What to Do When You Receive an Inheritance
Receiving an inheritance can be both a financial boost and an emotional event, often coming after the loss of a loved one. While it may be tempting to make quick decisions, taking a thoughtful and strategic approach can help you make the most of your inheritance.
1. Take Your Time
The first step is to avoid rushing into any financial decisions. Losing a loved one is an emotional experience, and it’s important to give yourself time to process before making any major financial moves. Keep the money in a safe place, such as a high-interest savings account, while you consider your options.
2. Understand Your Tax Obligations
In the UK, inheritance tax (IHT) is usually paid by the estate before assets are distributed. However, there may still be tax implications depending on how you use the inheritance. If you invest it, for example, you may have to pay capital gains tax or income tax on any returns. Seeking advice from a financial professional can help you understand your tax position.
3. Pay Off Debts (If It Makes Sense)
If you have high-interest debt, such as credit cards or personal loans, using part of your inheritance to pay them off can be a smart financial move. However, if you have a low-interest mortgage or student loan, it may be better to invest the money instead.
4. Build or Strengthen Your Emergency Fund
An emergency fund is a financial safety net that covers unexpected expenses, such as job loss, car repairs, or medical bills. At Universal Finance, we typically recommend having 3–6 months' worth of living expenses saved in an easily accessible account.
5. Invest for the Future
Investing your inheritance wisely can help it grow over time. Depending on your financial goals, you might consider:
ISA – Tax-efficient savings and investment options
Pensions – Boosting your retirement fund with the added benefit of tax relief
General Investment Accounts – Allows you to use capital gains tax allowance on any gains
If you’re unsure, speaking with a financial advisor from Universal Finance can help you choose the best investment strategy tailored to your specific situation.
6. Consider Property Investment
If your inheritance is large enough, you might consider buying a property, either as a home or an investment. Property can provide long-term value and rental income, but it’s important to factor in costs like maintenance, taxes, and mortgage rates before deciding.
7. Give Thoughtfully
If you want to support family members or charities, consider doing so in a tax-efficient way. The UK allows you to gift up to £3,000 per tax year without it being subject to inheritance tax, and donations to registered charities are always free from inheritance tax.
“Professional advice from Universal Finance can help ensure your inheritance is managed wisely. ”
8. Work with a Financial Advisor
A financial advisor can help you make the best decisions based on your personal circumstances. Whether you want to invest, plan for retirement, or reduce your tax bill, professional advice from Universal Finance, based in Omagh, can help ensure your inheritance is managed wisely.
Final Thoughts
An inheritance can be life-changing, but it’s important to handle it carefully. By taking a strategic approach - paying off debts, saving, investing, and seeking expert advice - you can ensure that the money benefits you and your family for years to come.
If you’ve recently received an inheritance and need advice, get in touch with Universal Finance today - we’d be happy to help you make the most of it!
*The information provided in this blog post is for general informational purposes only and should not be considered financial, investment, or legal advice. Every individual’s financial situation is unique, and you should always seek professional advice tailored to your specific circumstances before making any financial decisions.
