You’ve Received an Inheritance. What Should You Do Next?
Receiving an inheritance can bring mixed emotions.
Alongside the loss of someone important to you, you may suddenly have a significant financial decision to make.
Should you save it? Invest it? Pay off the mortgage? Help your children? Put more towards retirement?
There is no single right answer.
The best place to start is usually not by doing something immediately, but by taking time to understand what the inheritance could mean for your wider financial future.
Give Yourself Time
Unless there is a reason you need to act quickly, you do not have to make every decision straight away.
Leaving money in cash temporarily while you consider your options can give you some breathing space.
It can be particularly helpful if the inheritance has arrived during an emotional period.
A big financial decision deserves time and a clear head.
Look at Your Current Financial Position
Before deciding what to do with an inheritance, look at what you already have.
Consider your:
Savings
Mortgage and other borrowing
Pensions
Investments
Income and expenditure
Emergency fund
Longer-term financial goals
An inheritance may give you opportunities that were not previously available, but the right choice will depend on your individual circumstances.
Think About What You Want the Money to Achieve
Rather than immediately asking, “Where should I invest it?”, try asking: “What would I like this money to change?”
Perhaps it could help you:
Pay down your mortgage
Retire earlier
Increase your retirement income
Build long-term investments
Create more financial security
Help children or grandchildren
Move home
Reduce your working hours
Keep some aside to enjoy now
Often, the answer will be a combination rather than one single decision.
Should You Pay Off Your Mortgage?
Using an inheritance to reduce or repay a mortgage can be appealing.
But it is worth considering the bigger picture before automatically doing so.
Your mortgage interest rate, existing savings, pension position, other goals and how much accessible cash you want to keep can all influence the decision.
Paying off debt may provide peace of mind, but keeping some money available for other priorities may also be valuable.
Should You Invest an Inheritance?
If you do not need the money in the short term, investing some of an inheritance may be worth considering.
The right approach will depend on how long you expect to invest for, your attitude to risk and what you want the money to achieve.
This is where financial advice can be particularly useful.
Rather than choosing an investment in isolation, an adviser can look at how the inheritance fits alongside your existing pensions, investments and wider plans.
Could It Change Your Retirement Plans?
An inheritance can sometimes have a significant impact on retirement.
You may find that you can:
Retire earlier
Reduce your working hours
Increase your expected retirement income
Contribute more towards your future
Keep more flexibility in retirement
Financial planning can help you model those possibilities and understand what may realistically be achievable.
Sometimes an inheritance does not just increase the amount you have.
It can increase the choices you have.
Think Before Giving Money Away
Receiving an inheritance may also make you want to help your own family.
Perhaps you would like to contribute towards a child's house deposit or give money to children or grandchildren.
Before doing so, make sure you understand what you can comfortably afford to give away without compromising your own future.
There can also be tax and estate-planning considerations, so taking professional advice before making significant gifts can be sensible.
Do Not Forget About Tax
What you may do with the assets you inherit can have tax implications…
For example, investments, property or income generated from inherited assets may need to be considered differently.
If you have received a significant or more complicated inheritance, getting appropriate financial and tax advice can help you understand your position before making changes.
Why Speak to Brancaster House?
At Brancaster House Financial Planning, we help individuals and families across Norwich and Norfolk understand how significant life events can affect their wider finances.
Receiving an inheritance is rarely just about deciding where to put the money.
It may affect your retirement plans, investments, mortgage, family and the way you think about your own estate.
Our independent financial advisers can help you step back and look at the whole picture.
We can explore different options with you, explain the potential implications and help you build a plan around what matters to you.
And importantly, there is no need to arrive already knowing what you want to do.
Working that out is part of the conversation.
Inherited Money? Start With the Bigger Picture
An inheritance can create new financial opportunities, but you do not need to make every decision at once.
Take time to understand what you have, what you want the money to achieve and how it could affect the plans you already have.
If you have received an inheritance and would like to understand your options, Brancaster House Financial Planning can help.
Book your complimentary Financial Health Check and talk to one of our independent financial advisers about what your next steps could look like.
We’re here for every chapter.
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