By Brett Gottlieb
Receiving inherited money often comes with a mix of emotions. Alongside the financial opportunity may be grief, uncertainty, and the responsibility of making decisions during a difficult time. Many people find themselves asking questions they’ve never had to consider before:
- What should I do with the money?
- How will it affect my taxes?
- Should I invest it, save it, or use it to pursue other financial goals?
While it may be tempting to make quick decisions, receiving an inheritance deserves careful consideration. A windfall can impact many areas of your financial life, including retirement planning, investing, debt management, estate planning, and charitable giving. Taking the time to evaluate your options supports you toward clear decisions that align with both your financial goals and the legacy of the person who left you the gift.
If you’ve recently received inherited money, or expect to receive an inheritance in the future, here are several important factors to consider before taking your next steps.
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
Creating a Plan for Inherited Money
Receiving inherited money can create both opportunities and difficult decisions. During an emotional time, it can be challenging to determine how those assets fit into your broader financial picture and long-term goals.
Working with a financial advisor can help you evaluate your options, avoid costly mistakes, and make thoughtful decisions about how to use it in a way that aligns with your priorities. Whether your focus is investing, paying down debt, planning for retirement, or preserving wealth for future generations, a clear strategy can make a big difference.
At Comprehensive Advisor, we help clients navigate important financial transitions with clarity and confidence. If you’d like guidance on managing inherited money and building a plan for what comes next, contact us today at info@ComprehensiveAdvisor.com or call (760) 813-2125.
About Our Advisors
With nearly two decades of industry experience, Brett Gottlieb, and the team at Comprehensive Advisor provide personalized retirement planning and investment services. They help clients sift through the sea of investment options and make sense of what strategies are best suited for your unique needs. Our advisors customize financial strategies centered around “The Retirement Defense” process, a unique way we build your written plan that is designed to help get you to and through retirement by focusing on the key areas of your financial life. Our investment philosophy serves as a road map for helping you navigate the complexities of the financial landscape. By prioritizing capital preservation, emotional resilience, and personalized strategies, we help empower you to confidently pursue your financial goals and adapt to life’s changes.
Investment advisory products and services made available through AE Wealth Management, LLC (AEWM), a Registered Investment Advisor. Insurance products are offered through the insurance business C.A. Financial & Insurance Services. Comprehensive Advisor, LLC is an Investment Advisory practice that offers products and services through AE Wealth Management LLC (AEWM), a Registered Investment Advisor. AEWM does not offer insurance products. The insurance products offered by C.A. Financial & Insurance Services are not subject to investment Advisor requirements. CA Ins. Lic. #6000262. Review # 4136113 – 6/26
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