Top Steps to Take When You Recently Received an Inheritance

Receiving an inheritance is exciting but comes with a lot of stress, too. It can be very tempting to splurge once you’ve received some extra cash, but is splurging the best option? A study by the Bureau of Labor Statistics showed that one-third of people who receive an inheritance spend it within the first two years.

“My first piece of advice is to do nothing and to keep the inheritance private,” says Jennifer Stice, Chief Trust Officer at Town and Country Bank. “That may sound unusual, but I’ve seen far too many times when people receive a large sum of money and it burns a hole in their pocket. They feel like they have to buy something with it immediately. My advice is to digest the situation and put the funds somewhere FDIC insured while you take the time to consider your priorities and appropriately plan for how you want to use the funds.  Consider the intent of how whomever left you the funds wanted the funds to be used.”

Instead of spending it right away, consider the following to ensure you’re making the most out of your money.

Taxes

Get familiar with the state and federal taxes applied to your inheritance. Inheritances usually come in three forms: real estate, a trust account, or a retirement account. While currently only six states have inheritance taxes, most states have estate taxes.  These taxes will vary depending on the size of the inheritance and the state where you live, but all taxes must be paid in full before any beneficiaries can receive their inheritance.

Make a Plan

Just like you budget your monthly income, creating a budget or plan for the money you receive in an inheritance is an important way to reach your financial goals. Saving the money is the number one recommended course of action, so consider putting a good portion of the money into an emergency fund and savings accounts that gains interest. You should also consider paying off any high-interest debts you may have, like student loans. Paying off or reducing your mortgage will also save on interest costs and save you money in the long run.

Consult with a Specialist

Handling an inheritance can be overwhelming, so it’s a smart idea to consult with a specialist to ensure you’re doing the most to maximize your money. Be careful to consult with a professional that you trust, such as financial advisors, tax lawyers, or Certified Public Accountants, especially if the inheritance is a large sum of money. These professionals should never tell you what to do with your money but should advise you on the various options you have available and coach you on the pros and cons of your ideas.

For more information on how to best manage a recently received inheritance, contact our experienced Trust and Investments team or call our Customer Service Solution Center at (866) 770-3100.