Now That You’ve Inherited Money, What Should You Do?


You might be feeling conflicting emotions regarding your newly acquired inheritance. Losing a loved one is hard, but inheriting money can be a blessing. An inheritance can improve your financial situation and bring peace of mind—it can also remind you of your loved one’s legacy and how much they cared for you.

Unfortunately, sometimes people who receive an inheritance don’t know how to properly manage it. In worst-case scenarios, inheritors blow their inheritance in a matter of years or even months, sometimes falling into more debt as a result of overspending. 

To use these new funds wisely and avoid risking the legacy your loved one left for you, it’s important to approach your inheritance thoughtfully and strategically, and to allow yourself time to work through this transition and explore the options available to you.

Process The Loss Of Your Loved One

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’ll 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

It’s also important to consult a professional so you understand what 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 the category of inheritance you’ve received impacts how you access the inheritance, any taxes that may be associated with it, and what your options are to move forward. 

For example, if you inherit a home but don’t want to live in it, you may need to learn more about 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 obstacles, including potential penalties from taking an early withdrawal. Regardless of the inheritance you receive, it’s best to contact a financial professional who understands the intricacies of inheritance situations. 

Evaluate 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. 

For example, if you have high-interest debt to pay off, you could improve your financial situation by paying down that debt with money from the inheritance. If your emergency fund could use a boost, set aside a portion of the money to better protect yourself from unexpected life events.

If you’re debt-free and already have a comfortable emergency fund, there are other areas in your life you may need to catch up on, 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

And finally, it’s okay to treat yourself to a little bit of a splurge when you inherit money. Of course, it’s probably not a good idea to quit your job or purchase property you couldn’t comfortably afford otherwise. Ultimately, your lifestyle shouldn’t change too much when you receive an inheritance. Instead, your inheritance should complement and contribute to your overall financial goals.

Consult With A Professional

As with any major financial decision, it’s wise to consult a professional; even more so when the decision is potentially emotional. The objective advice from a knowledgeable financial advisor can help curb temptation and ensure you’re not misusing your inherited funds. A professional can also help you look at all options from all angles, optimizing the inheritance to build a better financial future for the long run.

We at Shelton Financial Group believe money is a tool, not a solution, to help our clients live confidently with their future in mind. An inheritance can help increase financial security or reach other financial goals, and our priority is for our clients to never outlive their finances. If you want to partner with a financial advisor who has your best interest in mind, reach out to us at 260-436-7006 or schedule your free 30-minute Fit Call online

About Shelton Financial Group

Shelton Financial Group is an independent, multi-generational firm in North East Indiana that takes a team approach to addressing their clients most pressing financial concerns. SFG was founded in 1996 with the mission of helping people enjoy their wealth. Using their proprietary “One Life Formula,” the team at SFG focuses on what matters most to their clients and what they can control, integrating their wealth management needs with other aspects of their financial picture. To learn more about Shelton Financial Group and how they can help you achieve financial independence, visit them online.