It is common to feel emotional angst after receiving an inheritance. Inheritors may have doubts as to whether they are “allowed” to use the assets as they wish, or whether they somehow have to use them in a way the benefactor would have chosen to use them.
There are two ways to approach a sudden influx of money into your control:
1. Spend it on things you would never have been able to afford otherwise. The downside of this is the risk of increasing your overall cost of living and finding yourself none the richer. For example, if you choose to upgrade your car, would you be able to afford higher insurance payments, gas, and upkeep in the future?
2. Incorporate the assets into your overall financial plan. You could use the inheritance to pay off debt (including your mortgage), fund your emergency account, or increase your savings. Other factors to consider are whether you should use the funds for charitable projects or earmark them for an inheritance for your own children.
Selling inherited assets is not being disloyal
Some beneficiaries feel an emotional attachment to the inherited assets that prevents them from making logical decisions. A widow may feel that she is disputing her late husband’s judgment by selling stocks he carefully chose years ago.
Yet what was good for your benefactor is not necessarily good for you, as everyone’s financial situation is unique. It is important to realize that inherited funds are yours, and proper use of the funds means making them jive with the rest of your financial plan. Your benefactor gave you a legacy to use as you wish; s/he can’t control the assets from the grave.
For more about how to handle an inheritance, read this.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published April 11, 2016.