Receiving an inheritance
06 November 2026
Receiving an inheritance can change your financial position significantly, sometimes almost overnight. Yet it often comes at an emotionally difficult time, when making major decisions about money may be the last thing you feel ready to do. Whether you inherit cash, investments, property or a combination of assets, there is rarely a need to decide immediately what should happen next.
Understanding what you have inherited, reviewing your finances and considering longer-term goals can help you make more confident, considered decisions.
What should you do when you receive an inheritance?
Once the estate has been settled and the assets have been passed to you, it can be useful to take stock of both the inheritance and your wider financial position. An inheritance may not arrive as a straightforward lump sum. You could receive investments, a property or other assets that each require different decisions.
An inherited property, for example, might be sold, retained as an investment or used personally. Inherited shares may need to be considered alongside investments you already hold.
It is also important to understand the tax position. Any Inheritance Tax due is usually paid from the estate before assets are distributed. However, tax may arise later on income or gains generated by inherited assets, such as interest on cash, dividends, rental income or gains made when certain assets are sold. Understanding these potential tax implications alongside your wider financial circumstances can help inform your next steps.
When it makes sense to hold an inheritance in cash
You do not necessarily need to invest inherited money straight away. Holding some or all of an inheritance in cash temporarily can give you time to consider your options, particularly if you are still dealing with the practical and emotional consequences of a bereavement.
For larger cash inheritances, it is also worth considering how and where the money is held. Qualifying inheritance proceeds can benefit from Financial Services Compensation Scheme temporary high balance protection of up to £1.4 million for six months. This gives you time to consider your longer-term plans without having to make immediate decisions.
Over time, however, holding a significant amount in cash may not always be appropriate. Inflation can reduce its spending power, while the return available will depend on prevailing interest rates. Once you have established how much you may need for emergencies and shorter-term spending, you can begin to consider whether holding the remainder in cash remains appropriate for your longer-term plans.
Capital at Risk
Capital at Risk
Please do remember that as with all investments, your capital is at risk. Tax treatment depends on individual circumstances and may be subject to change.
Reviewing debts, mortgages and existing investments
An inheritance can also provide an opportunity to reassess your existing financial commitments. Paying off debt with inheritance money may make sense where borrowing is expensive, particularly in the case of credit cards or personal loans, as reducing these liabilities can lower monthly outgoings and strengthen your overall financial position.
Mortgages may require a more considered decision. Paying off some or all of a mortgage could provide greater security and reduce regular costs, but it may not always be the best use of the entire inheritance. Your mortgage rate, any early repayment charges, other savings and longer-term financial goals should all form part of the decision.
Existing investments should also be reviewed. If you inherit a portfolio of shares or funds, the investments that were appropriate for the previous owner may not necessarily suit your own circumstances. Your time horizon, attitude to risk, tax position and financial objectives could be very different, so it may be sensible to assess inherited investments alongside the portfolio you already hold rather than simply leaving them unchanged.
What does your inheritance need to achieve?
Once the immediate financial decisions have been considered, it can help to think about the purpose you want the inheritance to serve. It might allow you to buy a home, support children or grandchildren, strengthen your retirement plans or simply create a greater sense of financial security.
Different goals may require different approaches. Money you expect to need within the next few years may be better kept accessible, while money intended to support retirement or other long-term objectives may have more opportunity to be invested. Rather than treating your inheritance as a single pot of money, it can be helpful to consider the different purposes it could serve and plan accordingly.
When can professional advice be useful?
Receiving an inheritance can introduce financial decisions you may not have faced before, particularly if it significantly changes your financial circumstances. Professional advice can help you understand how inherited assets fit alongside existing investments, pensions, tax planning and retirement objectives, as well as how you may eventually want to pass wealth on to future generations.
Rather than considering these decisions in isolation, an adviser can help you understand how they relate to one another and develop a financial plan that reflects your circumstances, priorities and longer-term goals.
How Killik & Co can help
Inheriting money or assets can bring new opportunities and responsibilities, often at a time of personal or family change. Taking a considered approach can help turn a sudden change in wealth into a financial plan built around what matters most to you, both now and in the years ahead.
At Killik & Co, our Wealth Planning Service can help you understand what your inheritance means for your wider financial position. Our Advisers will take the time to understand your priorities, review your existing arrangements and explore how inherited cash, investments or other assets could support your plans.
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