from then on they turn into adult ISAs and receive the same benefits.
This would allow you to put away about £50k this year, and £50k come April.
Consider Premium Bonds as a safe haven, but the returns are pitiful.
Edited by WhiskyDisco on Monday 12th March 11:22
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