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How to Manage your Inheritance

By: Mike Watson - Updated: 9 Jun 2010 | comments*Discuss
Bereavement Inheriting Inheritance

Receiving an inheritance always causes mixed feelings, which can be very difficult to deal with alone. The sadness of bereavement can never be offset by receiving money from the deceased, yet the fact remains that you are often put in the position of dealing with financial issues when you least want to (even if, as is often the case, you do not receive any inheritance until some time after the passing of the deceased).

There are two main things to remember: 1) Do not count on an inheritance until it has arrived. 2) Seek financial advice immediately should your inheritance be of a significant amount. If you are young this latter point may be particularly important. Often an inheritance involves having more money to hand than you have ever had in your possession before (or it at least significantly increases your wealth). For this reason caution must be urged as not only may you regret taking a singular opportunity to stabilise your finances and invest for the future – you may regret spending the last gift of a loved one, something very different from the feeling that accompanies merely blowing –or frittering away - a gambling win or work bonus.

In order to make the most of your inheritance it is wise to seek bereavement counselling (should you feel it will help), financial help, and the company of people in a similar situation. Family and friends of the deceased may be going through the same as you as therefore can advise you, or at least empathise with you. In some instances they will be directly linked to a decision you make (for example, if you have jointly inherited a property with one or more other persons and wish to decide whether to sell or keep it).

Seeking Financial Help

Essentially an inheritance needs to be dealt with like any other equivalent sum of money and in that respect you will need to gauge your spending priorities against your investment opportunities. If your priority is a course of study, or a holiday, to take two examples, set aside the amount you need for that and then invest the rest, if there is sufficient to warrant an investment.

If you have significant amounts of money you will probably think first about buying property or settling the mortgage on your own. If you inherit property, you may wish to decide to free up the money in the property by selling it, to live in it, or to rent it out. In each case you ought to be thinking primarily of an investment and if it is investment you are after, getting on the property ladder, or investing in more property should you have one already, is of prime importance. Investment of any other kind is not really worthwhile unless you are saving for a mortgage deposit. In this case you may wish to take advantage of your tax free savings by investing as much as possible in an ‘ISA’ account. This should be a first step if you have any money left aside from (or in order to plan for) after buying, or investing in, property.

Arguably now is not the best time to buy, as markets are unstable. However, in modern history property has always seen the biggest returns over a long period of time. Leaving money in the bank, or investing in share portfolios is really no safer, as our financial markets are inextricably linked to the housing market.

Aside from property there are, however, numerous ways in which you can invest to see quicker and bigger returns, although these kinds of investments are high risk and not really to be toyed with unless you have experience in investment. If you do wish to invest on the stock market it is advisable to see a broker or a bank who will put your money into a stocks and shares portfolio at a risk level you are happy with.

There are finally specialist areas that you may wish to invest in wish as wine investment or investment in artworks. This can be very worthwhile if you have a degree of financial stability and have a genuine interest in these areas. Returns can be impressive, but depend on due attention to the market.

Remember that in the case of investing an inheritance they key is to behave moderately with regard to what is often an unexpected amount of money. The key is to plan ahead wisely so that you may do justice to the parting gift you have received. The first step is to make an appointment with your own bank and to explain your situation. From there you can discuss the opportunities.

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