21st August 2023
Using your inheritance effectively
MAKING INFORMED DECISIONS ABOUT MANAGING THE FUNDS WISELY
Inheriting wealth can be both a blessing and a challenge. It presents an opportunity to improve your financial security and accomplish your goals but it also involves managing the funds wisely. Cash flow modelling is essential to help you make informed decisions about using your inheritance effectively.
Using investment growth, inflation and interest rates assumptions, cash flow modelling creates a comprehensive picture of your current and future financial situation.
ANALYSE YOUR FINANCIAL SITUATION
Create an individual cash flow plan: This involves thoroughly analysing your financial situation, goals and future needs. Gather information about your current financial situation: This includes your income, expenses, assets (property, investments, pensions, etc) and liabilities (such as loans).
Establish an overview of your assets: Determine the value of your property, investments and savings. It’s essential to have a clear understanding of your net worth.
Identify your financial goals and commitments: Consider short-term and long-term goals, such as saving for a house, funding your children’s education or planning for retirement.
Create a lifetime cash flow model: Consider your goals and commitments – this plan should project your income, expenses, assets and liabilities over time. It will help you estimate your future cash flow and determine if you’re on track to achieving financial independence.
Evaluate your risk tolerance and investment strategy: Assess whether your investment strategy aligns with your risk tolerance and financial goals. Adjust your portfolio as needed to ensure it’s optimised for your needs.
Plan for potential risks and liabilities: Ensure you have adequate insurance coverage to protect against unforeseen events such as death or disability. Additionally, consider strategies to minimise tax liabilities for yourself and your beneficiaries.
Develop an investment strategy for inherited wealth, capital and surplus income: If you inherit wealth or have additional income, develop a plan to invest…
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The value of your investments can go down as well as up, and you may get back less than you invested.
The tax treatment is dependent on individual circumstances and may be subject to change in the future. Estate planning is not regulated by the financial conduct authority.
A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.