Inheriting a large sum of money from a family member can bring up a lot of emotions. You may be sad your loved one is gone or even feel blessed for receiving the inheritance. Before thinking of ways to spend the money, you should remember that you may only receive this inheritance once, so it’s important to use your inheritance wisely.
We don’t learn enough about finances in school and it can be overwhelming to know what to do. At Bequest, we would hate for your inheritance to meet the same fate. While it is tempting to use your overnight riches to buy that flashy car or fund your Mediterranean vacation, your goal should be to use this money to make sustainable investments. If you don’t know where to start, keep reading, and get some help from a friend or even a financial advisor.
So what intelligent investments can you make with your inheritance? 🤔
What should I do with my inheritance?
- Get insured
Now that you have your finances covered, it’s time to start thinking about the future. Getting a comprehensive life insurance policy for yourself and your family is a great idea! At Bequest, we offer several custom options that can also help you insure important assets that you receive as a part of your inheritance. Understanding why you need life insurance is the first place to start.
- Make long term investments
If you’ve covered all your short-term needs and perhaps even a few wants (it’s okay to splurge a little 🎉), we recommend making long-term investments. Heirs that invest in substantial long term assets have much higher chances of retaining and even increasing their fortune over time. Investments like stocks and mutual funds offer great returns in the long run. You can even use a part of your inheritance to set up trust and pension funds depending on your long-term goals. While what you want to do with your inheritance is completely up to you, here are a few key points you should keep in mind while making long term investments :
- Try paying your debts off/down before investing in new assets. Your long term debt will inevitably accumulate a high interest fee over time. It is a wise decision to use a part of your inheritance to reduce your debts.
- You could invest in a passive portfolio. Investing in the next cryptocurrency token that Elon Musk tweets about might not necessarily be the right choice for you. It could be more wise to invest in a passive portfolio of Exchange Traded Funds (ETFs) that offer long-term investment options for little to no management fees.
- Invest in your loved ones. But what exactly does this entail? Keep reading!
Helping my loved ones 👪
Putting your kids through college, managing your family’s medical bills, moving to a bigger house, etc., are all expenses you may incur sometime in the future. Setting a part of your inheritance aside for your family helps you breathe a little easier. Most banks allow you to set up long-term college funds for your kids that offer healthy interest rates and even guaranteed returns. If you are, however, eligible to apply for a trust fund, we strongly recommend setting one up. Trust funds offer unparalleled returns and exemplary benefits, which makes them an excellent long term investment.
Giving to charity
You can honour your loved one’s memory by donating to a charity. This charity (of your choice) will be a great tool to help you give back to those in need and also attach your family’s name to a noble cause. You can donate the following to charity:
- Pecuniary gift (Cash).
- An asset such as property or stock holdings.
- A percentage of the inherited estate.
The cash you donate holds a greater monetary value for the charity than it does for you. U.K tax laws make this possible. When you (a U.K taxpayer) donate to charity, the charity can reclaim the basic tax amount (25%) that you have paid on this money. Simply put, for every £1 that you donate, the charity receives £1.25.
Another great way to give more to charity is by donating directly through your payroll. If your company has a payroll giving scheme such as CAF Give As You Earn, you can donate directly from your paycheck. No tax is deducted on this donation. What does this mean for you? Every £1 that you give to charity only costs you 80p.
Inheriting a large amount of money can often be confusing. You may be tempted to make the wrong investments, or you might simply not know what to do with your inheritance. At Bequest, we aim to help guide you in the right direction for better financial wellness and right investments that put your inheritance to a noble and fruitful cause. We hope the tips and options listed above help you invest better and support your family for years to come! 🙏