By Paul Bullock
It’s not uncommon for people who inherit large sums of money to feel unsure about how to handle their newfound wealth. Receiving thousands or millions of dollars can be an overwhelming experience, especially during a time of grieving following the loss of a loved one. The options and decisions that come with suddenly becoming wealthy can be daunting.
As you sift through your mix of emotions, it’s important to approach your decisions with a clear head and a solid plan to honor your loved one’s legacy. While you may have good intentions, it’s critical to have a comprehensive understanding of the inheritance process and how to use it wisely. Working with a trusted financial professional can help you make informed decisions and support you toward making the most of your inheritance. Here are some important considerations to keep in mind if you’ve recently received an inheritance or anticipate receiving one in the near future.
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 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.
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 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.
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
Get the Support You Need
Consulting a professional is critical when it comes to making major financial decisions, particularly when dealing with an inheritance. A trusted financial advisor can provide objective advice to help you optimize your inheritance for a better financial future (and help you avoid any temptation to misuse the funds).
At Wellington Investment Advisors, our team is committed to helping our clients experience clarity and confidence in their big-picture financial plan. Our customized services are tailored to your specific circumstances and financial goals. If you’re ready to partner with a financial advisor who puts your interests first, contact us today to Schedule a no-obligation introductory meeting or reach out to me at paul@wellingtoninvestmentadvisors.com or by phone at (812) 333-0874.
About Paul
Paul Bullock is CEO of Wellington Investment Advisors, an independent, boutique fiduciary firm serving pre-retirees and university faculty across Indiana. With over 32 years of financial experience, Paul is committed to building long-term relationships through thoughtful, personalized investment advice and guidance. He focuses on a disciplined tactical asset allocation approach to money management through a strong understanding of economic and market conditions and strives to build trust with clients by providing sound guidance. Paul understands the hard work his clients have put in to arrive at where they are today and wants to see them succeed in their goals for the future. Paul graduated from the University of Texas with an MBA, as well as a bachelor’s degree in finance, and has been dedicated to assisting clients with their financial needs ever since. When he is not working, Paul enjoys time with his family and is also an avid equestrian polo player who helps raise money for over 18 different charities through his playing. To learn more about Paul, connect with him on LinkedIn.