You’ve Inherited Money, Now What Should You Do?
Receiving an inheritance, whether expected or not, can be bittersweet. From a financial perspective, the gifted money or assets could bring about positive change to your personal financial situation. From an emotional perspective, you may be grieving and the inheritance is a stark reminder of the person you lost.
Once you’re ready to move forward, you may quickly realize the process of accepting an inheritance can be more complex than you might think. It’s wise to work with a trusted financial professional to walk you through the steps and inform you of particulars you may not have thought about. If you have received an inheritance, or suspect you will soon, here are four items to consider.
Before making any decisions about the money, you need to process the loss of your loved one. Failing to deal with your grief can result in emotional spending that compromises the money you’ve just received. If you give yourself some time, you may become more sensitive to your loved one’s wishes or have the chance to clear your head of complex emotions.
If your loved one spent their life building and protecting their wealth, they probably hoped you’d do the same. Letting your inheritance sit for a minute can help you overcome the initial temptation to splurge on something like a fancy vacation or expensive new home. If it’s important to you to honor their legacy, don’t forget to take care of your own emotions to protect the wealth they’ve gifted to you.
What Type of Inheritance Did You Receive?
Common types of inheritances include:
- A trust account or cash
- A retirement account such as an IRA or 401(k)
- A house or other property
Knowing and understanding the types of inheritance you’ve received impacts how you access the funds, any taxes associated with it, and what your options are moving forward.
For example, if you inherit a home but don’t want to live in it, you may need to learn more about potential capital gains taxes before deciding to sell the property. If you find that a capital gains tax would be too costly, you might explore another option, such as renting out the house or living in it temporarily as you assess your situation.
Likewise, inheriting a retirement account comes with its own set of considerations, particularly if you inherit the retirement account from a non-spouse. Regardless of the inheritance you receive, it’s best to contact a tax-planning or financial professional who understands the intricacies of inheritance situations.
Review Your Finances
Once you understand the type of inheritance you’ve received, you’re better equipped to align your plans for the inheritance with your other financial goals, such as:
- Contributing to your retirement account
- Paying down your mortgage
- Saving for your children’s college education
- Giving to a charity or foundation you care about
- Buying a vacation home or taking your family on vacation
Ask for Help
A trusted financial advisor relies on experience and provides objective advice to help you use the money wisely. They can also help you optimize your inheritance for a better financial future.
At New Century Investments, we believe the best way to tackle your financial goals is to team up. We partner with CPAs and independent financial teams in the industry to equip you with the knowledge and flawless collaboration you want and need. Our team is your team, and our goal is to put your needs first. If you’re ready to partner with a financial advisor who has your best interests in mind, schedule a complimentary introductory consultation by calling us at 817-238-6300, emailing Matt.Ward@NewCenturyInvestments.com, or scheduling an appointment online.
Matt Ward is a financial advisor and the president of New Century Investments, an independent investment advisory firm serving business owners, pre-retirees, and retirees in the Dallas-Fort Worth area and beyond. Matt is passionate about integrating investing, planning, and tax management into a holistic approach. Matt’s breadth of knowledge and experience in both taxes and investment management sets him apart, giving him the ability to design, advise on, and manage business strategies, tax efficiency, and retirement planning. He is known for his care and attention to detail and works hard to develop personal relationships with each of his clients so they can benefit from his customized service and guidance. He loves walking with his clients through their financial journey, supporting them and celebrating with them as they reach their goals.
Matt graduated from Texas Tech University with a bachelor’s degree and is a CERTIFIED FINANCIAL PLANNER™ and Chartered Retirement Planning Counselor℠ professional. When he’s not working, you can find Matt hiking, playing the guitar, and spending time with his family. To learn more about Matt, connect with him on LinkedIn.