Investing an inheritance: what to consider

This article was written by Peter Seamer and originally published by Canaccord Wealth.

Quick summary: How to invest an inheritance

If you’ve recently inherited money and want to make informed, confident decisions, this article will help you understand your options. From getting an overview of your finances from a Wealth Planner to investing your inheritance, here’s the key things to consider - helping you make the most of it. 

Receiving an inheritance can be both emotionally and financially significant. Knowing what to do next - and how to invest it wisely - isn’t always straightforward.

• Who should you consult? 
  A Wealth Planner initially to assess your full financial picture and an Investment Manager to create a tailored strategy
• Why invest an inheritance? 
  To protect your money against inflation, achieve long-term growth and support your financial objectives
• The best way to invest an inheritance 
  Through diversified, tax-efficient portfolios that balance risk and return according to your needs and timeframe
• Why take advice?
  Professional guidance helps avoid common mistakes, maximise tax benefits and align investments with your personal goals.

What should I do first after receiving an inheritance?

Before making any investment decisions, we recommend speaking to a Wealth Planner. Your first meeting is designed to give a clear understanding of your full financial picture. There’s no obligation and you’ll only be charged a fee once you have confirmed in writing the services you’d like advice on.

A Wealth Planner can help you answer questions like:

• Do you have debts or a mortgage that should be paid down first? Can some of the money be used for things like a home deposit, wedding or paying for education?
• Are you using your ISA and pension allowances effectively?
• What are your short, medium and long-term financial goals?Will you need access to this money, or can it be set aside for the future (e.g. a pension which is tied up until you are older)?

Every inheritance situation is different and the right course of action depends on your wider circumstances and the stage you are at in life. This is why an initial no-obligation conversation with a qualified – and independent – Wealth Planner is so valuable.

Is it best to save or invest my inheritance?

Leaving your inheritance in cash might feel ‘safe’, but over time inflation can erode its value. So while there’s no market risk, there is inflation risk – that can quietly reduce your spending power.

Some people consider buying a property with their inheritance. While property can help protect against inflation and generate rental income, it’s less flexible than many realise. Crucially, it’s an illiquid investment: you can’t sell ‘a bit of a house’ if you need to access funds.

For longer-term goals, investing in a diversified portfolio can be a more effective strategy. It offers flexibility, access to global markets and the potential for strong risk-adjusted returns – provided you’re comfortable with the ups and downs that come with investing.

What’s the best way to invest an inheritance?

There’s no one-size-fits-all strategy. We build each investment approach around the individual’s goals, timeframe and risk profile. But typically, we’ll consider:

• Tax-efficient wrappers: ISAs, pensions, and in some cases, trusts
• Investment horizon: Will the funds be required for a specific capital purpose in the future or will they be invested indefinitely?
• Income needs: Do you need to draw income from the portfolio, or can it be left to grow?
• Volatility tolerance: Everyone has a different level of comfort with risk.

Some clients choose to invest just part of their inheritance and use the rest to reduce debt or support family. Others split the money across different goals with separate strategies – for example, a higher-risk portfolio for retirement and a lower-risk one for upcoming school fees. Each portfolio follows a multi-asset approach: combining different levels of equities and bonds, for example.  

Can I use my inheritance to support children or grandchildren?

Many clients see their inheritance as a chance to build a legacy. That might mean:

• Setting up Junior ISAs or investment accounts for children
• Helping with university costs or getting them on the property ladder
• Contributing to a family trust or pension planning across generations.

Inheritance can be a powerful tool for intergenerational planning and the right structure can ensure your inheritance works harder, for longer. Investing inheritance for family is a key consideration for many of our clients.

Common mistakes to avoid with investing an inheritance

A few key things can work as biases or pitfalls when it comes to thinking about investing an inheritance.

While holding your inheritance in cash might feel reassuring, it’s important to consider the impact of inflation. Over time, inflation can quietly reduce the value of your money. Cash isn’t without risk – it simply carries a different kind of risk. 

There are also downsides with going all-in on one asset class such as property or thinking the stock market is the only way to invest money. Buying a second property may seem straightforward, but it ties up capital, lacks diversification and can come with tax and maintenance issues.

It’s easy to fall into some other traps too:

• Ignoring tax wrappers: missing out on ISA or pension allowances can reduce your long-term returns
• Assuming one-size-fits-all: what worked for someone else may not suit your goals, timeframes, or comfort with risk
• Trying to time the market: waiting for the ‘right moment’ to invest often leads to missed opportunities; a well-diversified, long-term approach usually works better.

Why take advice?

We understand that this may be your first interaction with a wealth manager. That’s why a Canaccord Wealth Planner will start with a no-obligation conversation, focused purely on your goals and situation. If investing turns out not to be the right option, we’ll say so.

Our Investment Managers work closely with our Wealth Planners to provide clear, joined-up thinking - helping you get the most from your inheritance, for yourself and your family.

Ask us a question

If you have any questions about investing an inheritance, please get in touch. We are happy to arrange an initial, no obligation conversation to discuss your personal circumstances and options or those of a family member who has received the inheritance.

Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. Past performance is not a reliable indicator of future performance.

The tax treatment of all investments depends upon individual circumstances and the levels and basis of taxation may change in the future. Investors should discuss their financial arrangements with their own tax adviser before investing.