Receiving an inheritance? Here are 3 ways to make the most of it

14/07/25

20th century author Carson McCullers once wrote, “Death is always the same, but each man dies in his own way.”

Understandably, it’s difficult to talk about death. What can make death even more complicated is that there are so many logistical factors that get in the way of facing your grief, such as the person’s funeral, sorting their financial affairs, and even listing their home for sale.

One particularly bittersweet factor is being in receipt of an inheritance.

You could feel honoured and privileged to be passed a sum of hard-earned wealth after a loved one dies, mixed with feelings of sorrow and even guilt for being “pleased” about the money.

The truth is, your loved one likely wanted you to use these funds in a way that is meaningful to you. After all, that’s probably why they chose to bequeath money to you after their death – as McCullers puts it, they did so “in their own way”.

But with great honour comes great responsibility, and you could be feeling paralysed by indecision once this windfall arrives.

Here are three different ways you could use your inheritance.

1. Save it

You may be:

• Short on your emergency fund (we recommend having three to six months’ essential expenses saved, at the very least)
• Saving for a short- or medium-term goal, such as a once-in-a-lifetime holiday or a new home
• Unsure how to use your inheritance just yet but want to keep it safe.

If so, you might want to consider saving the funds in an easily accessible, low-risk location, such as a Cash ISA or easy access savings account.

A few things to consider if you decide to take this route:

• Make sure you search for a competitive interest rate on your savings. At the time of writing (9 July 2025), Moneyfacts states that the highest available rate for an easy access account is 5%, and 4.98% for a Cash ISA.
• Be aware that you may pay Income Tax on the interest your savings generate outside of an ISA. If you surpass the Personal Savings Allowance, you could pay Income Tax on your savings interest. These rules are subject to change in future.
• Keeping funds in cash for many years can erode purchasing power. For the reasons stated above, keeping your inheritance in cash may be a smart move for the moment. But maintaining a large cash fund over several years might leave your money vulnerable to inflation.

A financial planner can help you determine whether keeping your inheritance in cash is ideal for your circumstances.

2. Invest it

While you may be grateful to have received a windfall from your loved one, you might not need the funds for any immediate purpose. If so, cash might not be the most suitable option to keep (and ideally grow) your wealth over time.

You may have read our previous insights into why long-term investing is, based on historic market performance, one of the most reliable ways to outpace inflation and grow your wealth.

In a nutshell, while investing over the short term carries risk and returns are never guaranteed, long-term stock market returns often outpace the interest savers earn on their cash. As such, if you are looking for a long-term way to grow your inheritance, a diverse portfolio of investments may suit you.

Remember, there is more than one way to invest. It may be best to work with a professional and consider all options, including:

• Tax-efficient investment vehicles, like a Stocks and Shares ISA
• Purchasing one or several properties
• Investing in a small business
• Boosting your pension pot.

You can commit the funds to one of these options or split it among several – whatever is most appropriate for your goals.

3. Spend it

While many seek to savour their inheritance, keeping it for a rainy day or putting it towards their retirement, there is nothing wrong with enjoying these funds in the here and now.

If you already have a solid financial foundation in place and feel confident that you can fund your retirement and achieve your goals, spending your inheritance on something meaningful could be the way forward.

For you, this might mean pursuing opportunities you had always felt were not “financially responsible” – travelling, purchasing a luxury item such as a car or piece of jewellery, or taking up a hobby and receiving private lessons.

Or, you may want to spend the wealth in other ways, such as:

• Gifting the funds to the next generation. There are several ways to spend this money on your own children. You could gift it directly, put it in trust, or pay for important milestones such as their first home or university education. Bear in mind that there may be tax to pay on certain gifts, which is why professional advice is useful.
• Starting a business. If you have always wanted to be the captain of your own ship but didn’t have the funds to gain traction, now may be the time to pursue this dream.
• Donating to a local cause or national charity. There are some tax advantages to this, too, so it’s worth speaking to a financial planner if you want to go down this route.

There is no shame in spending your loved one’s inheritance on an enjoyable experience or putting the funds towards something they would have been proud of.

Before you spend your inheritance, you could work with a financial planner and look at a cashflow model of your existing finances. Cashflow modelling allows you to map out your financial future using data rather than assumptions, giving you a fairly solid idea of whether you can afford the future you want.

Doing this could alleviate any “what if?” questions and help you spend your inheritance with confidence.

Get in touch

If you are set to receive or have already received an inheritance, we can help you honour your loved one’s wishes and use the wealth to pursue your future goals.

Email info@depledgeswm.com or call 0161 8080200.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The Financial Conduct Authority does not regulate estate planning, cashflow planning, trusts, or tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028).

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Investing in stocks and shares do not afford the same capital security as deposit accounts.