6 Tips to Making the Most of Your Inheritance

Recently, a friend came to me and asked what she should do with her inheritance.  She received a very large sum and was feeling overwhelmed.  Having recently lost her father, she was now grieving for the loss of both of her parents.  She vacillated between wanting to spend some of the money and then feelings of guilt for having received so much money to begin with.  

Co-mingling feelings of guilt and grief are common when you’ve inherited money, and we may also feel pressure like we have to decide what to do with the money right away.  We may have financial requests from other family members or friends to fulfill their needs and wants.  It can be a terribly difficult time.


Inheriting a large sum of money can be similar to winning the Lottery, where it’s hard to know what to do with a sudden large inflow, and people have a tendency to overspend and feel obligated as if they owe everyone else a piece of their good fortune.   

For those of you, like my friend, who have recently inherited a large sum of money, or are expecting to at some point in the future, I’ve put together a short list of 6 Tips that can help you navigate what is potentially a very challenging time in your life!

Tip #1:  Paying Taxes

One of the first orders of business when you inherit a sum of money is to determine how much, if any, is taxable, and set aside an appropriate amount to pay the estimated taxes.  It can be so tempting to make a large purchase and pay cash and not leave enough for the taxes.  Meet with your CPA and have them help you prepare these figures.

Since the Secure Act, we now have only a 10-year window to withdraw all the funds from an IRA or Roth IRA for non-spouse beneficiaries who are more than 10 years younger than the person who passed away.  This is a great over-simplification, so please speak to a professional for guidance in your specific situation.


Tip #2:  Account Titling

If you’re married and you deposit your inheritance into a joint account, you have just given up your ownership of the funds.  If you pass away and your spouse remarries, that person could ultimately control your inheritance, and this becomes especially complicated if you have kids.

A few years ago, I had an encounter with a woman who was the “second” spouse, she proceeded to move everything out of the husbands trust into a different trust where her daughter was the sole beneficiary, effectively dis-inheriting her husband’s children.

When you first inherit money, put those funds into an account in your name, and you can name a spouse or adult children as a beneficiary of that account.  Let it sit like that while you figure out what to do.  This tip is not meant to be harsh, it’s just that if you go the other route, by co-mingling – it’s extremely difficult to undo. 

You can always choose to co-mingle at later date, after you’ve had time to really think about it and get professional advice. 


Tip #3:  Start a Financial Journal

Starting a journal is a fantastic outlet to manage an inheritance without overspending right out of the gate. Traditionally, journaling helps deal with strong emotions and feelings, but it's also great for considering financial commitments, wishes and desires.

Person Writing

Take a financial inventory, as well as writing down your feelings, your hopes, and dreams.  Dedicate a small amount of time daily to writing in your journal, let it be a safe place to just imagine what you’ll do.  Notice how it changes over time, or maybe how it stays the same.  

Enjoy the journaling process, let it give you real insight into what your major goals and dreams are.  If you always wanted to retire early, now might be the right time.  Enjoy the process of daydreaming about the possibilities!


Tip #4:  Try to wait at least 6 months before making any large purchases

Even better, wait a year or more, before deciding to make a significant purchase.  A friend of mine has no memory of the 6 months after his loved one passed away, and he made several decisions during that period that he later came to regret. 

It may take 6 months or more for the estate to settle anyway, which is a perfect opportunity to just imagine what it will be like and visualize what you’ll do, before you actually commit.


Tip #5:  Care for Yourself – Spiritually, Mentally, Physically


If you’re not already doing it, it’s time to put yourself first, and really start taking great care of yourself.  The emotions around receiving a large sum of money can be very challenging and the strain of trying to please other people can really take a toll.

One of the absolute best things you can do for yourself is to get a great night’s sleep.  Try to schedule a 9-hour window for sleep, meaning if you have to be up at 6:00am, then be in bed by 9:00pm.  The health benefits are amazing!

Meditation is another great practice to care for yourself, as well as regular exercise.  If you sit for long periods of time, set a timer to remind yourself to get up and move around.  You’ll find that you actually get more done by sleeping longer and taking breaks.

Tip #6:  Meet with a Financial Advisor

Over the years, I’ve worked with dozens of families who have come into an inheritance.  As far as I can tell, the biggest secret to success, is simply to add the money received to your existing savings plans and treat it like any other sum of money.  For many of my existing clients, when they receive an inheritance, they just add it to their existing accounts with me, and they maybe take a slight increase in monthly spending, or maybe retire a year or two earlier than planned.

If you have any questions about this or any other financial topic, please call me at 775-364-0010 or email me at: [email protected].