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You’ve Inherited Money, Now What Should You Do?

Inheriting assets can bring about many mixed emotions, ranging from surprise and hope for the future to feeling overwhelmed with decisions that need to be made and sadness at the loss of your loved one. While the gifted money or possessions may improve your financial state, it may also serve as a reminder of the person you lost and cause grief.

Honoring your lost loved one through the wise use of inheritance requires careful consideration. Grief may cloud your judgment, leading you to overlook important details. Seeking guidance from a trusted financial professional can help you navigate the complex process of accepting an inheritance while revealing unforeseen issues. If you have received or anticipate receiving an inheritance, consider the following factors.

Take a Moment

Before making any decisions about the money, you need to process the loss of your loved one. Failing to deal with your grief could 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 would do the same. Letting your inheritance sit for a bit can help you overcome the initial temptation to splurge on something like a fancy vacation or an 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.

Understand the Type of Inheritance You’ve Received

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 can impact 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 wise to contact a tax-planning or financial professional who understands the intricacies of inheritance situations.

Take Stock of Your Financial Situation

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

We Are Here to Support

When making important financial decisions, such as what to do with inherited money, seeking professional advice can help prevent confusion while working to optimize your future finances.

At Tranquility Path Investment Advisors, we offer tailored services to help our clients pursue their goals with clarity and confidence. We work to support them through all of life’s transitions, even the ones that involve grief and loss, in order to create the financial future they desire. Schedule an introductory meeting online or reach us at (908) 759-6322 to partner with a financial advisor who is committed to prioritizing your best interests.

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