Managing an Inheritance

Receiving an inheritance often accompanies a highly emotional time. It may even create more financial stress than it relieves. You’ll never regret taking a little time to decide how to use your inheritance wisely. You will benefit from taking your time.

When you receive an inheritance, it can open an unprecedented wealth of opportunities. But it also comes with responsibility… quite possibly more responsibility than you’ve been used to dealing with in life to this point.

Assets, whether money or property, that have been passed on by a friend or relative can make a long-term difference in your life or the gift can be short-lived. You have received a legacy and it is not uncommon to feel the need for professional advice in dealing with it wisely.

Dealing with an inheritance requires consideration and planning, and it is an issue that should be met with timliness and integrity in making it a part of your financial plans and goals.

Understanding your inheritance

An inheritance can arrive in many forms. Before you make any major financial decisions, you may wish to talk over the details with an attorney, a financial advisor and tax professional. You’ll want to find out:

  • What type of assets you will receive? A house, other real estate, a business, stocks and bonds, retirement plans, IRAs or life insurance? What is the estimated value?
  • When the assets will be available — immediately or distributed over time?
  • What taxes might apply to these assets?

Think about your future goals

Identifying your financial goals can provide important cues to managing your new funds. If you received your inheritance from your spouse, partner or other close family member, you may want to consider how you might carry out a legacy or continue shared goals. Additional possibilities for your inheritance:

  • Adding to your retirement savings
  • Managing upcoming income and estate taxes
  • Paying for a family member’s or your own education
  • Helping out loved ones
  • Contributing to a favorite charity
  • Setting up a trust or foundation
  • Paying off debt

Preserve your inheritance wealth

Added wealth can come with additional tax, insurance and estate planning issues. A financial advisor can help you decide what may be relevant to your situation:

  • If you inherited expensive jewelry or artwork, you may need more property and casualty coverage.
  • You may also need more life insurance to help ensure your beneficiaries receive a greater portion of your estate after taxes.
  • Consider an umbrella liability policy to cover any gaps in your insurance.

Estate planning

  • Update your will to accurately reflect your wishes.
  • If your new wealth is significant, meet with your attorney right away.
  • Consult a financial advisor to help you develop a strategy to help minimize estate taxes for your beneficiaries.
  • If you don’t have an estate plan, now may be a good time to create one.

Charitable giving or gifting

  • Identify how you plan to share your inherited wealth with loved ones or donate to a charity.
  • Document all gift transactions.

Get help managing an inheritance

When your life and financial situation changes, working with an independent financial advisor can help you make informed financial decisions to help you preserve your inheritance wealth and plan for goals and dreams.