Inheriting money – Embrace the opportunity, ditch the guilt

For some, inheriting money can feel like a windfall that wasn’t earned, leading to feelings of discomfort or undeserving. It’s important however to remember that this didn’t happen by accident. Your loved ones intended to pass their wealth down to you and they likely worked very hard to do so. Just imagine how they would want their legacy to be used… it’s unlikely that someone’s last dying wish is for their legacy to be saved in the best interest rate bearing account possible and to be left untouched thereafter.

By striking a balance between enjoying some of what you have been left, and managing the rest wisely, perhaps someday you will provide your loved ones with a similar legacy, and you will have set a positive example of what to do with it that they can follow.

Rather than stressing over what to do or feeling uncomfortable, consider this an opportunity. An opportunity to honour your loved one’s wishes, to make them proud and to tick off any items on your bucket list, investing in you or your family’s future, or even donating to causes that are important to you or that were important to them.

We work closely with a number of charitable organisations and for those clients that have surplus funds and would like to give something back, we help them get involved with organisations like the Somerset Community Foundation, who do incredible work with individuals, businesses, trusts and the public sector to build stronger communities and to help those who need it most. For many, it starts with a donation and ends with membership and involvement in social events and philanthropic ventures.

We often speak to clients who have inherited large sums of money, but for whatever reason, be it fear, uncertainty, stress, or general malaise and ‘kicking the can down the road’ they have simply done nothing with it and left it in cash until an unspecified later date.

Aside from the more immediate risks of holding large sums of money in a default bank account (such as exceeding the Financial Services Compensation Scheme limit of £85,000 per account which covers your money if a bank goes bust) the real hidden cost is inflation.

The gradual and unrelenting rise in the price of goods and services means that holding money in low interest cash accounts leads to a rapid decrease in purchasing power over time. In October 2022 UK inflation hit a 41 year high of 11.1%, driven largely by soaring food and energy costs, partly caused by the economic impact of Covid lockdowns and supply chain disruptions from the ongoing conflict in Ukraine. Households saw energy prices rise by an average of £770 per year and these increases, although very much a spike from the normal longer-term rate of 2% show how money can lose its real value extremely quickly.

A £100,000 inheritance held for 10 years in a low-interest savings account would be worth approximately £81,859 in today’s terms if inflation had averaged only 2% over that period. That money invested and achieving 2% above inflation would be worth around £122,000 now, a huge difference which would provide significantly more security and freedom when called upon.

Lastly, the most important thing for us as financial planners is to do everything we can to ensure our clients make the most of life. Peace of mind that you’re going to be ok, and the knowledge that you have options and freedoms are paramount, but part of this is knowing you are protecting your wealth for children or loved ones as well. This can involve the use of trusts, protection, wills and lasting powers of attorney, or simply putting a plan in place to ensure the money lasts and is sheltered from any unnecessary taxes or risks.

So, ditch the guilt and embrace the opportunity. By managing your inheritance responsibly, you can hopefully do all of the things you’ve wanted to do, whilst providing both stability and opportunities for your loved ones in the future.

If you are considering what the changes might mean for you, our specialist financial planners will be able to help, please do get in touch by contacting us here.