I Just Received an Inheritance … Now What?

Inheritance

I Just Received an Inheritance … Now What?

Thanksgiving is usually a time for families to get together and be thankful. Like holiday shopping, your celebration may look different this year, but there are still plenty of reasons to be grateful. 

One way loved ones share their gratitude is by leaving cherished possessions and monetary gifts to their family members and friends when they pass away. But there are plenty of other ways to give. Many choose to give during their lifetimes so they can experience their loved ones enjoying the gifts. 

And as wonderful as receiving a windfall can be, generous gifts like these often leave the recipient asking some questions.

What should I do with my inheritance?

What’s the best way to save my windfall?

How can I make the best decisions about my inheritance?

What can I do to honor the person who gave me this bequest?

Do I need a financial planner for my inheritance?

How do I not mess up this inheritance?

If you’re asking similar questions about yours, you’re not alone. Receiving a legacy gift from a loved one who has passed could make an emotionally difficult time even more so. And, for those who receive an inheritance while the giver is still alive, receiving such a generous gift can be similarly overwhelming. 

But there are some techniques you can employ if you’re asking questions like those above to help you make meaningful decisions for what to do with your inheritance.

Take Time to Process — and Plan

Receiving an inheritance can be incredibly meaningful, not just in the thought behind it but also in its value. Before making any quick decisions — and assuming you’ve done your due diligence regarding legalities and the safety of your gift — take a step back. While it’s important to establish a plan for your windfall, it’s also key to first consider the gifter and their wishes, your own situation, as well as your emotions as the recipient. They’ll likely play important roles as you create your plan.

As you do, be sure not to miss these five steps:

1. Understand the tax implications.
2. Follow through on your loved one’s wishes.
3. Consider your own financial goals.
4. Come up with a cash-flow plan.
5. Plan your own estate.

Optional: Find a way to honor the person you’re inheriting from with your new financial plan.

Depending on your circumstances, the psychological side of receiving a bequest could be difficult. Take the time you need to process the non-financial side of your inheritance as well.

A How-to: Inheritance Planning

The “Sudden Money and Windfalls” and “Money Psychology” modules available in our e-learning platform can help you gain a deeper understanding of the role emotions play in finance and offer additional details on making the most of your inheritance. Use your login to access the Personal Finance Module site or head to the Teachable app to access your account. If you don’t remember your password or you haven’t received yours yet, just let us know and we’ll follow up with your login information.

Not a Comprehensive Services Client Yet?
Check out the free preview of our “Sudden Money and Windfalls” module

Put Your Plan into Action 

Rather than creating your plan and setting it aside, make it actionable. As you form your task or to-do list, don’t forget about S.M.A.R.T. goals. Depending on the targets you created in your plan, here are some task ideas put into templates you can use:

Put $X into my separate “Donation” savings account per month to accumulate $X for year-end charitable donations.

Invest $X per month in my taxable brokerage account to dollar-cost average into the market for my goal of building wealth.

Increase my 401(k) contributions by $X per month to bolster retirement savings; use $X per month from my inheritance to supplement my living expenses.

Save $X per month in my “Vacation” fund to take myself/my family on a trip.

Use $X to pay off my mortgage by the end of next month.

Mentally set $X aside in my checking account per week to order takeout/delivery for our family dinner and game night.

To keep it simple, you can put your recurring tasks on autopilot by setting up scheduled transactions. If you prefer to have a more active role in your finances, you might choose to set up a recurring event on your calendar with a reminder that pops up when you’ll be free after work or dinner. Or ask us to set up a task in your financial planning app to get reminders in your inbox. Whatever your method, keep yourself accountable so your actionable tasks stay that way.

Ways to Give

While receiving a bequest can be an incredible blessing, giving one can be just as fulfilling. Many who receive inheritances make plans to continue a tradition of giving and include them in their financial and/or estate plans. 

Whether you plan to give an early inheritance or are including your bequest in your estate, you have a few options. As you consider the possibilities, it can also be helpful to do a little reverse-engineering: Working backward, think of how your recipient or recipients might respond to your gift. Then ask yourself a few questions.

What can I do in advance to help the recipient emotionally, educationally, or otherwise prepare for this gift?

Should I provide any suggestions for how they might enjoy it?

Is now the right time for me to give?

