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If you\u2019ve received, or will soon receive, a significant inheritance, it may be tempting to view it as \u201cfound money\u201d that can be spent freely. But unless your current financial plan ensures that you\u2019ll comfortably reach all your goals, it\u2019s a good idea to have a plan of action for managing your newfound wealth.<\/p>\n
Take time to reflect<\/strong><\/p>\n Generally, when you receive an inheritance, there\u2019s no need to act quickly. Take some time to reflect on the significance of the inheritance for your financial situation; consult with a team of trusted advisors (including an attorney, accountant, and financial advisor); and carefully review your options.<\/p>\n While you\u2019re planning, park any cash or investments in a bank or brokerage account. If you\u2019re married, consider holding the assets in an account in your name only. An inheritance is usually considered your separate property in the event of a divorce, but it may lose that status if it\u2019s commingled with marital property in a joint account.<\/p>\n Avoid making quick financial commitments<\/strong><\/p>\n If your loved one\u2019s estate is still being administered, don\u2019t start spending \u2014 or make any financial commitments based on your inheritance \u2014 until you understand what your net proceeds from the estate will be. Once all fees and taxes are accounted for, the final settlement may be less than you expect.<\/p>\n If you\u2019re receiving your inheritance through a trust, talk with the trustee, familiarize yourself with the trust\u2019s terms, and be sure you understand the timing and amount of distributions and any conditions that must be satisfied to receive them.<\/p>\n Beware of income and estate tax consequences<\/strong><\/p>\n An inheritance generally isn\u2019t subject to income tax, but depending on the types of assets you inherit, they may have an impact on your tax situation going forward. For example, certain income-producing assets \u2014 such as those from real estate, an investment portfolio or a retirement plan \u2014 may substantially increase your taxable income or even push you into a higher tax bracket.<\/p>\n Depending on the size of the inheritance, it may also have an impact on your estate plan. If it increases the value of your estate to a point where estate tax becomes a concern, talk with your advisor about strategies for reducing those taxes and preserving as much wealth as possible for your heirs.<\/p>\n Review and revise your financial plan<\/strong><\/p>\n Treating an inheritance separately from your other assets may encourage impulsive, unplanned spending. A better approach is to integrate inherited assets into your overall financial plan.<\/p>\n Consider using some of the inheritance to pay down credit card or other high-interest debt (if you have it) or to build an emergency fund. The rest should be available, along with your other assets, for funding your retirement, college expenses for your children, travel or other financial goals.<\/p>\n Have a plan<\/strong><\/p>\n If you receive a sizable inheritance, there\u2019s nothing wrong with taking a small portion of it and splurging a bit. But for the most part, you should treat inherited assets as you\u2019d treat the assets you\u2019ve earned over the years and incorporate them into a comprehensive financial plan. You\u2019ll also want to address any inherited assets in your estate plan. Contact us for more information. <\/strong><\/p>\n \u00a9 2023<\/em><\/p>\n <\/body> If you\u2019ve received, or will soon receive, a significant inheritance, it may be tempting to view it as \u201cfound money\u201d that can be spent freely. But unless your current financial plan ensures that you\u2019ll comfortably reach all your goals, it\u2019s a good idea to have a plan of action for managing your newfound wealth. Take […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,9,10],"tags":[8,11,12],"class_list":["post-16604","post","type-post","status-publish","format-standard","hentry","category-articles","category-estates","category-news","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16604","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=16604"}],"version-history":[{"count":1,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16604\/revisions"}],"predecessor-version":[{"id":16605,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16604\/revisions\/16605"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=16604"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=16604"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=16604"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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