The amount of wealth passed down between generations each year in the UK is set to almost double by 2027 - from £69bn now to £115bn.
For many people, that inheritance will arrive not as property or cash, but as investment portfolios.
These could be bundles of shares, funds and even entire ISAs that can seem daunting if you’ve never dealt with them before.
Here we look at what really happens when you inherit investments, from tax and paperwork to your options once the assets are finally in your name.
Don’t panic about inheritance tax
“When you inherit shares or investments, you shouldn’t have any immediate concerns about Inheritance Tax (IHT),” says Zoe Brett, financial planner at EQ Investors.
That’s because the responsibility for settling IHT lies with the legal personal representatives (LPRs) of the deceased - the executors or administrators of the estate. They will handle the paperwork, pay any tax due, and manage the estate’s assets.
“This process can take up to 18 months before the investments are released to beneficiaries,” says Ms Brett.
Becoming the new owner
Once the estate is settled, the next step is transferring ownership.
“The LPRs should work with you to register the investments into your name,” Ms Brett explains. This requires paperwork, including a death certificate, legal documents, and forms with your personal details such as proof of identity, address and National Insurance number.”
Re-registration can take weeks or months, but once completed, you’ll face the big decision: keep the investments, cash them in, transfer them elsewhere, or even pass them on to someone else.
Factor in your wider financial plans
What you do next should depend on your individual financial goals. “A few of the key things to consider are what you want to achieve with the money, when you might need access to it and how the taxation of the inherited asset interacts with your current tax position,” says Ms Brett.
If you already have investments, you may want to consolidate them.
“There may be the opportunity to transfer the inherited investments to your existing account to be managed in unison with your current holdings,” she adds. This can be done by selling the assets and transferring the cash, or by re-registering the holdings directly.
For others, immediate goals such as paying off debt, funding retirement savings, or making a major purchase, may take priority. In these cases, selling may be attractive, but it’s wise to take tax advice first.
Passing wealth on with a deed of variation
Not everyone needs or wants to keep inherited investments, and a deed of variation is a legal tool that allows you to redirect your inheritance.
“Perhaps you don’t need the money, or you are trying to reduce your own inheritance tax liability,” says Ms Brett. In these cases, you can pass on the assets using a deed of variation, a legal document drawn up by a solicitor to redirect the inheritance.
It must be completed within two years of the death and is irrevocable once signed. Used correctly, it can allow wealth to skip a generation by, for example, going straight to children or grandchildren.
The capital gains tax angle
Inheritance comes with another important tax consideration - capital gains tax (CGT). The good news is that any gains accrued during the deceased’s lifetime are wiped clean for tax purposes on death.
But after that, CGT may apply. “If the LPRs realise a capital gain whilst in administration, they can use the annual CGT allowance of £3,000 in the year of death and the following two tax years,” Ms Brett explains. Once the assets are transferred into your name, you can use your own CGT allowance if you sell.
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Rates vary, with gains above the allowance taxed at 20 per cent if sold by the estate, or 10 per cent if sold by you. This difference can make it worthwhile to wait until assets are in your name before selling.
There can also be different rules if the shares are listed on the AIM market, and those will also change again in 2026.
Inheriting ISAs
ISAs carry special rules. The estate can retain the ISA’s tax benefits temporarily - until it is closed, the estate administration ends, or three years pass, whichever is sooner.
Spouses or civil partners have an extra advantage. “If you are a spouse or civil partner inheriting the ISA, you will receive an Additional Permitted Subscription (APS),” Ms Brett says. “This effectively increases your own ISA allowance by the value of the deceased’s ISA.”
But there are deadlines to this.
An APS funded with cash must be used within three years of the death or 180 days after the estate is finalised, while transfers of shares and funds must be completed within 180 days of distribution.
Consider professional advice
Inheritance can be complex, both emotionally and financially.
Even with clear rules, navigating tax allowances, paperwork, and timing can be overwhelming.
Whether you decide to keep, sell or pass on investments, taking time to understand the rules - and getting professional advice where needed - can make the difference between preserving wealth and losing it unnecessarily to tax.
When investing, your capital is at risk and you may get back less than invested. Past performance doesn’t guarantee future results.
