As Atlanta financial planners, we work with clients who have received an inheritance. The process of receiving an inheritance is often fraught with emotion – on the one hand, the client has lost a loved one, while on the other, in some instances the inheritance itself is large enough to be life changing. While each client situation is unique, when clients approach us with questions about how to invest an inheritance, we typically have 3 general suggestions as you’ll see below.
Don’t Rush – making financial decisions while under emotional stress isn’t usually a good idea. Given this and given the emotion associated with receiving an inheritance, it is typically a good idea to take a bit of time before deciding how to invest your inheritance. Avoid making any irrevocable choices like purchasing an annuity or giving money away until you have given yourself time to grieve and can approach the situation with a clear head.
Look at the Big Picture – if you already have a financial plan in place, take a look at how the inheritance impacts your plan. Perhaps you can retire sooner, or buy the vacation home that was previously out of reach. Regardless of what your goals are, understanding how the inheritance fits within your overall plan is a key step in determining how to invest an inheritance. If you don’t have a financial plan in place, receiving an inheritance is often a good reason to complete a plan.
Understand What You Have Inherited – the most common types of assets to inherit are financial assets – stocks, bonds and mutual funds – and real estate. In both instances, you’ll want to understand the cost basis of what you have inherited so that you can understand the tax impact should you decide to sell the asset in question. In the case of stocks, bonds and mutual funds, you need to determine if they fit within your overall portfolio or if they should be sold. In the case of real estate, the most common decision is whether to sell or keep the real estate. The ultimate goal when you invest an inheritance is to ensure that it is done in a way that supports your financial plan and complements your existing assets.
Understanding what you have inherited is the most technical of the three issues above, but a good financial planner should be able to help you with the first two issues as well. If you are looking for Atlanta financial planners to assist with your inheritance, the advisors at Minerva Planning Group can help.