Receiving an inheritance is often fraught with complex and sometimes conflicting emotions. It’s a generous gift that could improve your financial security for the rest of your life. But, on the other hand, you’re likely to still be grieving and decisions relating to what to do with the money may be affected by what you believe your benefactor would have wanted.
As a result, receiving an inheritance can often be an event that’s filled with emotional challenges. It can make deciding what to do with the money you’ve received difficult. However, there are some steps you can take to gain a clearer picture of what you want to achieve and understand how to go about it.
If you’ve received an inheritance, these steps can help you deal with the emotions you may be experiencing:
Give yourself time to grieve
The key thing to remember when you first receive an inheritance is that you don’t have to make any decisions immediately. In fact, taking a step back and giving yourself time to grieve can often be positive.
You’re likely to experience many conflicting emotions and not diving into decisions around how you’ll use the money can help you organise your thoughts once you’ve come to terms with losing a loved one.
While you decide on the next steps to take, you will need to ensure that your inheritance is secure. Under the Financial Services Compensation Scheme (FSCS), you’re entitled to up to £85,000 compensation per person per authorised bank or building society, rising to £170,000 for joint accounts. As a result, if you’ve received more than £85,000, it’s wise to split the inheritance across banks or building societies.
Understand the inheritance process
The inheritance process can be lengthy and complex, particularly when you’re already going through a difficult time. Understanding what will happen and what you need to do can make it less stressful.
An Executor will be responsible for collecting the assets of the deceased estates, paying any outstanding debts, and then distributing the assets to you and other beneficiaries. It can take some time from when you’re first informed of the inheritance to actually receiving it. Probate can be granted within three months for simple estates. However, if Inheritance Tax may be due or other steps need to be taken, such as selling a property, it can take considerably longer.
If your loved one died without leaving a will, you will need to apply for a Letter of Representation. Their estate will then be divided according to Intestacy Rules.
Set out your life goals
When you receive an inheritance it can be tempting to start thinking about how you’ll spend it; perhaps a home renovation or new car? But it’s important to remember that, for many, an inheritance is a once in a lifetime opportunity. Thinking about what you want to achieve in your life, and how the inheritance can support you with this, is a better place to start.
For instance, if your goal is to retire five years early, would the inheritance allow you to do this? Would you forfeit the tempting material goods now to secure the future you want? Taking a bigger picture view of your life and the inheritance can lead to decisions that are more fulfilling in the long term.
It’s common for beneficiaries to feel a sense of obligation to do what they think their benefactor would have wanted too. If this is the case, it can make decisions even more difficult to make. It’s important to focus on your personal goals as you proceed.
Now is also a good time to consider your long-term financial security. Taking some actions now could improve your finances for the rest of your life. For example, paying off the remainder of your mortgage can free up more of your income or placing a lump sum into a pension could boost your retirement prospects.
Speak to a financial planner
A financial planner can help bring the above points together to create a financial strategy that’s right for you and your overall goals. If you’re ready to take this step, please contact us.
An inheritance can be life-changing but there’s no one solution to help you achieve this. It should be based on the inheritance received your other assets and, ultimately, your aspirations. Bespoke financial planning can help you identify the best course of action with you in mind, whether that’s paying off debt to improve security in the long term or creating an investment portfolio that will help you achieve your retirement dreams.
Working with a financial planner should allow you to align your goals with your finances in a way that’s realistic and efficient.
Think about your own legacy
With a clearer idea of how you’ll use the inheritance to achieve your aspirations and improve financial security, it’s time to look at your own legacy.
Hopefully, the inheritance you received will improve your well-being. Planning your legacy can allow you to do the same for those you care about. Even if you’ve already taken steps to set out what you want to happen to your estate when you pass away by writing a will, now is the time to review it. Since receiving an inheritance, your wishes and financial position may have changed considerably. Reassessing your estate plan can help align your legacy to this.
At a minimum, you should have a will and Lasting Power of Attorney in place to provide protection for both you and your loved ones.
If you’ve received an inheritance and would like to benefit from dedicated advice that reflects your personal ambitions, don’t hesitate to contact us.