Instead of giving through a last will and testament, some choose to give earlier, in different ways. Whether it’s helping your nephew pay for their education costs, gifting to a friend to help with their medical bills, or a “just because” legacy gift, you could:

  • Transfer ownership of your gift to the recipient.
  • Name your recipient on the title or deed to the property you’re gifting.
  • Create a living trust.

You can also transfer some of your assets directly to your beneficiaries — outside of probate. These include but are not limited to your life insurance, retirement plans, bank accounts, and joint accounts. So be sure to check your beneficiaries on your accounts to ensure that they align with your gifting and/or estate plan.

Considering a Change to Your Financial Plan?

Head to the Meeting page and find a time that works for you! With unlimited meeting and consultation time, you don’t have to go it alone. We’ll even attend meetings relevant to your financial plan along with you!

Of course, be sure to work with the proper professionals as you create your gifting strategy.  Your estate attorney can assist as you create or update a trust or a last will and testament that truly reflects your current wishes — while helping you avoid potential pitfalls. If you work with a CPA or other financial professional alongside your financial planning relationship with us, be sure to include them as your gift may have tax implications. And please be sure to let us know! We’ll be happy to guide you on your gifting journey while helping you fit everything into your holistic financial plan.

Don’t forget to revisit your plan on a consistent basis to remind yourself about the values behind your decisions and ensure you’re following through on your to-dos. And remember that it doesn’t have to be set in stone! You can and should adapt your inheritance plan — and your estate plan — to life changes as well as to changes in taxes and laws.

Will you make gifting part of your family tradition? However you choose to show your gratitude, know that we’re grateful for you. Happy Thanksgiving from your friends at Financial Planning Fort Collins!

Ready to schedule your next meeting?

Simply head to the Meeting page where you can find and schedule a convenient time to discuss whatever is on your mind.

Regina Neenan
regina@fpfoco.com

Regina Neenan is a Financial Paraplanner Qualified Professional™ and the Cash-Flow and Insurance Planning Specialist at Financial Planning Fort Collins. With a lifelong passion for personal finance, they have been serving FPFoCo clients since 2018. You can learn more about Regina on our About page.



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Assets Under ManagementFee as a % of AUM
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MINIMUM ACCOUNT SIZE
There is a minimum initial investment of $100,000 per Strategy:FOCO client household. This minimum can be met via transfer of existing accounts or with new funds. A client household may generally include accounts for a head of household, a significant other, dependents, and any controlled organizations or entities.

Minimums do not apply to inStream proactive financial planning as a stand-alone service.
ANNUAL FEE
Assets Under ManagementFee as a % of AUM
$100,000 - $249,9991.00%
$250,000 - $499,9990.90%
$500,000 - $999,9990.80%
$1,000,000 - $1,999,9990.65%
$2,000,000 or more0.50%

inStream proactive financial planning as a stand-alone service: $1,000/year or $100/month
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The minimum initial investment for the Invest:FOCO platform is only $5,000 per account. This minimum can be met via transfer of an existing account or with new funds. Invest:FOCO is currently available for Individual, Joint, Traditional IRA, and Roth IRA registrations.
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FINANCIAL PLANNING
Financial planning services are ongoing, and include unlimited phone, email, web and in-person meeting and consultation time. Pricing is based on the unique circumstances of each client situation. Generally, there is a one-time plan development fee ranging from $500 - $2,000 and a monthly fee of $150 - $500; cancel anytime. Clients utilizing investment management services with portfolios of $500,000 or more will typically receive financial planning services for no additional fee.
INVESTMENT MANAGEMENT
Assets Under Management (AUM)Annual fee as % of AUM or flat-dollar
$0 - $249,9991.00%
$250,000 - $499,9990.90%
$500,000 - $999,9990.80%
$1,000,000 - $1,999,9990.65%
$2,000,000 - $2,999,9990.50%
$3,000,000 - $3,999,999$15,000
$4,000,000 - $4,999,999$20,000
$5,000,000 or more$25,000 + $2,000 per additional $1mm
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ESTIMATE YOUR FEE
Your fee is determined by the complexity of your needs and situation. The primary proxy we use for complexity is your investable net worth, which is generally your total net worth, excluding your primary residence. Your investable net worth includes the value of cash, bonds, stocks, mutual funds, rental real estate, and other business or financial interests. Our transparent pricing aligns with the holistic nature and value of our comprehensive services. You can use the chart below to estimate your fee based on your investable net worth. In some circumstances, your fee may be more than the minimums in the chart below.
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$8,000 - $12,000$1,000,000 - $3,000,000
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