Inheritance planning: Practical steps to future-proof your finances

Inheritance planning

Inheritance planning can often conjure up a mix of emotions. It’s a difficult topic to think about, let alone discuss.

First things first, we recommend that you take a step back if you can. This will allow you to take control and apply some practical steps to an emotive situation.

In this blog post, we’ll be offering tips and guidance for anyone set to receive an inheritance or starting to plan to pass on their own wealth.

Receiving an inheritance

Receiving an inheritance can bring with it lots of new opportunities. Take a moment to think about your future. What would your loved one have wanted for you? And what are your main priorities and goals in life?

Give yourself time to grieve before making any immediate decisions. If you are receiving cash, we recommend placing it in an accessible savings account. Remember, after six months, only the first £85,000 per person in any bank or building society is covered by the Financial Services Compensation Scheme.

Your options

1. Repay debt

Before you start thinking about how you can spend your inheritance, consider whether it would be worthwhile paying off your mortgage or any unpaid debts first.

Starting your journey to financial freedom will increase your overall financial security and wellbeing. And that’s often worth a lot more than a flashy car or luxury holiday.

2. Give it away

Help your loved ones by giving them a share of the inheritance. Perhaps your children or grandchildren could do with a hand getting onto the property ladder or paying their way through university.

Or, you could help make a lasting difference in the world by gifting money to charity.

3. Invest it for the future

Consider saving into a tax-free Cash or Stocks & Shares ISA. Your yearly ISA allowance is £20,000.

It could also be worth considering building an investment portfolio. Just bear in mind that you need to establish how much risk you’d like to take and what you hope to gain.

If you have a private pension scheme, you might want to top this up. Or, perhaps this newly acquired wealth has brought you closer to the retirement dream.

4. Spend it

This windfall could be the push you’ve needed to do a little more living. You could buy your dream house or travel the world. Just don’t spend it all without considering your financial future, as this money may never be replaced.

Sorting your affairs

Writing a will

Around 54% of UK adults don’t have a will in place. Without this crucial document, you could be at risk of having your estate distributed in a way that doesn’t match your wishes.

Even if you’re not sure what you want, having a simple will is better than no will at all. You can always change it further down the line. For more on this, see our eight reasons you should have a will in place.

We work closely with local solicitors and recommend every client has a will in place.

Inheritance tax

Whether you’ve received an inheritance or your accumulated wealth takes you over the current IHT thresholds, this could create complications for your family in the future who may become liable to pay inheritance tax (IHT).

If this money is surplus to your requirements and future goals, which should be your main priority, there are lots of different planning opportunities available to reduce your exposure to IHT. Making use of available allowances each year, giving some of your wealth away, taking out an insurance policy or putting your money into a trust.

You will need to understand your current IHT position, as well as your future goals and aspirations first. Then plans can be put into place, with the help of a financial adviser.

Creating a financial plan

Once you’ve considered all of the above factors, the next step is to create a financial plan. A holistic financial plan will incorporate estate planning and address all your inheritance planning concerns.

Whether you’re wanting to develop an investment strategy, protect your family from inheritance tax or learn what’s within your financial capabilities, holistic financial planning can help with it all.

For further information on the areas we’ve covered in this post – see our receiving an inheritance guide.

And of course, if you would like help with your inheritance planning, please get in touch with us and speak to one of our financial planners.