Managing an Inheritance

Benjamin Haas |

Financial plans tend to change when a client receives an inheritance. For some, they knew the passing of a loved one would mean an influx of wealth. For others, they were pleasantly surprised to know that they were the heir to an estate.

Regardless of the source, new considerations come with new wealth. So, here are a couple things to consider if you find yourself with new money on your balance sheet.

  • Park the cash – give yourself time. Don’t rush into any decisions, especially those that might be irrevocable. Instead, buy a short-term CD so it isn’t as easy to access while you plan. It’s not about the interest you’ll collect. It’s about protecting it. From yourself.
  • Cut debt and build a safety net. Go back to the fundamentals of planning to ensure your fiscal house is in order before considering long-term goals and big expenses. Cut high interest debt (maybe not the mortgage) increase your personal liability insurance and keep a cash reserve for future emergencies or opportunities.
  • Boost your savings. Instead of spending, invest in your future; maximize retirement contributions, college savings, set aside money earmarked for major purchases within the next 2-3 years. In other words, don’t kill the goose that’s now laying your golden egg.
  • Keep your job. Gradually increase your standard of living, ensuring that it’s sustainable. One way to do this? Spend only from the income your inheritance produces, as opposed to cutting into principal.
  • Learn to say no. Inheritances are sometime public. You may be asked for handouts or inclined to help others. While admirable, there will be a time for giving. Be sure to do your planning first, before saying yes to others.
  • Consider fees and taxes. Oftentimes, the more you spent the more you pay. Understand the taxable nature of the inheritance so you don’t get caught with large tax bills or tax penalties that perhaps could have been avoided.
  • Indulge yourself - a little.

I hope this was helpful. The easiest answer is, consult an advisor. CERTIFIED FINANCIAL PLANNERSSM like myself are here to help align your values, vision and new wealth. That’s our promise to you. That’s the power of personalized planning.


Tracking #1-483096