get an inheritance

Many of my client relationships began as a result of receiving an inheritance. The sudden infusion of money is a good impetus for a review of one’s goals.

The first thing to do when you get an inheritance is – nothing. There’s usually no rush to spend or invest the money. Let the pain you may feel at losing a loved one and the excitement of “coming into money” die down. Before you make any decisions about what to do, make sure you’re in a calm frame of mind.

Explore your options

Once you are ready to make some decisions, the next step is to figure out what you really want. Some people immediately use an inheritance to realize a material dream and buy a house, car, or go on a luxury vacation. The problem is that many of those who rush into spending an inheritance often find that in the flurry of excitement, they end up spending more money than the original bequest.

While there may be nothing wrong with spending an inheritance, be wary of compartmentalizing your finances. Look at your overall financial picture. Should you use the funds to pay off existing debt? Create an emergency fund? Save for anticipated future expenses like tuition, weddings, and retirement? And if the answer is “yes,” how will you do it?

Be realistic as to what the lump sum you received can actually do.  Even a six-figure infusion of funds may not stretch as far as you think it will. And Americans who inherit IRAs need to be aware of tax regulations affecting the way they can withdraw funds.

Maybe the most important thing you can do when you receive an inheritance is assure your children that it may or may not be passed on, so they should work hard and secure their own financial house.

To learn more about how to manage an inheritance, click here.

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 March 7, 2016.

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