7 Ways to Maximize an Inheritance

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By Katie Bruno, CFP®, CDFA®, MIMFA
Financial Planner



It’s estimated that $68 trillion worth of assets and wealth will pass down from Baby Boomers to younger generations over the next 25 years.1


Many beneficiaries of this wealth will not know how to put their inheritances to good use. In fact, many people may see a decrease in wealth after receiving an inheritance if they spend the money too quickly on expensive vacations, fancy cars, or helping out family and friends. Before they know it, the money can be gone, and they have nothing to show for it.

You’ve Inherited, Now What?

When you come into a financial windfall, there are some questions to deal with. A good place to start is evaluating where you are now financially, and then considering how the addition of this money will impact you. If used wisely, your inheritance has the potential to change your family’s legacy forever. Your financial planner at Morey & Quinn Wealth Partners can help you make decisions with clarity of mind, while answering your questions about how to manage sudden wealth.

Inheriting wealth presents opportunities, but also some challenges. Here are 7 ways to make the most of your inheritance:

1. Take your time.

Start by putting your inherited money into a savings or money market account until you have time to really dive into your situation. Don’t spend or invest your inheritance until you have given yourself the time to grieve the life of the person you just lost. When someone close to you passes away, you usually are not in the right state of mind to make any major financial decisions. A qualified, financial advisor can help you sort out the details when you are ready.

2. Build your team of professionals.

It’s important to determine how wealthy you are once you receive your inheritance. Before you spend or give any money away, decide to move, or leave your job, you should work with a financial advisor to start planning. Your financial strategy will depend on many factors. Hire a team of professionals who can walk you through the inheritance process, which may include:

  • A tax professional to help you understand the tax consequences of your inheritance
  • An estate planning attorney to create/update your will or other documents
  • A financial advisor to talk through your budget and calculate your net worth
  • An insurance agent or real estate agent

Guidance for Managing Sudden Wealth »

3. Pay down debt.

While not a glamorous way to spend an inheritance, paying down debt can reduce your monthly expenses and free up cash flow. If you want to build wealth, you have to start by eliminating the source of debt that is costing you the most. Start with paying off high-interest debt such as credit cards and consolidation loans. After you have paid off any high-interest debt, consider paying off student loans or mortgages. Before deciding to do this, consider the opportunity cost. Generally, the interest rates on student loans and mortgages are relatively modest compared to other types of debt and the long-term historical return of the stock market.

4. Build your emergency savings.

This is cash that is available to you in the event of an emergency, such as to cover your bills if you lose your job, or to meet a car insurance deductible in the event of an accident. Having your own emergency savings to draw on prevents you from having to rely on credit cards to meet unexpected expenses. Ideally, try to save three to six months of living expenses in a savings account that can be easily accessed in case of an emergency.

5. Enjoy it, in moderation.

Enjoy some of your inheritance by treating yourself to something you have always wanted. Take a vacation, treat yourself to the spa, buy new furniture or renovate a part of your house you’ve always wanted to. However, spend wisely and follow a plan. If you plan well and control the urge to emotionally spend or live lavishly, your discipline can help provide you with financial confidence for many years to come.

6. Invest!

There are several ways to move forward with making an investment.

  • Buy a house. You could use inherited money as a down payment to purchase a new home. While a large down payment is no longer required by most lenders, a downpayment of 20% or more could lower the monthly mortgage payment, and provides you with a cash buffer as you go through the home-buying process.
  • Save for retirement. Investing for your future is an excellent way to spend your inheritance. Work with a financial advisor to figure out which type of retirement account is best for you. Depending on your work situation, you may have the option to max out a 401(k) or another employer savings plan. Otherwise, you may be eligible to contribute to a Traditional IRA or a Roth IRA. Figure out where you want the money to go. Then work with a professional to figure out how to invest it based on your goals, time horizon, and risk tolerance.
  • Fund college for your kids. If you’re planning on helping your kids pay for school, you could consider using your inheritance to fund a college savings account or invest towards your child’s future educational costs. Read more about Saving for Their Future Using a 529 Plan.

7. Give a Gift.

If you’ve received more than enough money to cover your financial goals and create streams of investment income for yourself, consider charities that are near and dear to you. You may also want to give money to your friends and family. How much you give will likely depend on the size of the inheritance and how much will be necessary to set you up for success over the long-term.

Read More About Charitable Giving »

Financial Planning to Support Your Goals

Sometimes, we think of our financial goals in terms of “one or the other,” but your goals don’t need to be in competition with one another. Generally, financial goals boil down to a simple idea: building wealth or creating income. The role of a financial advisor is to help you figure out a plan that allows you to work on many of your financial goals simultaneously. At Morey & Quinn Wealth Partners, we are dedicated to making the process personal.

Morey & Quinn Wealth Partners understand that you need time to acclimate to your new situation after an inheritance. We can help you face important financial decisions with clarity. Contact a Morey & Quinn financial planner to begin a comprehensive financial plan that’s designed around YOUR life. As an experienced financial guide, we empower you with confidence to help you get closer to your goals.

Start the Conversation Today »

Morey & Quinn Wealth Partners 
Phone: 402.502.9900 
Toll Free: 877.541.6593 
11225 Davenport St, Suite 109 
Omaha, NE 68154

1- Source: https://info.cerulli.com/HNW-Transfer-of-Wealth-Cerulli.html

Any opinions are those of Katie Bruno, CFP®, CDFA®, MIMFA, and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state.

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