The period following the death of a loved one can be a tumultous time. Dealing with death and receiving an inheritance brings mixed emotions. The loss of a loved one is distressing, and while added funds can bring relief, it can be hard to think and plan objectively.
After receiving an inheritance, some people blow through it surprisingly quickly. Here are some mistakes people make when inheriting money and how to avoid them.
Depending on the size of the inheritance, you may get bumped into a higher tax bracket than you were previously. You could also be on the hook for capital gains taxes; if you’ve inherited property, you also may owe capital gains. Consider working with an attorney who specializes in estate planning in addition to talking with a financial advisor or an accountant before you spend any of your inheritance.
If you don’t have a budget and are not used to managing money, you may not be prepared to handle significant funds. This could lead to overspending and a quickly disappearing inheritance. If you already have a budget, factoring in your new funds will help you see how it will affect your saving and spending strategy.
When receiving a large sum of money, you may assume that it will easily last. All too often, people fritter away inheritances by making major purchases right away, such as cars, boats, or vacations. Even if such purchases don’t seem all that significant at first, the costs can accrue quickly, especially if items you’ve purchased have additional costs, such as maintenance and insurance.
Stay grounded and take time to consider whether you truly need what you’re buying. Also, think through how much more money you could have in the future if you invest the money instead of spending it now. If you know how much you will inherit before you receive it, you can create a budget in advance.
Paying off debts should be your first priority if you inherit a large sum of money. Paying off your mortgage, credit cards, or student loans will give you more freedom to do other things. You will still need to balance the debts you decide to pay with the amount of money you’d like to invest for the future.
For people relying on asset-based or income-based government benefits, such as Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), receiving an inheritance could end up disqualifying them from these crucial public assistance programs. The benefactor needs to plan for this before passing on the inheritance. Establishing and funding an appropriate trust will reduce the possibility of this happening.
Suddenly coming into a large amount of money can lead you to think about all the things you can do with it now instead of how you can save and invest for your future. After paying off debts, create an emergency fund with enough money to live on for about six months. Once you have done these two things, start increasing your contributions to your retirement accounts.
An inheritance, especially a sizeable one, can help you achieve financial security and allow you to pursue a dream career or some other life goal. However, an inheritance can vanish surprisingly quickly if not managed well. Before doing anything with your inheritance, consult with a financial advisor, an accountant, and an estate planning attorney.
Consult with your estate planning attorney to ensure you make smart investment decisions with your inheritance. Together with a financial advisor, an estate planner can provide valuable advice on diversifying investments and minimizing risks to maximize the potential growth of your inheritance. Seek out both these professionals to manage your inheritance wisely and plan for a financially healthy future.
You also can work with an estate planning attorney to get assistance in setting up a trust to protect your newfound money (or property). Additionally, partnering with an estate planner can mean knowing how to safeguard your inheritance for future generations.
Keep in mind that the estate planning process may prove useful in many ways other than protecting your inheritance. A good estate planning attorney can collaborate with you to create a detailed estate plan. This may include drafting a last will and testament, durable power of attorney, medical directives, and other important estate planning documents.
By connecting with your estate planner, you can make informed decisions that align with your financial goals and secure your financial future.
If you are fortunate enough to own a vacation home, you need to figure out what will happen to it after you are gone. Many people in this situation hope to keep vacation homes in the family. Guaranteeing that can be tricky, though. Meant to be fun...
A family limited partnership (FLP) is a business structure that allows family members to pool assets for business and investing purposes. Family limited partnerships can also protect personal assets, reduce taxes, and be used for estate planning...
Identifying the digital property you own and managing it is more necessary than ever. From smart home devices to online investments and bank accounts, we’ve gone way beyond using the internet to email family and social media to connect with...
Estate planning involves various legal instruments, such as wills, trusts, powers of attorney, and healthcare directives. We specialize in estate planning, ensuring that your documents comply with the ever-changing state and federal laws. We can help you navigate intricate legal requirements, minimizing the risk of costly errors and potential disputes.
Every person's financial situation and family dynamics are unique. We will take the time to understand your goals and circumstances, allowing for the creation an estate plan that suits your individual situation.
We can assist you in structuring your estate plan to protect your assets from potential creditors, lawsuits, and taxation. Our experience can also help you employ strategies to minimize tax liabilities.
Probate is the legal process through which a deceased person's assets are distributed. It can be time-consuming and costly. We can help you explore options to minimize or avoid the probate process, allowing your beneficiaries to receive their inheritances more quickly and efficiently.
When estate plans are unclear or disputed, it can lead to conflicts and legal battles. We can help you draft clear and legally sound documents that minimize the chances of disputes among heirs and beneficiaries. In the event that a dispute arises, we can also represent your interests and work toward an amicable resolution.
Estate plans need to be reviewed and updated periodically to reflect changes in your financial situation, family dynamics, and applicable laws. We can provide ongoing support and guidance, ensuring that your estate plan remains current and effective.
Engaging a law firm for estate planning provides peace of mind, knowing that your affairs are in capable hands. It allows you to focus on enjoying your life without the constant worry of what may happen to your assets and loved ones in the future.
Estate planning involves various legal instruments, such as wills, trusts, powers of attorney, and healthcare directives. We specialize in estate planning, ensuring that your documents comply with the ever-changing state and federal laws. We can help you navigate intricate legal requirements, minimizing the risk of costly errors and potential disputes.
Every person's financial situation and family dynamics are unique. We will take the time to understand your goals and circumstances, allowing for the creation an estate plan that suits your individual situation.
We can assist you in structuring your estate plan to protect your assets from potential creditors, lawsuits, and taxation. Our experience can also help you employ strategies to minimize tax liabilities.
Probate is the legal process through which a deceased person's assets are distributed. It can be time-consuming and costly. We can help you explore options to minimize or avoid the probate process, allowing your beneficiaries to receive their inheritances more quickly and efficiently.
When estate plans are unclear or disputed, it can lead to conflicts and legal battles. We can help you draft clear and legally sound documents that minimize the chances of disputes among heirs and beneficiaries. In the event that a dispute arises, we can also represent your interests and work toward an amicable resolution.
Estate plans need to be reviewed and updated periodically to reflect changes in your financial situation, family dynamics, and applicable laws. We can provide ongoing support and guidance, ensuring that your estate plan remains current and effective.
Engaging a law firm for estate planning provides peace of mind, knowing that your affairs are in capable hands. It allows you to focus on enjoying your life without the constant worry of what may happen to your assets and loved ones in the future.
Mon - Thurs: 9AM - 5PM
Friday: 9AM - 2PM
