Blog | Personal Finance

Quick Tips When Receiving an Inheritance

What would you do with a financial windfall?

Summary

• Be sure not to squander your surprise windfall

• Receiving an inheritance doesn't make you rich; but how you handle it will

• Taxes play a huge part with inheritance matters. Make sure you know the reality of your new financials

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In a recent survey conducted by Commerce Trust Company, one-third of high-net-worth individuals plan on leaving at least 50% of their assets to heirs. It will be interesting to see how that number plays out given the dramatic and fluctuating economic changes throughout the world.

When thinking about how to get the most from an unexpected inheritance, you’ll be naturally led to the question: “what shouldpeople do if they come into an unexpected amount of money?”

Here are the six tips several financial planners put forth.

1. Take your time Don’t make any major decisions until you’ve consulted with a financial planner, a certified public accountant and an attorney.

2. Don’t quit your day job, at least not right away Instead, keep your job and invest the money with the assumption that it will generate a 4% return each year which you can withdraw annually.

   Be discreet Don’t tell everyone, especially family and friends how much you have, or you may get plenty of tips and investment pitches from them.

3. Address pressing financial needs first
   Before you invest any money, pay off all credit card debt, student loans and other high-interest debt.

4. Pay attention to taxes Take into account that your inheritance may push you into a higher tax bracket requiring you to pay more in taxes.

5. Be true to your values.
   In other words, don’t let the money change you. Use it to further your core values.

Do you agree or disagree with this financial advice?

The question is… if a financially-illiterate family member or friend received an inheritance they had not planned on, what words of wisdom and financial education knowledge would you pass along to them? Talk it over amongst yourselves and provide your insights below.

And if you have no idea what you would do with an inheritance, check out our free, financial education resources here to start learning.