When your family inherits money, it’s usually from a close loved one. In the midst of grief, it can be a challenge to get a handle on everything. An inheritance of any size can bring a wide range of emotions with it. One of the ways you can honor the gift is to be a good steward.
There’s important steps that need to happen as part of settling a loved one’s affairs and estate. A qualified attorney, CPA, and fiduciary financial advisor can all play an important part. After the estate is settled and assets have been moved into your family’s name, what should you do next?
Make Time for Grief and Mourning
We hear about a recognized grieving period as far back as the Old Testament. In our modern society, we feel pressure to get back to a normal routine. The feeling of normalcy can be helpful, but “getting on with it” is not what everyone needs. To be in the right frame of mind to make wise long-term decisions for money your family has inherited, you might need time.
"When they came to the threshing floor of Atad, which is beyond the Jordan, they lamented there with a very great and grievous lamentation, and he made a mourning for his father seven days." Genesis 50:10 ESV
I helped a family once who had recently lost grandpa. He had worked for years at the same company and passed along a bit of stock in the same company to his heirs. The family decided it would be best to sell the stock and use the money for another goal, but when it came time to sell there was a problem. The prospect of selling those shares of stock brought a flood of emotions. We don’t think of something like stocks as emotional, which is why what the family felt was so unexpected. The act of parting ways with grandpa’s old company stock had a feeling of finality and separation they were unprepared for. In that case, a little extra time was warranted. Make sure your family has the time needed to grieve properly and fully.
Don’t Wait Too Long
While you shouldn’t feel pressured to rush, waiting too long can also be a problem. Some families encounter feelings of guilt, anxiety, or sadness when the task of what to do with an inheritance comes up. Taking steps toward a plan can have a feeling of “finality” that you might not want to face. That’s understandable and many folks feel that way. It’s still important to not wait too long. Your loved one intended for the assets you inherited to be used for your family’s benefit. Honor that intention by taking the first steps to move forward.
Organized What You’ve Inherited
One of your first steps should be to get organized. As you go through inherited assets, preferably with your spouse, make a note about any initial wishes you have for the item/asset. If you inherited a home and intend to sell it, write that down on your list. The simple act of recording a decision will bring you one step closer. You don’t have to make decisions at this stage of the game. “I don’t know” is a perfectly acceptable stance at this juncture.
Divide everything into the following categories:
Real estate like a home or other property like a car should go in this category. Make a file to keep important documents (Deed, Title, Etc.) that confirm you are the owner.
Any financial assets should be in their own category. This could include a retirement account (IRA, Roth IRA, 401k) or perhaps a brokerage account (stocks, mutual funds, bonds, etc.). Assets like these can carry complexity and implications, such as taxes, that could affect your family years in the future. Take extra care for these assets.
If your family inherited any additional assets (jewelry, keepsakes, collectibles, or other items), make a separate list.
"Prepare your work outside; get everything ready for yourself in the field, and after that build your house." Proverbs 24:27 ESV
Revisit Your Family’s Priorities
Set aside time to discuss with your spouse the family’s financial priorities. What is uniquely important to your family? If you’re not sure, that’s OK. Keep talking it over and pray about it. You want your inheritance-related decisions to support your family’s values and goals, but a lack of clarity or agreement here could make that impossible.
Make a Plan for Possible Paths Forward
Next, it’s important to consider possible uses for what you’ve inherited. Here’s some ideas.
For goals that are in the immediate or near future, think about saving. This could include planned uses for money in the next 18 months. If your family doesn’t have a sufficient emergency fund or needs to bolster it, this could be an appropriate choice. Other uses here could include saving for expenses that are on the horizon such as upcoming purchases or big events like the beginning of college.
It can be OK to spend some of the money you inherit. It might be appropriate to take a vacation that would have brought joy to the loved one you’ve lost. It can also be appropriate to pay down some debts like auto loans, student loans, or credit card debt if you have it. Paying off a mortgage, however, might not be the wisest move you can make.
Investing is appropriate for goals around 5 years or more in the future. Think about investing for family goals like retirement, college, future home, or something else long term. If you’ve made little progress or haven’t started at all, this could be a time to kickstart growth on these priorities.
Consider a donation of part of your inherited to church or charity. This could be to your loved one’s church or a favorite cause in their honor.
A Word About Taxes
Before you take significant action, be sure to get a handle on how taxes could come into play. Selling property, removing money from an inherited retirement account, or other moves could come with tax implications. Consulting with a qualified CPA or fiduciary financial advisor could be a critical step to understand and, in some cases, reduce tax liability.
Make the Inheritance Count
Your loved one chose to pass assets to your family. This is an act of love. Honor their gift with thoughtfulness and intention. Be wise to maximize the benefit, ideally for your family’s welfare for years to come.
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