You may need to take some initial measures to protect your new wealth, but don’t jump into making big decisions immediately.
When a loved one passes along an inheritance, it is often a gift of great potential. Therefore, the heir should take some time to reflect on the gift and determine how to make the best of it.
Making the best of an inheritance begins with recognizing the gift and its potential as something worthy of careful consideration. For some thoughtful counsel, consider reading a recent Kiplinger article titled “Heirs Should Treat Windfall With Special Care.”
There is simply much to be done, and much that can be done, but not all of it need be done at once. For example, you might begin the process by asking yourself some questions worthy of the gift and worthy of reflection. How was the inheritance received? What is the form of the inheritance, cash or illiquid assets? Are there any limitations or restrictions regarding the inheritance?
In addition to these questions, determine whether the inheritance must be protected and preserved. For instance, is personal liability or property insurance required? Will a new account need to be opened, especially if the inheritance is to continue in trust? Should the assets themselves be repositioned or restructured? Will you be passing them along as well?
In short, a windfall inheritance is and ought to be a moment of reflection. It can be difficult, but the moment of reflection may be rewarding and prove invaluable. In point of fact, families need not wait until the windfall itself to consider their options and their future.
Part of estate planning is doing what is best for the next generations. Consequently, that fact alone may require working with them from the beginning, and well before the gift, to ensure all is in place and aligned when needed.
If you are planning for your own estate, then how would you want your loved ones to treat their inheritance? What can you do today to ensure that they receive the greatest good from your largesse tomorrow? A little bit of planning on your part in coordination with your loved ones can keep the family strong in the process, too.
Reference: Kiplinger (February 2014) “Heirs Should Treat Windfall With Special Care”