Managing an Inheritance

Inheritance is often a complex process, involving many mixed emotions. An unexpected lump sum of money can provide financial relief but it usually comes with a loss of someone close. Also, once you have this money, the confusion doesn’t end there. What will you do with these new finances? How will it affect you and your relationships? What about tax? When it comes to inheritance, there is a lot to think about. With this in mind, what tips are available for the management of an inheritance?

Don’t Panic

The money that a person can inherit varies but even more modest amounts can be life changing. With all of the benefits that come with large, unexpected sums of money, there are also potential pitfalls along the way. Some people may panic when they find out about an inheritance. The thought of how this may change your life or the relationships that you have with those around you, can be potentially stressful. On the other end of the spectrum, some people may immediately want to spend this money on extravagant purchases or charitable donations.

Those who find out about an inheritance should try to remain calm and take stock. It can be easy to overreact to this type of situation but this will only lead to poor decisions. This is time to take a look at your current finances and create a plan that incorporates this new inheritance. Informed decisions, made with a cool head are much more likely to be in your best interests.


When it comes to inheritance, one of the first things to consider is how this will affect your tax. Standard inheritance tax is at 40% but this only affects estates that are worth over a specific threshold- in this case £325,000. It’s also worth noting that this 40% tax rate will only be applied to the amount over the threshold, not the entire sum.

There are also other factors to inheritance tax which should be considered. For example, this tax is not applied to an inheritance if the estate is given to a spouse, civil partner, charity or amateur sports club. Another detail to keep in mind is that any properties that are passed on to a child will have a higher threshold for the tax- in this case £500,000.

Fortunately for beneficiaries, inheritance tax is normally paid by the person managing the estate, using funds from the estate. However, receiving a large sum of money may affect the beneficiaries overall tax obligations.

Save, Invest or Pay Debts?

So, you’ve inherited some money, you’ve got over the shock and sorted out your taxes, what now? There are many ways in which to put new funds to good use but it depends on each person’s individual circumstances. Those who have any outstanding debt should aim to address this before looking at any savings or investments. However, there are different types of debt and you should prioritise. For example, paying off high interest debt such as credit cards or loans, is a much better use for your money than making early mortgage payments.

When it comes to choosing between savings and investments, there are some things to consider before making the decision. Savings accounts such as ISAs are a much safer, long-term solution but with rates so low, they don’t currently offer much in the way of interest.

Investing your money in stocks and shares has become much more popular in recent years, thanks to apps which simplify the process. Investment is almost on the opposing end to savings in that it can potentially offer a high return on your funds but there is risk involved. However, there are variations in investment and you can choose safer options, which provide a modest return but protect your assets.

Whether you’re planning to pass on an inheritance or you’re the beneficiary, the process can be complicated and stressful. Fortunately, the specialists at Salhan Connect provide a comprehensive asset protection service, utilising the experience of accountants, solicitors and experts in taxes and trusts.

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