So you are getting a large lump sum of inherited wealth or have been informed you are getting one through the passage of a relative or family friend. What should you do? Financially speaking, this kind of windfall is often no different than winning the lottery or getting a big bonus at work. And in general, the statistics are not in the inheritor’s favor.
According to Texas Tech researcher, more than half of the people who in inherit over $10,000 will have it spent in less than a year. For those who inherit less than $10,000, watch out eBay, it’s considered spending cash.1 Your first step is to find a qualified financial advisor. Skilled advisors are trained to help you first clarify your short-term, intermediate-term and long-term goals. In understanding those goals you will be more likely to make decisions that are long-term beneficial than short-term feel-good.
The newfound wealth can create a lot of opportunities for you that were not there before. The opportunities may include saving some of this money for your children’s college education, paying off some unsecured debt, saving more towards retirement or even buying a house. These and many others are all topics to discuss with an advisor. The goal should be to put you in a better financial situation then you were prior to inheriting the wealth.
Inheriting wealth can be a great financial windfall for most, but like most opportunities, there are new risks as well. Work through your options and get informed what restrictions and risks come with your new windfall; your final decisions may impact you for a lifetime!
1 Business Insider.com – Despite Good Intentions, Most People Wind Up Blowing Their Inheritance Anyway