What Should I Do With An Inheritance?
Receiving an inheritance can be life‑changing, but for many people, it also brings a surprising amount of anxiety. A sudden lump sum often comes at an emotionally difficult time, and the pressure to ‘use it wisely’ or ‘not make a mistake’ can feel overwhelming.
At Talis IFA, we regularly speak to clients who worry about what to do with their inheritance. They are concerned about the potential to waste it – whether by making a tax error, not investing it in the most beneficial way, or simply not knowing where to start.
If you’ve recently inherited money, here’s how to approach it calmly, confidently and with a clear plan.
Why are so many people anxious about inheriting a lump sum?
Lump sum anxiety is surprisingly common. You may also be dealing with difficult emotions due to the death of a loved one, and may be feeling pressure to ‘do the right thing’ with your inheritance.
A large sum of money can trigger several concerns:
“What if I make the wrong decision?”
“Should I invest my inheritance or pay off debts?”
“What are the inheritance tax rules in the UK?”
“What if I lose it?”
It might be reassuring to know that these fears are completely normal. Most people only receive a significant lump sum once or twice in their lifetime, so it’s not something they’ve had practice managing. And because inheritance often follows bereavement, emotions can cloud your decision‑making.
The good news is that you don’t need to rush into making any decisions immediately.
Making decisions about your inheritance: pause before you act
Before deciding what to do with an inheritance, give yourself time. There is rarely any urgency, and acting too quickly is one of the most common causes of regret.
A short pause allows you to:
- Process the emotional side of the inheritance
- Understand any inheritance tax implications
- Clarify your financial priorities
- Avoid knee-jerk decisions
Even if you’re thinking about investing your inheritance or paying off your mortgage, it’s worth taking a breath before committing.
What are my options for using my inheritance?
The specific options available to you will depend on your personal circumstances and the amount you have inherited. But here are some of the options that Talis IFAs most commonly discuss with their clients:
- Paying off your mortgage or other debt
Clearing debt can feel satisfying and may reduce monthly outgoings. But it’s not always the most efficient use of a lump sum, especially if your mortgage rate is low or you have early repayment charges.
- Building an emergency fund
If you don’t already have 3-6 months’ expenses saved, using part of your inheritance to create a financial buffer might be a smart move.
- Investing your inheritance
Investing can help your inheritance grow over time, potentially outpacing inflation. But choosing the right investment strategy depends on your goals, time frame and attitude to risk.
- Boosting your pension pot
A pension contribution can be tax‑efficient and may significantly improve your long‑term retirement position.
- Saving for future goals
Whether it’s helping the next generation, buying a home, or planning early retirement, an inheritance can accelerate your financial plans.
Will I have to pay inheritance tax (IHT) on my inheritance?
Many people worry about inheritance tax even after receiving the money. In most cases, inheritance tax is handled by the estate, not the beneficiary. There are circumstances where you may have to pay tax on your inheritance though, especially if assets continue to grow or if you plan to pass wealth on later.
An IFA can help you understand:
- Whether any tax applies to your inheritance
- How to invest or gift money tax‑efficiently
- How your inheritance fits into your own estate planning
Learn more about IHT: How can I minimise Inheritance Tax for my family? – Talis IFA
Where can I get advice about managing my inheritance?
Managing a lump sum effectively to make it work hard for you isn’t just about choosing between saving, investing or spending. It’s about understanding how each option affects your long‑term financial wellbeing.
An IFA can help you:
- Build a personalised plan based on your goals
- Understand the risks and benefits of investing inheritance
- Avoid tax mistakes
- Balance short‑term needs with long‑term growth
- Increase your confidence about making financial decisions, and relieve your anxiety
Most importantly, professional advice from an IFA gives you clarity. Instead of worrying about ‘doing the wrong thing’, you’ll understand your options and how your inheritance can support your future.
How a Talis IFA will help you manage your inheritance
At Talis IFA, we take a ‘life first, money second’ approach. That means that our advice is focused on helping you to feel that your inheritance is an opportunity, not a source of stress. We’ll take the time to understand your current circumstances and your future goals, before providing guidance based on making your money work harder for you, giving you the confidence to make decisions based on turning a lump sum into long‑term security, meaningful goals and financial peace of mind.
If you’ve recently received an inheritance and want to understand your options, Talis IFA can help you make clear, confident decisions that support your future.
This article is for information only and does not constitute personal financial advice. Financial decisions should be based on your individual circumstances, and you should seek professional advice before taking action. Tax rules can change and their impact depends on your personal situation.