Family and Friends

Four Steps to Manage an Unexpected Inheritance

No matter the circumstances, any windfall needs to be managed wisely if it is to have a lasting and positive impact on your financial life. “Don’t make any big lifestyle changes right away,” says Jack Morey, Financial Advisor, SunTrust Investment Services, Inc., located in Ponte Vedra Beach, Fla. “Too many people blow through inheritances.”

Consider these four steps to help you manage your new assets effectively. 

1. Seek advice

The first step, according to Morey, is to meet with an objective observer, such as your financial advisor. He or she can help you incorporate your inheritance into your overall financial plan in a comprehensive way. Just be aware that this first meeting can be an emotional one, especially if you’ve recently experienced a loss. “You may want to bring a family member or close friend along to help you remember details and to ask questions,” Morey says. You could also bring a tape recorder to capture the conversation, but remember to ask permission to record.

2. Determine your priorities

The next step is to identify your financial priorities so you can put your inheritance to use in a way that maximizes its benefits to you. During this process, be sure to review your current financial picture to see if there are any gaps you need to fill. For instance, if your home is in need of repairs or you have a funding shortfall in your retirement savings, you might want to address those needs before making any big moves, such as buying a new car.

3. Pay off debt

Another priority: Eliminate your credit card debt. Balances on your credit cards are probably costing you more than 10% in interest rate charges. Those rates are typically higher than you can earn with an investment portfolio, so the best return you can earn on your money is paying off that debt. If you have multiple balances to pay off, “Pay off the one with the highest interest rate first,” Morey advises. 

4. Plan for the future

With the money left over after addressing your immediate priorities, you can start planning for retirement or other lifestyle changes. Build up an investment portfolio that can provide you with additional income in retirement. Or put money into a college savings account for your children or grandchildren. You may even have the opportunity to create a lasting legacy by setting up a trust that benefits your heirs or serves your charitable intentions.

You can always splurge and treat yourself to a bigger home or an extended family vacation, too, but don’t make big decisions on impulse. The key to effectively managing an unexpected inheritance is to make decisions gradually. “Remember that it’s evolution, not revolution,” says Morey.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.


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