In 2012 Ohio State researcher, Jay Zagorsky, found that one out of every three Americans who receive an inheritance have a negative amount of savings within two years. He also found that in beneficiaries that receive $100,000 or more, one of every five lose it, spend it or donate it. If you are to receive an inheritance, you may want to take notice of these tips to ensure that money last more than just a few years.
1. Don’t make hasty decisions.
Once you receive your inheritance it would be best to put it into a safe place until you have made a long term financial plan. Put the money into a savings account, CD or money market so you do not do something foolish without considering the consequences. If you are married, you need to decide whether to keep the account in your name or to include your spouse. If you are wanting to give some to your children, be sure you understand all the tax implications involved. Setting up an emergency fund would be a wise decision. Put aside enough funds to pay for your expenses for six months or a year if you already have an emergency fund started.
2. Put more towards retirement, if you are still working.
Put more money into your 401(k) if you are working and are not already contributing the maximum allowed. Start an IRA if you do not have a 401(k) with your employer. If you inherited a traditional IRA, all withdrawals will be included in your taxable income. To minimize the tax consequences, only withdraw the required amount and leave the rest in the inherited IRA.
3. Hire professional advisors.
A team of professional advisors can help you take full advantage of the inheritance you receive. They can help you set up long term plans for those funds by analyzing your current financial situation first. Then using the inheritance build a solid financial foundation for you with investment advice, insurance, credit and debt management, savings for college, and retirement planning.
By planning ahead with your financial advisor, you could purchase your first or second home, or start a charitable foundation. Having an accountant on your team will help you determine cash flow, minimize capital gains and help you keep your tax liability to a minimum. Estate planning attorneys can help you create or update your estate plan. Every person should have a will, revocable trust, advance medical directive and durable power of attorney. The attorney will help you decrease or eliminate estate taxes and help you meet your charitable goals. A gifting strategy and family legacy can be created. Your attorney will also help you protect that inheritance from creditors, predators and lawsuits.
Don’t waste the inheritance your loved one has left for you. Take full advantage of every dollar and it may even be enough to last your lifetime. Call our office today and allow us to help you make long term plans for your inheritance. We can answer your questions concerning receiving, growing, donating, protecting and passing on your inheritance.