Inherited Investments: Dos and Don’ts

Posted on: 6th August 2021 in Financial Planning Investments

Inheritance is associated with the relationship between parents and children. We inherit our parents’ assets such as homes, cars, money etc when the unthinkable happens and we do the same for our children. However, there is now also the option of inherited investments which could be confusing for people who are not well versed in financial markets.

Inherited investments: Do they mean trouble?

A survey published by Hargreaves Lansdown showed that a lot of participants do not feel comfortable with inherited investments. More specifically, almost 50% of them replied that they wouldn’t know what to do with inherited investments since they don’t have the financial background to take advantage of them. Data released showed that mostly women and men belonging to the middle-aged group found it difficult to benefit from inherited investments.

Analysts at Hargreaves Lansdown noted that “half of us wouldn’t have the faintest idea what to do if we inherited investments from a loved one, and with one in three of us expecting to inherit something, there’s a reasonable chance that an awful lot of us will face this dilemma. If we don’t get to grips with investments, we could make some very expensive mistakes.”

What you shouldn’t do with inherited investments

There are many things that you can do when you inherit investments that would help improve your life and the lives of your loved ones. Yet, there are also many potential mistakes that you could make if you don’t build the right plan.  You can read about these mistakes below:

Being impatient

Everyone would be glad to inherit money in the form of cash or investment. Nevertheless, rushing into a wrong decision is possible when emotions are high. Then, instead of making things simpler, the situation might become complicated, especially if you don’t have the necessary knowledge to reverse it. Making decisions when you are excited and impatient isn’t ideal. Financial advisers stress that you should feel settled to make a wise choice.

Liquidating your inherited investments

This is a common mistake that some people make when they inherit an investment portfolio. Knowing its value, they find it easier to turn inherited investments into cash because they think that “cash is king”. While this is not entirely wrong, rising inflation is an issue that should be taken into consideration before proceeding to such an action.

Statistics show that inflation has risen across the world in the past months as a result of the monetary policies implemented by central banks. Inflation eats away the value of your precious cash, so it might be best not to act fast.

Not considering taxes

Inheriting assets means that you would have to pay taxes. While making quick decisions may not be the right approach, financial advisers suggest that it is best to know exactly how much tax you would have to pay on these assets. This way, you could eliminate the possibility of an unfortunate surprise that would put a strain on your finances. At the same time, you would be able to improve as much as possible your financial plans for the future.

Not seeing the big financial picture

You might have already built your own investment portfolio or maybe you never considered doing it as some people don’t see themselves as investors. Inheriting an investment portfolio would change a lot in terms of financial planning. One of the usual mistakes that people make is that they don’t see the whole financial picture and don’t take all facts into consideration when making a decision. Some become attached to inherited investments, and others behave like their portfolios are fragmented instead of unified.

What you should do with inherited investments

First of all, you should take the time to appreciate the fact that someone, parents or other relatives, thought of you and trusted you to become the owner of their assets. Finding ways to take advantage of inherited investments that you haven’t chosen is not always easy, especially if you are not into finance. While it would be good to learn to manage your finances as best as possible, this could prove costly if you own an investment portfolio.

Individuals who would like to benefit as much as possible from inherited investments are advised to seek professional financial advice. You might believe that financial advisers are only suitable for those with substantial investment portfolios or high net worth individuals. This is not necessarily true. The truth is that a financial adviser’s services could be of interest to a much broader range of investors. Having an experienced financial adviser on your side could open a whole new world of financial options that could change the way you live.

Holborn and your investment portfolio

If you have inherited some investments, it would be best to get in touch with a financial adviser that could help you maximise the opportunity. For over twenty years, Holborn’s fully qualified financial advisers help our clients benefit from our comprehensive financial planning thanks to our experience and the broad range of financial products, which make us stand out from the crowd.

All of our independent financial advisers (IFAs) are required to achieve the highest levels of qualification and professionalism. If you would like to learn more about how we can assist you, please fill out the form below.