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You Have Inherited Money, What To Do Now

Gain an understanding of what you have inherited

Before you make any decisions you will want to gain and understanding of what you have inherited. Inheriting a sum of money can be scary. Even if you have a lot of investing experience, there are still legal and tax obstacles to navigate. It’s best to consult professionals early to help make the most of the money that's been left to you. From start to finish, it will likely take some time so do not rush through the process.

Pull together your financial dream team: I can assist as the wealth advisor and planner. Access my calendar to schedule a phone session.

  • Wealth advisor/planner: Can help quarter back through the process and put together a financial plan

  • Estate attorney: Focus on those who handle trust and estate

  • Tax advisor: Estate taxes, inheritance tax or other income taxes could be in play

This team can help you understand the types of assets you have inherited. The type of asset and the titling of the asset are very important. Some are subject to probate and others are not therefore the decisions, timing and financial options can differ with each. If the assets are held in an IRA or a 401(k), your options will be dependent upon whether you are a spouse or not. If you are a spouse, you can transfer the IRA assets into an IRA in your name and treat them as your own. If you are non-spouse you can then move the assets into an inherited IRA. There are various strategies around how to handle the account after it is transferred. Your advisors can assist with these decisions.

If your inheritance is in the form of a trust, be aware that it will often be managed by a trustee that isn't you. The trustee is responsible for managing and distributing the assets held in the trust according to the trust's language, so you should carefully read the trust so that you understand the trustee's responsibilities. Be sure to open a communication dialog with the trustee. The trust will dictate how the money is distributed, to whom and how much.

If your inheritance is from a savings account, it will depend on how the account was titled. If you are the beneficiary of a life insurance policy, a claim form and death certificate will need to be submitted to the issuing insurance company. Once processed, a check for the benefit will be issued.

Revisit, update or create your financial plan

Once you have a handle on what you are receiving you will want to formulate a plan. It will be tempting to start spending your inheritance. However, it is likely best to take some time before making any big financial decisions. Depending on your prior financial status, you may already have a plan in place or you may not. In either case, I suggest you recreate a financial plan that outlines a spending rate tailored to your financial priorities and risk tolerance. You will also want to revisit your will, beneficiary designations, titling of your accounts and life insurance coverage amounts to make sure they are up to date and appropriate for your new net worth. Revisit your priorities, charitable giving, lifestyle objectives, and aspirations. You have been given a substantial gift, it is appropriate to handle it with proper planning.

How to invest your inheritance

This will be dependent upon the plan you have created. Whether you decide to go it alone or hire a professional you will have many options to choose from. I encourage clients to invest towards their personal rate of return and cash flow needs. This is a number I establish based your financial plan which is derived from your financial needs, priorities, risk tolerance and aspirations. I then build a holistic portfolio tailored to pursue the personal rate of return. At minimum, you want to maintain diversification and have a portfolio that aligns with your risk tolerance. I offer a free proposal and risk tolerance questionnaire to get you started.

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor


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