How Do I Make the Most of My Inheritance?

Your inheritance can be a great financial windfall, but it can also be a source of stress if you’re not prepared for it. If you make any rash decisions, you could end up regretting them later on. Instead, take your time and consider all of your options before making any major purchases or investments.

If you’ve inherited a large sum of money, it’s a good idea to talk to a financial advisor about how to best invest it. They can help you ensure that your inheritance is working for you in the long term, and can help you grow your inheritance and make sure it lasts as long as possible.

We just had an existing client inherit dad’s assets, including a house. There is a lot of money there. I have arranged for the couple to visit a lawyer we know to write up their wills & powers of attorney. You don’t want to die intestate and have the gov. distribute your assets. Next up, the accountant. I send clients to an accountant who I know. The accountant will make sure that all write-offs are used and tax is minimized.

There are a few key things to keep in mind if you have recently inherited money or are expecting to do so in the future. In this article, we will discuss what you should do (and what you should avoid) with your inheritance.

1. Don’t make any rash decisions

It can be tempting to want to splurge on a new car or take a luxurious vacation after coming into a large sum of money. However, it is important to resist the urge to spend impulsively and instead take some time to think about how you want to use the money.

The more you can avoid making hasty decisions, the better off you will be in the long run. One of the best things you can do is to speak with a financial advisor who can help you map out a plan for your inheritance.

2. Pay off your debts ASAP

If you have any outstanding debts, it is a good idea to use your inheritance to pay them off as soon as possible. This will help to reduce the amount of interest you are accruing on the debt and can free up more money in your budget each month.

Make sure to focus on paying off high-interest debt first, such as credit card debt, and then you can focus on paying off other debts, such as student loans or a mortgage.

There is another theory, it’s called the “snowball” by American speaker & author Dave Ramsey. He advises: pay off the small debts first. Then use that debt payment saved to increase payments on your larger debts. You’ll feel good about reducing the number of debts.

Either way, remember that your personal debt interest payments are not tax deductible. So, if the interest on your credit card is 19.9% and your in a 30% tax bracket, then you are paying 28.4% pre tax interest! Ouch, that hurts.

3. Invest in yourself

Another great way to use your inheritance is to invest in yourself. This could mean taking classes to improve your job prospects, starting your own business, or taking steps to improve your health. Investing in yourself is a great way to ensure that you can make the most of your inheritance and can help you to build a brighter future for yourself.

4. Take the money straight to a savings account

If you are not sure what you want to do with your inheritance, another option is to simply take the money and put it into a savings account. This will give you time to think about how you want to use the money without having to worry about spending it right away.

Plus, having the money in a savings account can provide you with a financial cushion in case of an emergency. You will also earn interest on the money, which can further grow your inheritance over time.

5. Start investing

Whether it is stock or real estate, investing is the best way to grow your money over time. While there are risks involved with investing, it can be a great way to secure your financial future and make the most of your inheritance.

Buy some stocks that can give you good returns in the future. If you have enough money, investing in real estate could never go wrong. Be smart with your investment decisions, and soon you will be enjoying the rewards.

Note About Annuities

What if you could buy a pension income with your inheritance? You can. For you or your partner or kids. What about a disabled child? Yes. Here’s how that works: let’s say you move $100k to an insurance company. That insurer will quote and agree to pay you xxx per month or year for a certain time period, could be for life. We’ll get you quotes from all the major insurers. Connect with us.

6. Build an emergency fund

Emergencies can show up at any point in time and often when we least expect them. This is why it is important to have an emergency fund that you can tap into when unexpected costs arise.

Your inheritance is the perfect opportunity to start building (or adding to) your emergency fund. Ideally, you should aim to have at least 3-6 months of living expenses saved so that you can cover yourself in case of a job loss or other financial emergency.

7. Build your retirement fund

If you are not already doing so after you have inherited money, start contributing to a retirement account as soon as possible. The sooner you start saving for retirement, the more time you will have to grow your money.

There are several different retirement account options available, so be sure to do your research to find the best option for you. A financial advisor can also help you to choose the right retirement account for your needs.

8. Save some money for your children’s education

If you have children, another great way to use your inheritance is to start saving for their future education. The cost of college is only rising, so the sooner you start saving, the better. You can either open a dedicated college savings account or invest the money in a 529 plan.

If your children are interested in business, you could also use your inheritance to help them start their businesses. This can be a great way to teach them about financial responsibility and give them a head start in their career.

9. Don’t forget about the taxes that come with it

When you inherit money, it is important to be aware of the taxes that come along with it. Depending on the size of your inheritance and your relationship with the deceased, you may be responsible for paying estate taxes, income taxes, or both.

Working with a financial advisor can help you to understand the tax implications of your inheritance and can help you to plan accordingly. A financial advisor will be able to reduce the amount of taxes you owe and can help you to keep more of your inheritance.

10. Give some money away

Last but not least, don’t forget that you can also use your inheritance to give back to others. Whether you donate to your favourite charity or help out a family member in need, there are many ways to use your inheritance to make a difference in the lives of others.

After all, what good is having money if you can’t use it to make the world a better place? You will also get some mental peace knowing that your money is going to a good cause.

Final thoughts

No matter what you decide to do with your inheritance, be sure to think carefully about your options and make a plan that is right for you. With careful planning, you can make the most of your inheritance and secure your financial future. Don’t just rush into things and make hasty decisions that you might regret later.

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