Inherited Wealth and What to Do With it

On the surface, inheriting a big lump sum can seem purely positive. But transfers of wealth can also be fraught with anxiety, often because the inheritance comes following the loss of a loved one. When you’re suddenly faced with making decisions you may not have been prepared for, it can be a lot to take on.

If you are expecting an inheritance or would simply like to know more about the steps to take if a large sum of money falls into your lap, consider this your guide.

‘More Than Just Money’

“When someone inherits a significant amount of money — whether from a parent, spouse, or another loved one — it often comes with a complex swirl of emotions: grief, gratitude, guilt, even fear of making the wrong move,” says Thao Truong, CFP, founder of Anora Wealth.

“I’ve worked with many clients navigating this moment, and I always remind them:

• An inheritance is more than just money.
• It’s often a final act of love.
• A symbol of trust, and sometimes, a source of pressure.
  
  

Seek Clarity and Confidence

As a financial advisor, Truong’s goal is to help clients move through the inheritance experience with clarity and confidence. Here’s how she and other financial planners guide people through the emotional and financial aspects of inheriting wealth.

Pause to Process

While some people may want to push ahead, it’s important not to feel pressured to make quick decisions. Why? Because grief and rushed financial choices don’t mix well, explains Truong. She encourages people to pause and process what has happened.

In the days after learning about an inheritance, you should also:

• Gather important documents
• Notifying an estate attorney and/or financial planner
• Take time to reflect on what the inheritance may represent

“Creating space to process the emotional meaning of the inheritance helps lay the groundwork for making more thoughtful, values-aligned decisions down the line,” she says.

Put Protections in Place

Just because you’ve received an inheritance doesn’t mean it’s automatically safe. Truong says she often helps clients put protections in place — especially if the windfall is substantial. Those measures include:

• Keeping assets separate from marital property
• Updating or creating trusts
• Revisiting insurance coverage
• Refreshing estate documents, including beneficiary designations and wills
  
  

Consider Tax Implications

While taxes shouldn’t drive the entire decision-making process, Truong says, it’s vital to keep them in mind. She suggests:

• Tax Considerations. Working with tax professionals to explore strategies that may help reduce the overall burden over time — whether that’s spreading distributions out across multiple years, giving to charity in a tax-smart way, or using newly inherited assets to fund long-term goals efficiently.

• Retirement Accounts. If the inheritance includes retirement accounts from a spouse, you could consider strategic Roth conversions over time.

• Beneficiaries. For non-spouse beneficiaries, the focus can be on timing distributions in a way that aligns with life transitions and income levels.
  
  

Prioritize Financial Goals with Intention

When certified financial planner Samantha Mockford of Citrine Capital helps clients with inherited wealth, she asks them to do a few things:

First, they should write out their financial goals.

Second, they need to prioritize them by importance and time horizon.

Mockford offers these real-life examples:

1. If you are not already maximizing your pre-tax retirement savings, consider maxing out your deferrals and making up the difference in your net paycheck with distributions from the inheritance, which allows you to save more in a tax-deferred account.

1. If you’re not sure what to do with a cash inheritance just yet, invest it in a vehicle that earns a modest interest rate while you consider other options. If the amount is under FDIC limits – $250,000 per person, per financial institution – consider moving the money to:
• A high-yield savings account
• A money market fund
• A certificate of deposit (CD)
  
  

Follow Investment Guidelines

“Invest the money in a way that aligns with your risk tolerance and time horizon,” Mockford says. “Funds that you need later can be invested more aggressively; funds that you’ll need in the near term should be invested more conservatively to preserve capital.”

Do one thing: If the inheritance represents a larger sum of money than you typically deal with, look to a financial professional to learn about the options you have to meet your specific goals.

*Fortera’s Wealth Management Team is here to help you work toward a strong financial foundation. Providing members with access to retirement planning solutions offered through Osaic Institutions. The licensed and experienced Financial Professionals of Osaic offer thoughtful guidance designed to help clients understand their options and financial priorities. We’re here to help you navigate important financial decisions and work toward your long-term goals. Visit our Financial Planning page to learn more or give our Wealth Management staff a call at 931.431.3315.

This material is provided for educational purposes only and is not intended as individualized investment advice. Original article by Jean Chatzky and Casandra Andrews and adapted in partnership with SavvyMoney.

*Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. Fortera Wealth Management is a trade name of Fortera Credit Union. Osaic Institutions and Fortera Credit Union are not affiliated. Products and services made available through Osaic Institutions are not insured by the NCUA or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by a credit union or credit union affiliate. These products are subject to investment risk, including the possible loss of value. For more information, please visit http://www.finra.org/ or http://www.sipc.org/. Members should consult a tax advisor for additional tax information.