By Tricia Lepofsky
Receiving an inheritance can be a bittersweet experience. You may have lots of emotions, such as surprise, overwhelm, hope for the future, and sadness. On one hand, the gifted money or assets could bring about positive change to your financial situation. On the other hand, you may be grieving and the inheritance serves as a reminder of the person you lost.
Using your inheritance wisely is a great way to honor your lost loved one. While you might have good intentions, it’s easy to overlook certain things, especially when you are grieving. The process of accepting an inheritance can be more complex than you might think. It’s wise to work with a trusted financial professional to walk you through the steps and inform you of things you may not have thought about. If you have received an inheritance, or suspect you will soon, here are some things to consider.
Take a Moment
Before making any decisions about the money, you need to process the loss of your loved one. Failing to deal with your grief can result in emotional spending that compromises the money you’ve just received. If you give yourself some time, you may become more sensitive to your loved one’s wishes or have the chance to clear your head of complex emotions.
If your loved one spent their life building and protecting their wealth, they probably hoped you’d do the same. Letting your inheritance sit for a minute can help you overcome the initial temptation to splurge on something like a fancy vacation or expensive new home. If it’s important to you to honor their legacy, don’t forget to take care of your own emotions to protect the wealth they’ve gifted to you.
Understand the Type of Inheritance You’ve Received
Common types of inheritances include:
- A trust account or cash
- A retirement account such as an IRA or 401(k)
- A house or other property
Knowing and understanding the types of inheritance you’ve received impacts how you access the funds, any taxes associated with it, and what your options are moving forward.
For example, if you inherit a home but don’t want to live in it, you may need to learn more about potential capital gains taxes before deciding to sell the property. If you find that a capital gains tax would be too costly, you might explore another option, such as renting out the house or living in it temporarily as you assess your situation.
Likewise, inheriting a retirement account comes with its own set of considerations, particularly if you inherit the retirement account from a non-spouse. Regardless of the inheritance you receive, it’s best to contact a tax-planning or financial professional who understands the intricacies of inheritance situations.
Take Stock of Your Financial Situation
Once you understand the type of inheritance you’ve received, you’re better equipped to align your plans for the inheritance with your other financial goals, such as:
- Contributing to your retirement account
- Paying down your mortgage
- Saving for your children’s college education
- Giving to a charity or foundation you care about
- Buying a vacation home or taking your family on vacation
Don’t Go It Alone
It’s important to consult with a professional when facing a major financial decision, such as what to do with inherited money. A trusted financial advisor can provide experienced and objective advice so you aren’t tempted to misuse the money. They can also help you optimize your inheritance for a better financial future.
At KFA Private Wealth Group, we want our clients to have clarity and confidence in their financial future. Our goal is to make complex financial challenges achievable. We do this by tailoring our services to your individual circumstances and financial goals. If you’re ready to partner with a financial advisor who has your best interests in mind, reach out to us today by sending an email to firstname.lastname@example.org or call 571-327-2222 to schedule an appointment.
Tricia Lepofsky, is a financial advisor at KFA Private Wealth Group, a registered independent advisory firm founded on the premise of providing conflict-free financial and investment advice. With a background in music education and opera, Tricia transitioned to the financial industry to help people understand what their money can do and feel more in control as they work toward their goals. Tricia is known for her attention to detail and her dedication to her clients and their unique financial challenges. She is passionate about building relationships with her clients and partnering with them as they walk through life’s milestones, keeping them accountable and motivated to pursue their goals. While she serves a diverse range of clients, Tricia uses her background of 18 years in the Washington National Opera and Washington Concert Opera to specialize in serving hardworking, intelligent individuals who have a connection to the arts. In her spare time, Tricia loves to travel with her husband, Mark, hike trails along the Potomac River or in the Blue Ridge Mountains, and support former colleagues by attending live performances of operas and musicals. To learn more about Tricia, connect with her on LinkedIn.