Picture the scene. You’re at home, and suddenly the postman delivers a letter for which you need to sign. You’re surprised, of course, but you’re also relieved because the envelope doesn’t look like the kind of envelops that would contain threatening content about your tax return or a speeding ticket. In fact, it doesn’t look like it comes from any governmental or organisational institution. It’s plain and white, and your address has been handwritten.
When you open it, there’s a letter printed in a narrow font inside and preceded by the logo of a notarial practice in the Republic of Ireland. And here’s the bonus: as you read, you learn that you had a great-aunt Betsy who just died, making you her most direct heir. You are due to inherit a fortune and her old country mansion too. Sounds great, doesn’t it? But cut the celebrations short for now, you need to think of how to make the best use of your inherited money.
01. Oh my God, it’s like winning the lottery!
At first, you might feel like you’ve just won the big lottery of life, and you didn’t even know you were playing. You’ve got a million of new possibilities: fly to Disney World in Florida, buy that large house you’ve been dreaming of, or even buy a better car. Except that inheritance, contrary to a lottery win, does need to be somehow part of your tax return. For a start, you need to sort out your great-aunt’s income tax at the time of her death, as you might need to organise a payment or repayment. Then you will need to find out whether you are receiving any income from Betsy’s estate, that you need to report to the HMRC. Additionally, for any estate worth more than £325,000 you will have to pay an inheritance tax of up to 40% of the estate. However this tax is generally paid out before you receive the property, but it’s worth checking.
02. Join the property investment market
You don’t have to sit on your inheritance and save it passively for the future. You could invest it to maximise your income. For instance, buying a house to sell or to sell, using professional expertise to unlock large mortgages from Enness Mortgages, would allow you to create an additional stream of revenue for your household. As a piece of advice, you can choose to invest in the letting market, especially if you can get your hand on conveniently located flats in big towns, such as London, Birmingham, and Glasgow. Some landlords find that they can earn enough from monthly rents to quit their jobs, so that’s something to aim for.
03. How do you feel about market stocks?
If you feel comfortable with handling pressure and constantly evolving environments, you can decide to buy individual stocks. The first rule of stock market investment from Market Watch is the most important for you to remember: market stocks are part of a diversified investment portfolio. What it means is that you can’t invest all your inheritance in buying stocks as there’s no guarantee to maintain a positive ROI. If you decide to work without the advice of a stock expert, you need to stick to companies you know and consider the price-to-earning ratio.
04. Got a business mindset? Become a startup investor
The Jumpstart Our Business Startups (JOBS) act allows individuals to invest in startups that have been specifically vetted, using online platforms that are very similar to Kickstarter or Crowdfunder. But unlike these crowdfunding platforms, once you’ve invested in a startup, you own a stake in the business and can cash out as it grows. There’s no risk as the JOBS portals are required by law to protect your funds from theft and digital malfunctions. Why are startups a sound investment plan? Because a successful startup can multiply your return by 10 or even 20 within a few years.
05. Be mindful of the money
What if you’re not ready to invest in growing your income? It’s okay; you can step out of the capitalist train and consider options that are more meaningful to your lifestyle or the deceased’s interests. Maybe Betsy loved animals? So why not donate a portion of your inheritance to a charity, preferably one that Betsy would have approved of? Donations to charities are completely tax-free, which is good news for you. However, do make sure to keep a record of your donations to take them off the total taxable income at the end of the tax year.
From property investor to generous donor, you can find plenty of ways of turning a significant inheritance into a meaningful revenue, whether it supports your needs or the needs of others. Now all you need to do is to hope that there’s a Great-aunt Betsy somewhere waiting for you!