large amount

Inheritance, lottery win, business sale. How to handle a large amount of capital

There are several ways that you, or someone you know, could come into a large amount of money; an inheritance, selling a business, a legal settlement, even a lottery or Premium Bonds win, all spring to mind.

A large windfall can be life changing. However, it means careful, well thought through decisions need to be made.


The main dangers are that money is invested poorly, or even frittered away, without significantly improving your life, or that of your family.

Let’s take lottery winners as an example. Statistics from Camelot Group PLC show that they have:

• a 44% chance that all the winnings will be spent within five years; and
• a 90% probability that the winnings will be gone by the third generation.

An almost 1 in 2 chance that the money will be gone in five years shows that many people make very poor decisions. In our experience, it is those who aren’t used to significant wealth who are the most likely to lose a large proportion of a windfall relatively quickly.

This is often due to making poor investment decisions, such as:

• taking undue risk;
• trusting the wrong people; and/or
• failing to undertake sufficient due diligence
This isn’t always the case though. We find that the decision-making process changes depending on how the windfall is acquired. For example, someone who inherits a large amount of money from a loved one will probably be more cautious than, say, a lottery winner.

Take your time

A large amount of money is life changing for you and those around you. Managed well, it could help you, and future generations, achieve things you’ve only dreamed off. Managed poorly, you could be left regretting the decisions you made, for the rest of your life.

As tempting as it might be to go out and spend large amounts, knee-jerk decisions should be avoided. It is far better to spend time thinking about what you want your new-found wealth to do for you. Ask yourself:

• How can you use it to improve your life?
• What can you now do that you couldn’t before?
• What will make you happy?

However, practically speaking, the money must sit somewhere while you get used to your new-found wealth and decide on the best options.

In the short term at least, security is more important than returns. That means keeping account balances below the £85,000 Financial Services Compensation Scheme (FSCS) limit. A large windfall could therefore leave you with an unmanageable number of accounts.

National Savings & Investments (NS&I) are often a useful alternative; money held with them is 100% protected, without limit.

In the longer term, especially when interest rates are below inflation, holding large amounts of Cash isn’t generally considered sensible. You should therefore start to think about how the money can be invested to provide the return required to meet your future lifestyle aspirations.

The best way to start is by having a conversation with your Partner, who has the knowledge and qualifications to help you make the right choices to support your financial goals. For those who haven’t got a financial planner, they should look for one who is regulated by the Financial Conduct Authority (FCA) and, preferably, recommended by someone they trust.

Once your Partner has guided you through your options, take your time to reflect before making any final decisions.

The value of your investment can go down as well as up and you may not get back the full amount invested.