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Just Received a Large Inheritance? Do These 5 Things Immediately!

October 21, 2019
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Have you recently received an inheritance? This can be a life changing, pivotal time for individuals. Not only can this have a massive impact in your financial lives, it can often come attached with deep feelings and emotions. Here are a few tips of what to do.

1) Wait! Don’t make any sudden movements.

If you have just received a large inheritance, perhaps the worst thing you could do would be to make some quick decisions with the money without a set plan in place.

Did you know lottery winners go broke at twice the rate of everyone else? The reason is because it is easy to feel invincible with newfound wealth. The reality is, spending money without a plan in place is comparable to getting in a car and driving without any destination.

2) Define your Summits

To go along with number one, not only should you wait before spending, but it is also a good idea to make a wishlist of things you hope to do and accomplish in the next year, 5 years, and long term. Think about what brings fulfillment to your life. What are the things that bring you joy? Is it a particular skill or hobby? Is it donating to the poor? Is it the thought of retiring early? Taking a dream vacation? Perhaps investing more in your business?

Some call these your financial goals, we call them your “Summits”.

What are the Summits you are trying to reach in life either personally or professionally?

Listing these out can be powerful because you realize that money is just paper, but that paper can be exchanged for real and tangible items or experiences that can bring you meaning and fulfillment.

3) List your debts and the cost of each debt (interest rates).

We aren’t going to go so far as to say you should immediately pay off your debts, because paying off debt isn’t necessarily the best option to you. It can depend on the type of debt, the dollar amount, the interest rate and payoff options. Even more importantly, the reason you are in debt and your spending habits could need to be addressed as well before simply writing a check and paying it all off.

However, all of that said, paying off debt is rarely a bad idea. Especially in the circumstance where the cost to maintain that debt is high such as a high interest credit card. Perhaps one of the greatest advantages to paying off debt is the emotional boost it provides.

4) Find a financial planner who is a CFP®

A CFP® is the designation you want to look for when hiring a financial advisory firm. This means they have fulfilled years of educational and experience requirements, and it also means they are legally responsible to act in your best interest. Kind of like you wouldn’t go to a doctor for a complicated surgery who doesn’t carry the top credentials, going to a financial advisor who isn’t a CFP® can be risky. That said, there are certainly trustworthy, competent advisors who are not CFP®s, but the CFP® designation adds a measure of security to the process.

5) Find a CPA and create a tax plan

Our 5th and final tip is to find a CPA who specializes in tax planning. You’ll want to be sure your financial plan and your new inheritance is set up in the most tax-advantageous way, while being mindful of what to expect when tax season comes around.