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How To Get The Most From an Unexpected Inheritance

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What would you do with a financial windfall?

It’s estimated that more than $41 million will be transferred to heirs over the next 50 years, according to the Center on Wealth and Philanthropy at Boston College. Of course, much of that money will come from the already, very-wealthy families. It will be interesting to see how that number plays out given the dramatic economic changes throughout the world.

An article featured in USA Today titled, “How to get the most from an unexpected inheritance.” picked up on this statistic. They focused on the question of what should people do if the 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.
  3. 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.
  4. Address pressing financial needs first.
    Before you invest any money, pay of all credit card debt, student loans and other high-interest debt.
  5. 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.
  6. 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.

Original publish date: May 03, 2012

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