Receiving an inheritance can inspire mixed emotions. The Reading (PA) Eagle Business Weekly’s recent article, “What to do and what not to do with your inheritance,” says that your inheritance can change your life for the better. But if you’re grieving, it may be hard to move forward with your financial planning. Wait until you’re ready. At that point, you’ll be ready to look at these Do’s and Don’ts guidance in order to make wise and informed decisions.
What not to do with an inheritance
There’s no rush. Don't go nuts and spend every dollar immediately. Don't invest in long term or risky projects. Be patient.
Don't pay too much in taxes. Work with an estate planning attorney so you pay the appropriate amount to the IRS.
Don't pay off the mortgage. Although this can be emotionally fulfilling, it may not be the best use of your money. Explore all of your options and your specific financial situation with your financial advisor and accountant before making any decisions. Create a financial plan so that you don’t run out of retirement funds.
Don't go on a mad spending spree. Self-explanatory.
Don't be pressured. Don’t be surprised if many people suddenly come out of the woodwork to offer their unsolicited advice—relatives, old pals, insurance agents, bankers and investment advisers. Just say, "No, I am not ready to make a decision yet." Likewise, don't get pressured into sharing your money with a friend or family member.
What to do with an inheritance
Save it. Deposit the money in the bank, a money market account or a short-term CD. Make decisions when you are in the right state of mind and are not being led by grief.
Pay off debt. Get rid of credit card balances and other high-interest debts that don't have tax benefits.
Do some financial planning. Figure out your long-range financial plan before spending any of this new found wealth and make plans for your retirement.
Update your estate plan. Make sure that your estate plan is up-to-date so your assets go to the intended persons, and you don’t waste it on probate fees and unnecessary taxes.
Hire an attorney. Your estate plan is important, so be certain it is drafted by a qualified attorney and regularly update your plan to keep current with your situation and changes in the economy and the law.
One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.
Reference: Reading (PA) Eagle Business Weekly (January 17, 2017) “Office Space: What to do and what not to do with your inheritance”