How to Manage your Inheritance
How to Manage your Inheritance
Inheritance, no matter how sizeable it is, can be extremely important for anyone’s financial situation. Whether it’s a large asset like a house, a lump sum of money, or a pension it can be used in so many ways to improve your quality of life and ensure future financial stability.
People often use inheritance to cover a down payment on a house, pay off debts or a mortgage, or invest into their savings. In this article we’ll discuss how you can make the most of your inheritance and manage it properly.
Hansford Bell are independent financial advisors based in Tavistock. We provide our clients with impartial advice into managing their finances, whether you are getting started on your financial journey, or already have a portfolio in place, get in touch to see how we can help.
Making a Financial Plan
The first thing you do when you come into a large sum of money and are not sure what to do it with it is to reassess your financial situation and start planning for the future. Identify high interest debt like credit cards, or short term loans, and pay these first. This can reduce your monthly expenditure and help you save more money month to month. Once this is done, you can start allocating money to different things and plan where to invest your money.
Assess long-term and short-term financial goals, if you have an emergency fund, then allocating some money to this would be good for a rainy day. It’s important to be aware of your future cash flows, Cash Flow Planning can help assess your ‘personal liquidity’ and can account for periods of low income which savings will help with.
If you have been planning on making an important purchase, such as a new bathroom or car, then this is the time to address what is urgent and prioritise your purchases, this can reduce unexpected costs later on down the line. Completing these steps should allow you to maximise the impact of your inheritance and improve your financial resilience.
Invest in Assets Which Appreciate in Value
Investing your money into assets which appreciate in value are a great solution for inheritance. Properties are always a good investment as they rarely lose value compared to other assets like a car which often decline in value year on year.
Other assets which typically appreciate in value over time include:
- Commodities – Gold, Silver, or Platinum
- Bonds
- Art
- Land
Making smart buying decisions and investing in valuable assets is also a good way to make sure your money doesn’t lose value during an economic downturn or periods of uncertainty.
*It is important to note these assets are not always guaranteed to increase in value.*
Open a High-Yield Savings Account
A savings account is on option to manage your inheritance long-term. Choosing the right account, is important, interest rates and conditions of saving vary from place to place, picking a high-yield savings account can offer more than 3% annual interest can help maximise your investment.
Make sure you check the conditions of the account, some high interest accounts lock down the money over a fixed period, typically between one and three years. If you might need access to the money during this period check the fine print as you can be charged for early release of funds.
Seek Advice from a Professional
If you are struggling to plan your finances or need more ideas on what you can do with your inheritance, then it’s always a good idea to seek advice. There is a lot of professional help you get, whether it’s an actual financial planner, financial adviser, accountant or tax expert.
If a financial planner was already managing the estate you’ve inherited, consider asking them to help you manage your inheritance as they will already have good knowledge of what they’re working with.
Our experts can assist with managing your inheritance, we offer Financial Life Planning for holistic and robust planning techniques and Wealth Management for optimising your investments and overall wealth.
Create a Pension Fund
A pension offers numerous benefits for investments, but the main benefit is security for your inheritance money and savings. Whether you or your estate manager dealt with it, you’ll most likely already be familiar with inheritance tax.
The main benefit of a pension fund is the tax benefit, you can withdraw 25% as a tax-free lump sum and if you pass away with a pension fund then it can be passed on, with no inheritance tax on it.
Therefore, although pension funds won’t generate high returns on your inheritance money like some of the other strategies we’ve discussed, they are a secure and sensible way of saving for the future.
We offer retirement planning services to help you plan pension spending and make sure you are managing you cash flow effectively.
Financial Advice and Wealth Management with Hansford Bell
Ultimately the amount of inheritance you receive, your costs, and general financial position will heavily influence how you invest your inheritance.
As long as you make smart, long-term choices about your money, you’ll be able to properly manage your inheritance. Get in touch to find out how we can help you the make the most of finances.
This blog is for general information only and does not constitute advice.
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