In the next few months I will inherit a substantial amount of money - roughly £700,000, plus the sale of a property valued at around £200,000. 

I need advice about what I should do with it. I know that there will be a large inheritance tax bill to pay and would like to mitigate some of that if possible.

I am single with no children and retired early. I am receiving a smallish final salary pension but will receive the full state pension in October 2025, so my relatively frugal lifestyle and living costs are covered with these pension incomes. 

It is what I do with the inheritance that is the issue and causing some considerable anxiety.

I have not been a financial risk taker as my income has always been modest working first for a small charity and then for a local authority. 

Debt was an issue for a while though I am now debt and mortgage free. I am however prepared to relax my risk averse attitudes partially with some of this inheritance, but not all. 

I intend to pass on my estate to my nephews and nieces and some to small local charities where I know it will make a big difference, so I would like to grow the inheritance whilst keeping it safe for the future.

I think I need professional advice but even after reading articles about the difference between one off financial advice and longer-term financial planning, I am none the wiser about which I should opt for but I know I am not confident or competent to take a DIY approach on investments. 

I am also unclear whether I should engage advice now or whether to wait until the estate is finalised? L.E, via email

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Harvey Dorset of, This is Money, replies: Receiving a windfall can be a beautiful nightmare - it's difficult to know the best way to manage such a large sum of money.

Understandably, inheritance tax will be a worry, both on the money you are receiving, and when you eventually pass your estate on to your nieces and nephews.

We spoke to two financial advisers to find out how you can ensure as much of your inheritance is passed on to your nephews and nieces as well as the charities you want to help, and how you can ensure your money is safe but also growing in value in the meantime.

Aaron Banasik, independent financial adviser at Ascot Lloyd, replies: It's entirely natural to feel anxious about managing a substantial inheritance. 

This is a significant life event, and it's commendable that you are seeking to handle it thoughtfully.

A key priority will be addressing inheritance tax (IHT), which is charged at 40 per cent on estates exceeding the nil-rate band of £325,000.

While couples benefit from a combined allowance of £650,000 and an additional £175,000 residence nil-rate band when leaving a home to direct descendants, the latter relief may not apply in your case. 

However, several strategies can help mitigate your IHT liability.

One option is lifetime gifting. 

You can gift up to £3,000 per tax year within your annual gifting allowance, and any gifts beyond this amount will remain part of your estate for IHT purposes unless you survive for seven years. 

Given your intent to leave a portion of your estate to charities, remember that leaving at least 10 per cent of your estate to charity reduces the IHT rate from 40 per cent to 36 per cent on the remainder of your estate. 

This not only reduces your tax liability but ensures meaningful support for the causes you care about.

A discretionary trust could be an effective tool for managing your inheritance while preserving flexibility. 

With this arrangement, you can invest funds into the trust, designating your nephews, nieces, and chosen charities as beneficiaries. 

Trustees, who you appoint, would have the discretion to allocate funds in line with your wishes. 

Funds placed into such a trust are generally considered outside your estate for IHT purposes if you survive seven years, professional advice is essential when setting up a trust to ensure it aligns with your objectives.

As your living costs are already covered, you could adopt a slightly higher-risk profiled investment strategy to grow your inheritance while maintaining a degree of safety. 

Consulting an independent financial adviser will help you develop a diversified investment portfolio tailored to your risk tolerance and long-term goals. 

Utilising annual Isa allowances and premium bonds can also protect a portion of your funds from income tax while offering security.

To further protect your beneficiaries, consider an insurance policy specifically designed to cover IHT liabilities. 

This type of policy is written in trust to ensure the payout bypasses your estate, providing immediate funds for the beneficiaries to use to pay the IHT liability so that your executors do not have to depend on selling your assets to fund the HMRC tax bill. 

An IFA can guide you on the most suitable options based on your age, health, and the cover required.

Deciding between one-off advice and ongoing financial planning depends on the complexity of your needs and confidence. 

Long-term financial planning not only helps establish the right structure and strategy but also provides continuous monitoring and adjustments to ensure your plans remain aligned with your evolving goals.

Engaging professional advice now, rather than waiting for the estate to be finalised, enables you to start planning effectively, offering both peace of mind and a clear path forward for managing your inheritance.

Malvee Vaja, financial adviser at Rathbones, replies: Coming into an inheritance at any stage of your life can spark mixed emotions, having to make financial decisions whilst grieving the loss of a loved one can be difficult, but it can also be a great opportunity to review your long-term financial planning.

Of course, a substantial sum such as this may tempt you to spend on luxury or 'dream' items. 

However, carefully considering your financial goals and circumstances with a professional adviser will ensure that you do not make any costly decisions.

One-off financial advice is ideal for simple financial advice and if your circumstances are unlikely to change in the short to medium term. 

However, you may wish to opt for ongoing advice if you have more complex financial planning needs or do not feel confident managing your own plans and investments.

Your financial adviser will guide you on the best options based on your circumstances, knowledge and experience. 

I recommend speaking to an adviser ahead of the estate being finalised as this will allow you to start working out your priorities in terms of how much you'd like to spend for yourself and how much you can afford to give away.

Cash-flow planning is a great tool to model different scenarios so that you can be confident the money will last throughout your lifetime.

Something to consider is the cost of long-term care should you ever need it. 

A financial adviser will be able to advise on how much you may need to keep back for this purpose.

As a single person and a homeowner, you will have a 'nil rate band' of £325,000 and any remaining value of your estate will be taxed at 40 per cent.

Although, for those leaving their property to children there may be a further £175,000 taxable at 0 per cent which is known as the 'residence nil rate band'.

Did you know that if you gift at least 10 per cent of your estate to charity, then the rate of inheritance payable on the remainder of your estate falls to 36 per cent? 

You also have an annual gifting allowance of £3,000 (or £6,000 if you haven't used your allowance in the last year) and making use of this regularly will not affect your nil rate band so this is a great way to consider making small regular gifts to loved ones. 

You might also consider setting up a trust which will allow you to maintain some control over the money until you decide who you wish to gift to.

Your financial adviser will discuss your appetite for risk and advise you on their recommended risk level. Investing your funds in a professionally managed diverse portfolio is the best way to grow your capital over the longer term and avoid the effects of inflation.

Your money can be invested in a fund-based approach or on a more personalised bespoke basis and your financial adviser will help you decide which approach is best. 

You should also retain an emergency fund of at least 3-6 months' worth of your expenditure.

But it's important to remember, the value of investments can go down as well as up so you could get back less than you invested.