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made after comparing the interest rate and length of term on debts with the potential returns earned on investments. However, this is generally considered to be a higher risk approach to personal financial management, and we would advise anyone considering this to seek professional advice to ensure it is a suitable choice for their circumstances.
Save for the short, medium and long term.
Following the payment of any liabilities, the next natural step is to keep a portion of the inheritance as an emergency cash reserve, while investing the remainder for the long term. Instead of succumbing to the temptation of spending the entire inheritance on frivolities, it is strongly advised to save and invest in strategies that will provide the best balance between short, medium, and long-term goals.
For your rainy-day cash fund, you will want to make sure this element of your inheritance is accessible and as secure as possible. We generally recommend having an emergency fund of 3-6 months’ worth of living expenses to cover those unforeseen events, such as illness and loss of a job.
If this reserve amount is going to be substantially above £85,000, you may want to consider spreading your cash deposits across several financial institutions to ensure you are fully protected by the Financial Services Compensation Scheme (FSCS) beyond the £1 million protection offered on high balances for 6 months each year. This is because the FSCS will only pay up to £85,000 per person per institution in the worst-case scenario where a UK- authorised bank or building society collapses.
National Savings & Investments (NS&I) are worth considering as a safe place for significant quantities of cash. These are government run savings accounts 100%
backed by HM Treasury, which means you do not need to worry about spreading your cash around here. The main products to look at are: Premium Bonds, Income Bonds, and the Direct Saver. These products are all easy access, with no notice and no penalty.
You may also want to put your inheritance to work for you in the long run. It can be invested in a variety of financial assets, such as shares, bonds, currency, commodities, or real property. Provided you are happy to put your capital at risk, these investments put you in a position to potentially earn greater returns in the future, such as price growth, dividends, interest payments, or rent. Diversification among assets, sectors, and countries can help to mitigate the risks.
contributing a proportion of their inheritance to charity as well. Transferring a legacy obtained from a close relative to a good cause can be rewarding. The inheritance is therefore not only a gift to you but a way to assist others.
Keep some for your own pleasure
If you inherit a large quantity of money, you have every right to enjoy it on personal pleasures guilt-free. However, before rewarding yourself, it is important to first pay attention to your debts, savings, investments, and your future. After proper financial preparation, you should have no worries about spending any residual inheritance on holidays, luxury goods, house improvements, or anything else that brings you joy.
Professional advice
It is an intelligent option to obtain the help of professionals. An independent financial adviser should provide you with an unbiased evaluation of your financial status and will also offer you much needed support and guidance. A financial adviser can also help you choose the best ways to invest your inheritance based on your risk tolerance, age, short-term and long-term objectives, and present financial situation.
In conclusion, an inheritance, if handled properly, may put an end to years of financial struggle and pave the way for years of financial stability. As a result, one should engage in careful financial preparation. An inheritance may be used to pay off debts, save and invest for the future, plan a happy retirement, establish a secure financial future for future generations, and improve your quality of life. When choosing what to do with your legacy, it is crucial to plan prudently and with due consideration.
Please visit www.churchgates.co.uk for more information or call 01284 701271.
. . . an inheritance, if handled properly, it may put an end to years of financial struggle and pave the way for years of financial stability.
Put some of it in your pension
A pension is an excellent vehicle for both long term investment returns and tax advantages. Contributions to a pension can provide income tax relief in accordance with your tax position, which is particularly powerful for higher rate taxpayers, and any investments within a pension can grow largely free of tax. Furthermore, 25% of the retirement fund can be withdrawn as a tax-free lump sum from age 55 (55-57 from April 2028), and the pension pot can be passed to future generations without incurring any inheritance tax consequences.
Donate a portion to charity
Many individuals think about
Whatever stage in life, good advice is invaluable. We’d like to hear from you - contact Robin Jackson, left, or Matthew Boardman, right
18 Langton Place, Bury St Edmunds, Suffolk, IP33 1NE
T: 01284 701271 W: churchgates.co.uk E: info@churchgates.co.uk
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