Here's What To Do If You Receive An Inheritance

September 26, 2019

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What would you do if you received a large amount of inheritance money? Pay off debt? Buy a house? Go no vacation?  Financial experts say if you want to be financially prudent about it, the answer is to do nothing with the money, at least for a year. Many people spend their inheritances faster than they expect by splurging on short-term pleasures and failing to plan for the tax burden. While there is no inheritance tax, property, stocks and bonds left to you may owe capital gain taxes.  Its why you may want to hang on to your inheritance for at least several months to a year to think through options so you can get financial and legal advice that best benefits your situation. Until a plan is in place, heirs should park any cash and life insurance proceeds in a federally insured bank account, but not in a joint account with a spouse, experts say.  If you keep your inheritance money completely separate, you have a better chance of it being considered “separate property” in the case of a divorce—though you’ll want to meet with a lawyer to get the full details. After the year is up, and after you’ve moved beyond the immediate emotions surrounding both your loss and your inheritance, you’ll be able to make more thoughtful decisions about what to do with the money. You won’t be acting out of grief or excitement or pettiness or fear, and will have had some time to talk with accountants and lawyers about all of the options and implications that come with an inheritance. So don’t spend your inheritance right away. Even if you want to use your inheritance to solve an immediate financial problem, like paying off debt, give yourself a few months to consult with financial professionals and learn about everything associated with inheritance money, from taxes to marital property laws. That way, you won’t waste a penny of the money that was designated into your care.

SOURCE: Two Cents

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