Finding yourself on the receiving end of an inheritance can be a bitter-sweet scenario. You might still be grieving the loss of a loved one, but quietly cheering at the thought of your financial windfall.
Getting an inheritance isn’t always as simple as a cheque being deposited into your bank account and living happily ever after. Some people seem to be able to set themselves up for life, while others are less careful and very quickly have nothing left.
Here are our tips for some important things to consider if you do find yourself getting an inheritance, no matter how large or small.
- Get professional advice
The first thing to do, particularly for a large sum of money, is to speak to a financial adviser about your windfall. There could be quite a few ways you can benefit, and the advice needs to be tailored to your particular situation. How a young couple spend an inheritance is likely to be very different to the way a single retiree handles their money.
It can be tempting to rush out and buy a new car or go on a holiday, however the best thing to do is sit tight and speak to a professional first.
- Look at the tax implications
Tax implications will be explained to you when you see your finance expert, and they are a hugely important factor when you receive a lump sum of money.
You will probably need to pay tax on the amount you have received, so this can reduce your final payout quite significantly. Get some good advice about any ways in which your tax bill can be reduced.
- Consider the nature of your inheritance
Inheritances can come in a variety of different ways – lump sums of money, money in instalments, property and assets, or a combination of these.
Some inheritances come with certain conditions. You might only be able to access your money when you reach a particular age, or have instructions for how the money is to be used, such as for your children’s education or to buy a house.
What you receive, how it’s given and when you can get the money will all affect your plans.
- Communication is key
Do you intend to share your inheritance with other family members if they are not specifically stated in the will? If you inherit property, will it be sold, kept as an investment or will you live in it? How will you manage disagreements over what to do with the property?
Speaking to a professional will help you make the right decision for all these scenarios.
- How will you use your inheritance?
At the end of the day, what you do with your inheritance is entirely up to you.
You can save your money for emergencies or just to have peace of mind. You can pay off your debts, save for your retirement, invest your money, splurge on some luxuries, gift some to your children or a charity, or a bit of everything if your inheritance is large enough.
The ideal scenario would be to pay off all your debts, invest the money so you have a steady stream of income, and splurge! This will all be affected by the amount and nature of your inheritance and what you choose to do with it.
Be sure to speak to a professional before you make any major decisions, and you might just live happily, and wealthily, ever after.