Hearing about an inheritance can be bittersweet because it’s nice to receive a lump sum of money, but it likely means you have lost a loved one.
Real Simple’s recent article entitled “The First 3 Money Moves to Make if You’re About to Get an Inheritance,” says that while you may be excited about the prospect of receiving unexpected money, there are certain financial moves you should make to ensure you’re prepared when you do get the inheritance.
Be patient and cautious. When you hear that you’ll be getting an inheritance, know that you’re probably not going to receive a check that week. This process can be slow. When you do get your money, take some time to consider what you want to do with this gift.
Seek out expert advice. Work with professional financial advisors and an experienced estate planning attorney to navigate your inheritance’s financial and legal implications. One task is to set up an account for your retirement because you don’t want to lose it or blow it.
An attorney can help you with tax implications you must consider. Estate taxes have become less of an issue due to recent changes to the lifetime exemption amount. However, certain parts of an inheritance can trigger significant income taxes. An experienced estate planning attorney can explain how federal estate taxes and applicable state inheritance taxes may impact your inheritance.
Update your estate plan – even if your inheritance isn’t going to make you an Elon Musk, take that time to review and update your current estate plan.
In addition to impacting how your family might inherit from you, getting an inheritance might make you consider other alternatives for disposing of your estate, like charitable contributions.
If the inheritance you’re receiving is significant, the chance that your children or family will inherit a larger amount could also require additional planning.
Reference: Real Simple (Dec. 27, 2021) “The First 3 Money Moves to Make if You’re About to Get an Inheritance”