Bereavement is never truly easy. Whether someone they were a close or a distant relative, the loss of someone in your circle can be a quietly devastating thing. Additional difficulties arise where the nature of their will is concerned; you may find yourself juggling both your grief and the weight of receiving items of value from someone you love.
Indeed, if you are in a position where you are receiving a large portion of someone’s estate, it can be hard to know exactly what you should do with it. Large inheritances are not uncommon and can have dramatic impacts on aspects of your life – largely for the better. But thinking about how to manage them most effectively might not be at the top of your list. What are some essential considerations when dealing with an inheritance?
Put It in a Savings Account
First and foremost, much of the sum of your inheritance should be placed in a savings account, if only for the short term while you figure out your long-term plans. Savings accounts vary in type, allowing you to refine your option to your specific needs.
For example, if you’re planning to access the money soon and wish to be more agile with it, then an easy-access saver account would be a better option. If you have no immediate plans and don’t mind locking your inheritance away for a little while, a savings bond can provide higher returns over time. For tax exemption on any interest gained, ISAs are unparalleled.
Invest in Assets
ISAs can also be used in service of this following tip: don’t be afraid to invest with your inheritance. Long-term financial security comes from bracing your savings against inflation and implicit devaluation, something you can achieve with a multi-faceted approach that includes investment. Stocks and shares might seem a little volatile, but a global fund or index bought into via a stocks and shares ISA can provide inflation-beating returns with relatively low risk.
Pay Into a Pension
Your workplace pension plan might be as far as you have considered your retirement finances, but with a lump sum gained through inheritance, your options widen a little. Private pension plans also exist, that benefit from the same government tax relief and give you an opportunity to meaningfully save for your future. Combining your employer’s pension plan with your own can help you make your future much more secure – and even bring forward your retirement.
About Inheritance Tax
Many bereaved parties become rightfully confused about where Inheritance Tax – a marginal 40% tax on the deceased’s estate above a government-set threshold – comes in. Inheritance Tax is handled by the estate and deducted prior to you receiving your inheritance. Of course, there are exceptions – such as if you were gifted a large sum by the deceased less than seven years prior to their death. Generally speaking, though, tax is not something for you to worry about.
*Collaborative post*
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