What to keep in mind if receiving an inheritance

A woman sits at a table with an older couple going over financial documents
August 08, 2023 | Anne Purcell

Those who fall in the age range of 60-80 currently hold approximately half the wealth in the US. As a result, their children are expected to receive the largest inheritance across all generations. While there are expectations that this inheritance won’t go as far as it would have years ago due to high inflation recently, the amount passed down can still help many young adults out financially when used wisely.

To some, receiving an inheritance may come as a surprise. Others may be aware of the possibility of an inheritance or even expect it. This can lead to anxiety over the transfer of wealth and how to best manage their inheritance. According to a study conducted by New York Life, under half of adults who expect to receive any inheritance, whether in the form of cash or non-cash assets, feel comfortable with managing it.

If you anticipate receiving any type of inheritance in the future, knowing your options is critical. Here are some tips on how to approach receiving an inheritance.

Manage your expectations

If you are expecting an inheritance, keeping yourself in check with the amount you may receive is best. If your parents, or whomever you may inherit from, do not have a will or beneficiaries on their accounts, their estate would go to probate, which can be lengthy and costly. Or there may be accounts where someone else is named a beneficiary but was never updated, such as an ex-spouse. Further, end-of-life costs may add up, leaving less to distribute.

If you're comfortable, talking to your family members may help clear the air of any confusion. A great place to start would be to discuss your parents’ accounts, such as their will or retirement plans.

Talk to an expert

If you are unsure where to begin or want extra help, contacting a financial advisor can help. There may be some paperwork to do, or you may have questions about tax implications, and seeking the advice of an expert is the best way to ensure you're doing all the correct steps. A financial advisor can also help you create short- and long-term goals of what to do with your finances and help you manage any non-cash assets.

Pay off some of your debts

Assessing your debts to see if it is possible or pay some off may be a hot item on your to-do list if you receive an inheritance. Depending on where you are in your life, some possible debts would be credit card debts, student loans, mortgages or car loans. Assess the different interest rates on your debts and make choices that work the best for you with your financial goals in mind.

Save and invest

Depending on the sum of your inheritance, it might make sense for you to put some of the money away. While putting it in a savings account might be a first instinct, you’ll want to assess which account is best and will provide you with the best rate.

If you don’t need your inheritance money for any short-term goals, looking at other ways to invest your money is a good idea that could help you earn more on your assets compared to that of a savings account. Putting your money into a certificate is a good way to safely put your money away and earn a set interest rate for a period of time. Or, investing your money in a stock market is an option if you have a longer timeframe and are comfortable dealing with stock market volatility.

Get your own estate in order

It is never too early to get your own estate in order, and after you receive an inheritance is a good time to either start the process or update your current documents. Start by checking to make sure you have a record of all your accounts and assets in a safe place. Then, see if you need to add or update the beneficiaries linked to the accounts. Lastly, start a will or update your current one.

While starting this process now may feel daunting, it will make all the difference to your family later on. If you have recently lost a loved one and are in the process of receiving an inheritance, know that you can take time to grieve before jumping into your finances. There’s no need to rush.


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