Inherited investments from loved ones? How to avoid ‘some very expensive mistakes’

5 mins read

A survey initiated by Hargreaves Lansdown revealed 48 percent of people felt they would not be able to manage an inherited investment properly and with the average inheritance being £11,000 that’s a lot of earnings that could be at risk. Sarah Coles, personal finance analyst at Hargreaves Lansdown explained why this dilemma is such a big concern and what Britons should be doing with their inherited investments.

Also discovered in the survey was that 35-54 year-olds were the least confident age group when it came to managing inherited investments.

“If we don’t know what to do with the investments, there’s a risk we just cash them in.

“But converting investments into cash could come at a high price. If you put the average sized inheritance of £11,000 into a savings account, you could lose £17,686 over 20 years,” she explained.

So, if cashing out is not the ideal ‘quick-fix’ that it seems, what else should beneficiaries be avoiding when it comes to managing their inheritance?


Acting too fast.

“When you’re still grieving, getting your head around investments can feel like a step too far, so you may just give up and sell up,” Ms Coles suggested.

Assuming it will last forever.

Much like lottery winners, there is a tendency when people come into a fair share of money for them to burn through it very quickly.

Not considering your finances as a whole.

“Keeping the money invested may seem like a smart move.

“However, repaying expensive debts, building an emergency cash buffer or topping up your pension could be a better use of the inheritance, depending on your situation,” she explained.

Getting emotionally attached.

An inheritance does come with plenty of emotions, but it’s important not to allow this sentimentality to hold one back from doing what’s most beneficial.

Not reconsidering your portfolio as a whole.

“If you already have investments, you need to work out how the inherited ones fit into your portfolio.

“They could make it less diversified and skew the risk level.”

Ruling out taking advice.

“You may feel that paying for advice will eat into the inheritance, but if you’re not confident about investing, an adviser can help you manage the investments, and protect them from the taxman.”

Not considering the tax position immediately.

Ms Coles continued: “While you don’t want to make any rash decisions, you do need to pay attention to tax, especially if you inherit investments in a pension.”

Not taking advantage of any additional permitted subscription (APS)

“Savers that have inherited an ISA from a spouse or civil partner can apply for an APS, which is an additional ISA allowance.

“This means that inheriting the ISA won’t eat into your own ISA allowance (£20,000 for 2021-2022),” she elaborated.

Forgetting about the FSCS protection.

“If liquidating investments is the right thing to do for you, bear in mind that if you have more than £85,000 in cash you should try and spread it across different institutions.

“This is because if a bank collapses, the Financial Services Compensation Scheme will only protect up to £85,000 held with each institution by each person,” Ms Coles concluded.

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