Tips for Managing a Sizable Inheritance

By Megan Morrow
Published February 9, 2017


While many people dream of winning the lottery, receiving a sudden financial windfall or inheritance can be more challenging than you might expect. In order to manage your sizable inheritance for the long term, you will need to think carefully about your future – and not just buying a new car or planning a luxurious vacation. To some, an inheritance can feel like more found money than earned money, leading people to treat the funds differently than they would income they earned the hard way. If you are thoughtful and sensible regarding the inheritance, you will be less likely to do something that you will later regret.

The following five tips can help you safely and successfully manage your ample inheritance:

  1. Practice, patience. While waiting several months or even a year might not be your first instinct, financial advisors recommend pressing the pause button before making any financial moves. Unless you have significant debt to pay off, put the money in a savings account or money market account for a short period of time until you can determine your best financial next steps. This will also take some of the emotion out of the process, since an inheritance can involve very strong emotions and attachments. Do not quit your job, do not buy that luxury vehicle and do not make a big donation to charity – at least not yet. Give yourself the time you need to think, grieve and plan for the future.
  2. Consult with your advisors. Ensure that you connect with your financial advisor, accountant and attorney to discuss the inheritance. These individuals can help you examine possibilities for investments, charitable donations and making the money work for you for decades to come so that you have a considerable inheritance to give in return. In addition, it is important to examine any tax implications related to the inheritance, and this trio can help you prepare for tax season.
  3. Determine your priorities. A significant inheritance will likely shift your plans. You might decide to retire earlier, increase your monthly allotments towards your children’s’ education, offer to pay for your child’s wedding or slate additional funds for charitable giving. When you are ready, take the time to examine your financial and lifestyle priorities and then determine your next step. Typically, experts recommend paying off any debt first, bolstering your retirement accounts second, and then considering kids, hobbies and travel. Likely, a yacht is not your top priority, although it might seem so initially, hence the importance of thoughtfully organizing this list and acting accordingly.
  4. Honor the legacy. How can you best honor the relative or friend who bequeathed you this legacy? What were they most passionate about in life? You may consider setting up a foundation, holding an event, or creating a scholarship in his or her name. A sizable inheritance gives you the chance to make a further impact on the world in that person’s name and honor.
  5. Have some fun. Finally, if you are debt-free, you do have permission to treat yourself to that trip, new set of golf clubs and even a car that is within your budget. Experts generally recommend allocating about five percent (10 percent at most), for splurges and treats. Have some fun, within reason.
Meet with your advisor.

Receiving a significant inheritance can feel overwhelming, and it is really important to contact your financial advisor to determine your next steps.. Talking with family and friends is helpful as family relationships are especially important at this time, and you should discuss the inheritance and any future plans. To that end, make sure that there are no surprises when you establish your will and benefactors, so that any subsequent inheritance is not overwhelming for your heirs.

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The material presented here is for information purposes only and is not to be considered an offer to buy or sell any security. This report was prepared from sources believed to be reliable but it is not guaranteed as to accuracy and it is not a complete summary of statement of all available data. Information and opinions are current up to the date of publication and are subject to change without notice. The purchase and sale of securities should be conducted on an individual basis considering the risk tolerance and investment objective of each investor and with the advice and counsel of a professional advisor.

The opinions expressed by Ms. Morrow are strictly her own and do not necessarily reflect those of Herbert J. Sims & Co., Inc. or their affiliates. This is not a solicitation to buy or an offer to sell any particular investment. All investment involves risk and may result in a loss of principal. Investors should carefully consider their own circumstances before making any investment decision.

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