Financial Planning Should Come First When You Inherit

Many people fantasize about getting an unexpected inheritance, but what would you do if it happened to you? Would financial planning be at the top of your to-do list?

According to USA Today, “More than $41 trillion will be transferred to heirs over the next 50 years…Much of that wealth will be passed on to people who are already affluent and presumably schooled in how to manage an inheritance. But for those who are accustomed to living paycheck to paycheck, even a modest windfall can present daunting challenges — and significant risks.”

Don’t make any sudden moves: Getting a lot of money at once can be a heady experience. You might be tempted to splurge or quit your job, thinking that you are set for life. Even doing something sensible like paying off your mortgage can backfire if you don’t get the right advice about tax liability.

It is tempting to start to spend but much wiser to seek the advice of professionals like a Fee-Only Financial Advisor. You might consider putting the money away for at least year while you process this change, especially if the money came from a loved one whose passing you are still grieving.

Don’t tell everyone (but do tell a trusted few): A large inheritance can be a great boost for you, but it might be a big disappointment if someone else thought they would be inheriting. Not broadcasting the news can mitigate tension and also decrease the number of people who come to you seeking money.

“At the same time, inheriting a large amount of money can lead to isolation, says Anne Ellinger, co-founder of Bolder Giving, an organization that helps heirs become philanthropists.” As someone who has experienced this, she encourages sharing your news with people you trust if you feel overwhelmed.

Stick to your values: One young woman USA Today interviewed first took her money to a well-known firm but found that her adviser was dismissive. She then put her money into a mutual fund that gave her more control over her money. You should not allow anyone else to dictate how you spend an inheritance that was earmarked for you.

© Clarity Financial Planning. Financial Planning Should Come First When You Inherit is a post from: Bring Clarity to Your Finances™

About the author

Claire Emory, MBA, CFA, CFP®

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