The challenges of receiving an inheritance


Receiving an inheritance can be a challenging time, it’s often a life event that’s associated with conflicting emotions. While the financial gift that your loved one has left you could be life-changing and improve your financial security, you’re still dealing with loss. As a result, you may find an inheritance difficult to deal with, especially when you’re expected to make significant decisions.

If you’re in a position where you’ve received an inheritance and are feeling overwhelmed, it may be down to these five challenges:

1. Understanding the inheritance process

Firstly, the inheritance process can be complicated and lengthy. The process will depend on whether your loved one wrote a will. If they didn’t it can take more time.

Without a will in place, you will need to apply for a Letter of Representation. From here, their estate can be distributed according to Intestacy rules. These follow a strict line of inheritance, starting with a spouse or civil partner and children.

If your loved one wrote a will, how complex the process is will depend on their wishes. An Executor will be responsible for collecting and then distributing assets to beneficiaries. In straightforward cases, you can expect to receive the inheritance within three months. However, there are times when it’s more complicated. For example, if your loved one left several beneficiaries a set portion of their estate, known as a residuary bequest, it may be necessary to sell some assets to carry out their wishes.

2. Deciding what to do with the money immediately

Once you’ve received an inheritance, it can feel like you’ve got to make decisions straight away. But this isn’t the case. In fact, it’s often advisable to take a step back and allow yourself to grieve before you plunge into making any significant financial decisions.

Giving yourself more time can help ensure you’re in the right frame of mind and that you’ve mulled over your decision and the alternatives. To begin with, simply placing the inheritance into a cash account can give you peace of mind. If you decide to do this, be aware of the Financial Services Compensation Scheme limits. The compensation limit is now £85,000 per person per authorised provider. If your inheritance is larger than this, spread it across several authorised banks and building societies, although you may benefit from the ‘Temporary High Balance’ limit of £1 million for up to six months.

3. Putting your aspirations at the centre

Even if you have an idea of how you want to use your inheritance, you can still feel conflicted. Perhaps you worry about what your loved one would have wanted you to spend the money on. Or you feel pressure to ensure it improves your life as much as possible.

While it’s natural to want to take your loved one’s goals into consideration, it’s important that your aspirations come first. For some, this can be a challenging part of the inheritance process. Taking the time to think about what you want to achieve, without worrying about the expectations of others, is the first step in the process. From here, you can move on to how the inheritance can help you do this.

4. Looking at the long-term plan

An inheritance could be a once-in-a-lifetime opportunity to improve your financial security and take a stride towards your aspirations. Depending on the size of the inheritance, it could change your life. This is where a long-term plan is important. While it’s often the short-term expenses that spring to mind first, perhaps a holiday or a new car, these are unlikely to enhance your life in the long term.

Would paying off debt, such as your mortgage be the best option for you? Or would investing make more sense? How much can you afford to spend on indulgences? Financial planning can help you get the most out of your inheritance with your ultimate goals in mind. With a tailored financial plan, you can have more confidence in the decisions you make.

5. Planning your own legacy

After receiving an inheritance, your mind may turn to how you’d like your wealth distributed when you pass away. It’s not something anyone wants to think about, but taking the time to write a will can ensure your wishes are carried out. If you’ve never considered your legacy, now is the time to do so. If you already have a will in place, an inheritance may mean that it needs updating to reflect changes to your circumstances or aspirations.

If you’d like to discuss an inheritance you’ve received or are expecting to receive in the future, please contact us. We can offer tailored advice that reflects your concerns and goals, moving at a pace you’re comfortable with.

Please Note: The value of your investment can go down as well as up and you may not get back the full amount you invested.