Money Help Desk: I need somewhere to keep £50,000 inheritance safe

I do have plans for it and just need somewhere to invest it in the meantime where I won't be tempted to dip into it, and where hopefully it might grow a bit.

Any advice on the pros and cons would be much appreciated as I'm a complete novice.

AT, Edinburgh

Danny Cox, of Hargreaves Lansdown, writes:

"Seven or eight years is sufficient time to invest in riskier assets such as the stock market, if the reader is prepared to accept the investment risk. The choice of investment should be driven by her goals. For example, if she has a very specific date she needs her money back, investing in the markets becomes problematic since there can be no guarantee she can cash in at a decent market level - meaning she may have to delay encashment.

Cash provides the financial security at the expense of her potential returns.

Probably the best solution is to invest in a range of assets, keeping some cash back and then investing the balance in fixed interest and the stock market, through funds such as unit trusts. The reader should maximise her Isa allowance annually, firstly sheltering the fixed interest funds from tax.

A cautious investor may consider a 50/50 equity bond split, with the majority focusing on UK markets. This would seem sensible given the time frame, but she could consider a small exposure to overseas emerging markets: more volatile but with better potential returns.

Michelle Slade, of Moneyfacts, writes:

"There are a number of options where you could invest your money, but it will depend on your attitude to risk. The potential for the biggest returns will be on stock market-linked investments, but these are not for everyone. If you are risk-averse then a cash savings solution may be your best option.

If you haven't used this year's allowance then I would recommend putting the first 5,100 in a cash Isa. Fixed rate Isas offer the highest rates of return at the moment, with Birmingham Midshires paying 4.25 per cent on its five-year bond. As the base rate is likely to rise in the not too distant future, many savers are opting for shorter-term commitments so that they can move to a better deal later on. If you only want to fix for one year at a time then Northern Rock is paying 3 per cent on its cash Isa.

As you don't want access to the money, I would then put the rest in a fixed rate bond. As with fixed rate cash Isas you have the option of tying your money up for between three months and five years. If you just want to invest the money and leave it for a while then Birmingham Midshires is paying 4.6 per cent for a five-year commitment, while the AA is paying 4.55 per cent . Over the medium term, Dunfermline BS is paying 4.1 per cent on its three-year bond and 3.6 per cent on its two-year bond. If you would prefer to review the rates of interest each year to ensure you can take advantage of future rate rises then Northern Rock is paying 3 per cent on its one-year bond.

One last thing: if the money is being invested on behalf of your children, remember they have a personal allowance which can shelter further cash from tax.

Donations after death

NOW I have retired, I am considering volunteering with a charity. I am happy to be able to offer them my time but I know that in these difficult times they need donations now more than ever. It is important for the time being to protect my savings and be in a position to support my family. I would like to think in the future I might be able to leave behind something to help those less fortunate. What is the best way to do this?

LK, Peebles

Fiona McDonald, a partner at Pagan Osborne, writes:

We all know that charities are facing massive pressures. At a time when there has been a decline in donations there has also been a marked increase in demand for their services.

A large proportion of charities' funding comes from legacies in wills. The gift would only be made on your death.

It is important to have an up-to-date will which takes into account all your wishes. If you already have a will, this can be changed at any time.

There are a number of ways to leave a legacy. The simplest one is a pecuniary legacy, which means leaving a specific sum to your chosen charity.

You could also leave a specific gift such as a property or art. Charities are also extremely grateful for legacies of shares.

A residuary legacy is used if you want to leave a certain percentage of your estate to charity once expenses, debts and specific gifts have been accounted for. This is a very popular option as it ensures your estate is divided in accordance with your wishes without setting figures which will undoubtedly change.

A legacy to charity will be exempt from inheritance tax (IHT). With the IHT rate at 40 per cent on taxable estates, it is good to know that your gift will pass in full to the charity.