You Just Inherited a Substantial Amount of Money. Now What?

Did you recently inherit a significant amount of money or assets from a parent, grandparent or other loved one? If so, you’re not alone. According to analysts, the United States population has recently entered a phase informally known as “the great wealth transfer,” which involves baby boomers and other older Americans passing more than $30 trillion of wealth on to their heirs over the next several decades.1

Like most heirs, you’re likely dealing with a whirlwind of emotions. You may be grieving the loss of your loved one, while also feeling hopeful about what the inheritance could mean for you and your family, especially with regard to financial security.

For some heirs, an inheritance represents more wealth than they’ve ever had in their life. It can be difficult to know how best to use that inheritance. Should you pay down debt? Should it go toward retirement or college funding? Is it OK to spoil yourself with a vacation or a new car?

These are complicated questions with no easy answers. Your best course of action depends largely on your unique needs and goals. Below are a few tips to consider as you develop a strategy:


Understand what you’ve inherited.

Not all inheritances are the same. Some have unique terms and limitations, or may create tax liabilities. Some may need to be sold to generate any kind of useful liquidity. Others may have sentimental value but little financial value.

It’s important to analyze the inherited assets so you understand your options. For instance, some beneficiary-designated assets, like traditional IRAs, 401(k) plans and annuities, may only have several payment options, all of which may create taxable income. Advanced planning can help you minimize the liability.

Real property, such as houses, cars or furniture, may need to be sold on the private market or even in an auction. It’s possible that you may need to first invest time or money into the asset before you can sell it for top dollar. You’ll need to determine whether you want to make that investment.


Analyze your needs and goals.

It’s tough to make an informed decision about your inheritance if you don’t understand your own financial situation. Take some time to do a comprehensive financial analysis. Review your goals and your progress toward those goals, as well as any existing threats.

You may need to bolster your retirement savings or pay off some outstanding debt. You might be tempted to pay for your child’s college tuition, but that may not be wise if you have nothing saved for retirement. Again, planning and analysis can help you make these tough decisions.


Spoil yourself … in moderation.

Your loved one was probably happy and proud to be able to leave this inheritance for your benefit. They likely would want you to enjoy it. Don’t feel guilty about using some of the funds to take your family on a nice vacation or to finally buy that dream car.

However, spoil yourself only to the extent that you can afford to do so. For example, if you have a serious challenge with retirement savings or debt, it may be wise to spoil yourself in a very limited way. The more you understand your own financial needs, the better able you will be to determine how much discretionary spending you can afford.

Not sure what to do with your inheritance? Let’s talk about it. Contact us today at TB Financial. We can help you analyze your needs and goals, and then develop a strategy. Let’s connect soon and start the conversation.




This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.

16242 – 2016/11/15

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