Top tips for people inheriting property

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Written by:
09/11/2015
Inheriting a home from a parent or family member? Here, senior wealth management and financial planning experts outline key considerations to help you decide what to do next.

Sell or let? Choose wisely

Sarah Lord, managing director of Killik Chartered Financial Planners, says:

“Your first decision is whether to keep the property to generate an additional income stream or sell it to generate cash and reinvest the proceeds to help with meeting your longer-term financial objectives.

“If your primary objective is additional income and the yield on the property is good, then keeping it could be a sound option. However, you need to bear in mind there will likely be void periods where you don’t receive any income and also a requirement to spend time and money on an annual basis to make sure the property is maintained.

“Alternatively, if you require access to the capital or don’t want the hassle of letting, you would be better off selling the property and re-investing the proceeds into an investment portfolio aligned to your objectives, time horizons and importantly attitude to investment risk. When investing it is important to ensure you have a balanced portfolio with a cohesive investment strategy.”

Retiring? Get strategic with investing

Chris Justham, relationship manager at 7IM, says:

“A couple at this stage in their lives will likely be considering retirement in the not too distant future, so establishing what their objectives are, prior to any investment, is essential.

“Is there a need for the lump sum to generate income over the short to medium term, or is the goal purely to achieve growth for the future? This will have an impact on the make-up of any investment portfolio, as well as lead to further conversations around what realistic level of return can be expected for the amount of risk the couple are willing to take. Once a tolerance level has been established, it will offer greater clarity around what vehicle may be suitable.

“The adage of ‘eggs in baskets’ is still relevant, so broad diversification is key. An effective method of achieving this is within a collective investment fund. Seeking professional advice, to navigate what can be an intimidating universe is recommended here. This will also ensure investments are structured in the most tax-efficient manner, making use of all allowances available.”

Stay disciplined as an investor

Andrew Gibbs, investment manager at Henderson Rowe, says:

“A sizeable inheritance can make a substantial difference to a couple’s retirement, if carefully invested with a clearly defined long-term investment plan. Investment discipline is key.

“Financial history provides ample evidence that over the long term equities provide the highest returns relative to bonds and cash, but with higher short-term risk of loss.

“Market timing is incredibly difficult and to benefit from longer-term equity growth, investors need to stay invested in down periods. Easy to say, but harder to do when presented with a sea of red, especially as a novice investor. The greatest service the experienced wealth manager can provide here is to counsel investors to focus on long-term objectives, rather than letting market noise pull them into investment after rallies and out after falls – the reverse of sensible long-term investing.”

Review your overall financial plan

Elissa Bayer, investment director at Investec Wealth & Investment, says:

“If you already have an investment portfolio then this would be a good time to have a review as it would provide the opportunity to introduce some new stocks. It may be a chance to grow the investments rather than look for a higher income.

“ISAs are now an important part of financial planning and as a couple you can invest £30,000 between you. Windfalls are a great opportunity to add an ISA to your existing portfolio if you have not already done so this tax year.

“Pensions remain a minefield, particularly with the new legislation, but don’t ignore them.  A windfall means a review can take place, as to how much can be put in this tax year. Finally, you should also consider keeping some cash; although interest rates may be low it is always useful to have funds – but not too much as there are better ways of growing your funds.”

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