What to Do With the Inheritance First
What would you do if you received a large amount of inheritance? If you want to be financially prudent, the answer is nothing – at least not for a year.
As Susan B. Garland explains in The New York Times , many people are spending their inheritance faster than they expect due to the fact that they spend money on short-term pleasures and cannot plan their tax burden. Garland quotes Susan Bradley, founder of the Sudden Money Institute, who suggests waiting at least a year before spending money on an inheritance:
Ms. Bradley encourages new heirs to enter the “decision-free zone” for months to a year to consider options. During this time, she proposes to create what she calls a “brain trust” of professionals such as a financial advisor, accountant, and lawyer.
Until a plan is drawn up, experts say heirs should keep all money and life insurance proceeds in a federally insured bank account and not in a joint account with a spouse.
Yes, you read that correctly – experts suggest keeping the inheritance in your own bank account, and not in a shared account with your spouse. (If you keep inheritance money completely separate, you are more likely to be considered “separate property” in the event of a divorce — although you will need to meet with a lawyer to find out all the details.) Invest your money. in a place where no family member can access it except you, and do not touch it.
Waiting for a year not only prevents you from turning your inheritance into a temporary luxury, but it also gives you a standard answer to suggest to people who might assume that your new windfall will make you more receptive to requests for financial assistance. No, you cannot give your friend or cousin (or spouse or child) extra money to fund their latest business idea or whatever. You won’t be spending money on an inheritance this year.
As the year goes on, and after you move beyond the immediate emotions of both loss and inheritance, you will be able to make smarter decisions about what to do with your money. You will not act out of grief, excitement, pettiness or fear, and you will have time to speak with accountants and lawyers about all the options and consequences associated with inheritance.
So don’t waste your inheritance right away. Even if you want to use your inheritance for an urgent financial problem like paying off a debt, give yourself a few months to consult with financial professionals and learn about everything related to inheritance money, from taxes to family property laws. This way, you will not spend a single cent of the money allocated for your treatment.