Years ago, $100,000 was like inheriting $1,000,000. Today it is not really that much when in comes to extra money. If you were to save it at a rate of 1.5% and just withdrawal $10,000 a year, the money would last 10 years and you would have some interest left.
Since you are retired and have Medicare for your health insurance, you do not indicate if you have a Medicare supplement that covers the portion that Medicare does not. You might consider using the interest to pay for a Medicare supplement.
The one thing you do not want to do at your age is to pay off the mortgage unless you can’t sleep at night because you have one. Paying off the mortgage causes two problems.
1. You lose the tax deduction of the interest. If you don’t itemize, then this is not a concern. But if your income is high enough to cause your social security to be taxable, then the mortgage interest can offset some of the tax hit.
2. If you pay off the mortgage, then all your liquidity is tied up in your house. If you need money in an emergency, you would have to either sell the house our borrow your own money to make in liquid. If you are selling your current home, I would add the equity, if any to the inheritance and give you a small nest egg to invest based on your risk profile and use the dividends and interest to supplement your mortgage payment or annual income. The first $250,000 of gain on the sale of a home is capital gain tax free, $500,000 if married, if you have lived in your home for 5 out of the past five years.
You do not have to worry about adding the $100,000 to your estate, since the first $5,340,000 is estate tax free. California does not have an inheritance tax, so your $100,000 would be tax free.
You do not have to set up a trust for your children or grandchildren unless you want to. You could add an insurance policy placed in an irrevocable life insurance trust and have your heirs a beneficiaries. Even at age 69, if your health is good, you can fine a reasonable premium for insurance if you want to leave tax free money to heirs.
Since you say you are conservative, you should find a financial planner that fits your savings and investment profile and talk to them about a balanced portfolio. You should talk to a few planners, (most have the first hour of consultation free.) There are ways to make this extra $100,000 work for you.