If you’re lucky enough to inherit money, you might wonder: how will an inheritance change my financial picture? For some, an inheritance could mean a drastic change in their finances. For others, inherited money might be a nice cushion against unexpected events.
If you do receive an inheritance, here are some tips to make the most of your loved one’s hard work:
Don’t blow it. Think carefully about how you can best use the money to further your financial goals. That’s not to say that you can’t spend any of an inheritance, but it’s very important to act in a careful and considered way. Your inheritance could mean many things to your family: college for your children, an early retirement, a larger nest egg or a legacy for your loved ones.
Take a step back. Inheritances come in all shapes and sizes, and they can mean different things to your lifestyle and long-term financial picture. Take time to think about your situation and consider all of your options. If you share an inheritance with others, don’t rush into decisions based on someone else’s timeline.
Speak to a professional. A financial professional who understands your personal situation can help you understand your options and show you how you can use your inheritance effectively. When multiple family members are involved, a neutral expert can help keep discussions on track and find solutions that benefit all parties.
Remember rules about inherited Individual Retirement Accounts. Special rules apply when you inherit an IRA. If you inherit a Traditional or Roth IRA, speak to a qualified professional who can help you understand your options and obligations.
Don’t count your eggs before they hatch. While you might be expecting an inheritance, there’s no guarantee that it will arrive. Most people receive inheritances upon the death of their parent or grandparent. With today’s elders living well into their 80s and 90s, they may end up spending down more of their assets than you anticipate. Rather than count on an inheritance to finance your lifestyle, make sure that you’re saving enough to thrive anyway.
Inheritances can be a wonderful opportunity to use a loved one’s legacy to improve your life. Some of our clients have used inheritances to shore up their retirement nest egg. Others have chosen to use the money to support their family’s values and remember their loved ones through a family vacation fund or a second home where relatives can congregate. The important thing is that they made decisions that were right for their situations.
If you have any questions about inheritances or want to discuss your personal financial situation, please let us know; we would be happy to help you find answers that work for you. FBN
By Ben Stanton
Ben D. Stanton is an Enrolled Agent and Registered Representative. Stanton Financial Services was founded in 1997, specializing in full service accounting and income tax preparation. In addition, Stanton is a senior registered representative with Ascendant Financial Solutions, Inc.
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