Making sense of an inheritance: A supportive guide to your next steps

Whilst an inheritance can provide tremendous opportunity, it’s likely that it has arrived during a very difficult time. Having a clear and defined plan in place can help you to make thoughtful, informed decisions that support both your immediate needs and your long-term wellbeing.

In this guide, Rupert Lovesy sets out a five-step framework to help you kick-start your plans and make the most of your new financial situation. This practical guide can be used alongside Rupert’s recent video covering some of the more immediate things to think about when Receiving an Inheritance.

Understanding the Timeline

Before making any major decisions, it can help to understand the typical timeframes involved in settling an estate. Probate—the legal process of distributing someone’s assets—often takes 9–12 months, although this can vary depending on the complexity of the estate. Once you have received the funds, you will have access to additional protection from the Financial Services Compensation Scheme, covering your temporary high balance up to £1.4m for up to 6 months.

1. Take stock of your current situation

Before thinking about how to use an inheritance, it’s important you start from a thorough understanding of your financial position today. This should include:

Your savings and investments
Any outstanding debts or regular borrowing
Your income and future earning potential
Your monthly expenditure and essential costs
Any foreseeable capital needs, now or in the future

Having a clear picture will help you make decisions from a position of insight rather than urgency.

2. Clarify your long-term goals

Even if your mind is on short-term needs, the best choices often depend on where you ultimately want to be.

Picture your life in 10, 20 or 30 years’ time:

What would you like to be doing? What’s important to you?
Do you have plans to buy a home, change career, retire early or build long-term security?

When your long-term goals are clear, you can align your inheritance strategy to support them.

Even if your mind is on short-term needs, the best choices often depend on where you ultimately want to be.

3. Decide what would make the most difference

Think about how the inheritance could genuinely improve your life.

Do you have debts that could be cleared?
Do you have adequate savings to be sufficiently flexible in paying for things?
Would income or capital make most difference to you?
Do you need the money now or at some point in the future?
How much financial flexibility is right for you?

If you are making regular loan payments, partially or fully clearing the debt may be appropriate. This makes your existing taxed income go further (as repayments will be reduced or eliminated), whilst generating additional income may increase your tax liability.

4. Understand your attitude to risk

If you are considering investing part of your inheritance, understanding your comfort with risk is crucial. This depends on:

How long you expect to invest (your time horizon)
How you feel about market ups and downs
How much you can afford to lose
How much growth you require to meet your goals

There is no “right” risk level, only what is right for you.

5. Consider whether you’ll need the funds in your lifetime

With people generally living longer these days, you may inherit later on in your life when you’re already fairly financially secure. If you already have sufficient put aside for your future needs, and have built in a reasonable contingency, you might want to explore:

Making gifts to loved ones
Philanthropic donations
Estate-planning products designed to give you access to funds while supporting long-term planning
Don’t forget to revise your own will to reflect your new circumstances

If the estate has been passed to you recently, note there is usually a two-year window in which a deed of variation can be used to redirect assets for tax or planning purposes. This can avoid the risk of the funds being subject to inheritance tax again if you don’t live seven years as it will be deemed to have been left directly by the deceased.

Inheriting a significant amount of money brings with it many challenges and opportunities. It’s important to remember that managing an inheritance is both a financial and an emotional process.

Speak to a Professional Adviser

Inheriting a significant amount of money brings with it many challenges and opportunities. It’s important to remember that managing an inheritance is both a financial and an emotional process. A qualified financial adviser can help you:

Avoid common pitfalls
Structure your assets effectively
Protect your long-term financial wellbeing
Make decisions that feel right—practically and personally

You don’t need to make big decisions alone. If you’d like to speak to someone about your financial situation following an inheritance, or you’re expecting to receive an inheritance in future, please contact us here.

Making sense of an inheritance: A supportive guide to your next steps

Whilst an inheritance can provide tremendous opportunity, it’s likely that it has arrived during a very difficult time. Having a clear and defined plan in place can help you to make thoughtful, informed decisions that support both your immediate needs and your long-term wellbeing.

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