How to Handle An Inheritance Without Stress or Regret

Receiving an inheritance can often set off a chain of varying emotions. You may have grief for the one who passed away and guilt for getting money as a result, mixed with excitement that the money comes at just the right time. The money might offer you the opportunity to make a significant change or realize a dream.  You might also feel overwhelmed at the thought of looking into the IRS rules related to the money you received.  You could feel jealousy for other family members who received something different than you, or who seem just fine when you’re still a mess.  The list goes on.  Grief does weird things to us on its own, but add money in, and people can act downright strange.  Whatever you are feeling, know that it’s normal.

Having seen it all in my work with clients, I want to provide some tips as you navigate this time.

Take a Step Back

First, get some time and space away from the actual event that caused the inheritance.  Except for perhaps some paperwork, there is no emergency to make big decisions regarding this inheritance. There is no need to rush the grieving process. You don’t need to make any money or non-money-related decisions right away. Grieving and feeling emotions should be your main priority.

Aside from speaking with a grief counselor if needed, at this point, you can seek some outside counsel if you feel up to it. Some examples include a tax accountant, an attorney, or a financial advisor to help you begin the process of understanding what you have inherited. Most professionals are trained to let you have as much space as you need to focus on yourself and your family. It should be a red flag if anyone pressures you into making quick decisions regarding this inheritance.

Look at the Big Picture

If you haven’t done any “inner work” lately try looking at the big picture. Losing a loved one can often cause us to evaluate our own lives. This includes what we want for ourselves, our families, our careers and our own legacy. It’s worth spending some time thinking about questions, such as what would I regret if I don’t achieve this during my lifetime? Or how would I like to be remembered?  These types of reflective questions can help you think more clearly about the goals for your life.

My Book, The Resiliency Effect offers reflective questions with each chapter designed to help you build resilience and create changes that move you more toward your goals in life and career.

Upon reflection, we can better understand how the inheritance might help us achieve those sorts of long-term life plans and legacies.  If you find these reflective exercises overwhelming, that may be a sign that you need to continue sticking to the first step above before moving on.

Then Make Sure of The Rules 

This is where it can be beneficial to have advisors and help in your corner. A trusted advisor can help you get organized, evaluate the inheritance sources, and get your own financial house in order.

Did you know that there are mandatory amounts you must withdraw from inherited ROTH, 401ks, and Traditional IRAs? Have you considered the tax consequences of selling real estate or stocks if you sell now versus waiting?  Rules are constantly changing as Congress and state legislatures consider new tax laws.  It can be beneficial to have someone in your corner to be a sounding board as you consider the tax impacts and the nuanced rules, and navigate decisions that must be made collectively by your family or the other beneficiaries of the inheritance.

Get in touch with a CPA, attorney, and/or financial advisor when you’re ready, and ensure they are willing to listen to you about your unique situation.  We offer this service to our clients — reach out if you need support.

Then Prioritize Your Goals

Hopefully, you have been able to engage in some reflective work that has helped you begin thinking through your financial and personal goals. Do you need funds to go back to school or start a business? Have you been interested in buying a house or paying off your mortgage? What about funding college for your children or other kids in your family?  What about the seemingly way-off goals like retirement or partial/early retirement?  It can be helpful to think through various timelines, such as these are my goals for the next year, the next 5 years, the next 10-20 years, and so forth.  Consider creating a chart or map to visualize your goals and priorities.  Resist making quick decisions before you have considered both the short-term and long-term goals.

An inheritance can be a life-changing way to jump-start action on any number of (or all of) these goals. However, you may need to spend considerable time thinking and rethinking your priorities before making a decision.  Then you can decide when to distribute the funds, the frequency at which they get distributed, and finally what to do with the funds.  Again, having a trusted financial advisor as a sounding board can be particularly helpful in this regard. We’re not here to judge your process, your goals, or your effort, but to listen and provide guidance.

Don’t Forget to Examine Charitable Giving Opportunities 

Most people want to leave a lasting legacy that includes gifts to charity during or after their lifetime. Receiving an inheritance can be a good time to evaluate these potential opportunities. There could be very smart tax reasons to do so as well.  Not everyone is charitably inclined, but as you evaluate your goals, don’t forget to consider your goals for charitable giving.

No two inheritance cases are exactly alike because no one has the goals and preferences that you do. So there are often no right or wrong answers.