The death of a loved one brings the sadness of a life ended and the natural feeling of loss and mourning.

It’s clearly not a time to think about money or financial issues. However, it may well be the case that you receive an inheritance as a result of the loss.

It’s also possible that you’re aware of an inheritance you’re likely to receive sometime in the near future. So, it can make sense to have some idea of your financial plans for any inherited assets so you’ve one less thing to worry about.

Here are some key things I suggest you bear in mind when it comes to manging any inheritance you receive.

1. Plan ahead

Rushed decisions are rarely good ones, so it’s worth taking time to plan ahead. This will help you avoid any hurried choices that you may later come to regret.

Even a relatively small sum of money could have a positive impact on your future finances, so making sure you use what you inherit effectively is always advisable.

You may well already have tentative thoughts, so now is the time to talk them through with your spouse or partner and make them part of a detailed plan.

How you use the money will inevitably be dependent on your personal circumstances. Some steps you may want to consider including in your plans are:  

• Supporting other family members such as your children and grandchildren
• Taking steps to stabilise your current financial position
• Maximising your pension contributions, and those of your spouse or partner
• Putting money into savings and investments
• Donating to charitable causes.

One thing I’d always recommend is that you focus on what’s right for you. It’s easy to second-guess yourself and consider what your benefactor would have wanted you to do, but your top priority should nearly always be what’s best for you and your loved ones.

2. Take steps to reduce or totally clear your debt

Another top priority should be to reduce or remove any outstanding debt you have.

Excessive debt can be debilitating, and a block on your wider finances. High-interest debt, such as some of the rates of interest you could be paying on credit cards, can leave a severe dent in your disposable income.

Once you have cleared debt, it’s much easier to see the road ahead in terms of taking meaningful steps to secure your future, and that of your family.

Loans secured on property are normally cheaper than unsecured debt, so clearing any outstanding mortgage you may have could be a secondary concern. However, after an unprecedented period of low interest rates, the cost of borrowing is now on the rise, so clearing your mortgage could be a very prudent move.

3. Rebalance your portfolio if needed

The type of assets you inherit will clearly have a bearing on your planning.

For example, deciding what to do with a property you inherit will be an important issue to resolve, and thinking this through in advance could make it ultimately easier to manage. 

Another issue could be how any investments you inherit could affect the overall balance of your existing holdings.

You may find that you have an over-concentration in one particular asset class, so an early priority could be rebalancing to ensure you maintain an appropriate mix across different markets and sectors.

4. Think about how you’ll deal with an inherited property

As you’ve already read, dealing with any property you inherit will be an area where advance planning can stand you in good stead.

A lot of inheritances take the form of a family home that passes on to children.

Clearly if you’re the sole beneficiary, you can usually decide whether you want to sell it, retain it for your own use, or perhaps rent it out to create an income stream.

But if the property is to be shared between yourself and other family members, it’s good to have an idea of how you’ll want to manage this.

One common solution is for the property to be sold to one individual – maybe out of other inherited wealth.  

Alternatively, you may all agree to sell the property immediately and share the proceeds on completion.

5. Securing your financial future

It’s likely that you’ll want to invest some of the money you receive.

Again, we’d recommend taking your time, and seeking expert advice before you do this.

For one thing, you should ensure that your investment portfolio is well-diversified and carries a level of risk that you’re comfortable with. It also needs to match your attitude to investment risk and reflect how much risk you’re prepared to take to achieve your aims.

Your timescales will also be a key issue, as will exactly when you start the investment process.

6. Consider your own legacy in the light of the one you receive

Receiving a large inheritance may well significantly alter your overall financial position.

If that’s the case, a key step will be planning your own legacy, given the big change in your financial circumstances that might not have previously been reflected in your estate plan.

This means that if you don’t currently have a will in place, setting one up is a high priority. Even if you do have a will, you should review it to check you’re happy with how your assets will be allocated on your death.

Your wider estate plan could become more important than it was before.

A substantial legacy can secure your future, and by taking the right steps you can ensure your legacy will, likewise, secure the future of your loved ones.

Get in touch

If you have any queries regarding a future inheritance you’re likely to receive, or need some guidance, then please get in touch.

You can email me at graeme@macfp.co.uk or call me on 01349 832849.