How to Invest a Lump-sum Inheritance

The problem with most lump sums inheritances is that they come unexpectedly, may be in illiquid assets and are unlikely to fit neatly into an investors’ long-term financial planning

Cherry Reynard 29 January, 2016 | 10:00AM

The number of UK families paying inheritance tax has hit a 35-year high, as the rise in house prices push more people above the threshold. The IHT net has widened three-fold during the past six years. While no-one likes paying tax, greater inheritance bills means that more people are receiving a lump sum and need to decide how to invest it. How should investors approach an inheritance tax windfall?

The problem with most lump sums inheritances is that they come unexpectedly, may be in illiquid assets and are unlikely to fit neatly into an investors’ long-term financial planning. Lump sum investing is tricky in itself; investing a lot of money all in one go leaves investors vulnerable to swings in market valuations – they may get lucky and invest when share prices are low, but equally, they may be investing at the top of the market.

What to Consider Before Lump-sum Investing

Gavin Haynes, investment director at wealth management group Whitechurch Securities, says investors need to consider three things: the objectives for the money, the risk they are prepared to take and the amount of time over which the money is to be invested. He says: “Inheritance often comes as a windfall and sits outside an investor’s normal financial planning. People have to decide where the investment is going to fit in.”

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About Author

Cherry Reynard

Cherry Reynard  is a financial journalist writing for Morningstar.co.uk.

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