Most of us have wished that some unknown distant relative will pass away and leave us millions of dollars with which we can do as we please. Unfortunately, most of us do not have wealthy relatives that we’ve yet to meet, and who would choose to give us their inheritance. Despite this, over $41 trillion will be transferred to heirs over the course of the next 50 years, which will be the largest transfer of wealth in United States history. But once you get an inheritance, what should you do with it?
Whether you inherit thousands or millions of dollars, it is important to be wise about the way in which you use the funds. Many of us think to use the funds to instantly pay off our vehicle, home and any other debts. While this is a great idea, the increased income could push you into a higher tax bracket and land you with a hefty tax bill. If you had invested the funds or left them in a tax-deferred IRA and taken distributions to spread out the funds, paying down your debts as you go, you could avoid paying additional taxes.
Don’t Rush! Because we have seen many people’s choices upon receiving an inheritance, we know that one of the best pieces of advice we can give is to not make rush decisions with those funds. We have witnessed heirs spending hundreds of thousands of dollars in a matter of weeks, only to end up losing everything down the road. Think carefully about how these funds will best support your plans and goals for the future. Should you invest the funds? Pay off debts? Start your own business? Pursue a dream? Whatever your decision, make certain you use your inherited funds toward the purpose that will best help you in the long run.
Seek Council. Getting a large sum of money at one time can be overwhelming for many people. Also, there are a wide number of options and potential tax consequences to consider. By meeting with a financial advisor and your estate planning attorney, you can ensure that you are making the right choices for your funds and protecting your assets.
To Invest or Not To Invest? You can choose to invest your funds, taking a portion out each year to give a boost to your existing income and ensuring additional funds are available for a rainy day and for other future needs. If managed correctly, you could actually increase your funds by investing them wisely. Speak with your financial advisor about the various options available to you.
What the Attorneys of Morris Hall Can Do For You:
The attorneys at Morris Hall have 100’s of years of combined experience ensuring that families’ assets are protected from probate, unnecessary taxes, creditors, ex-spouses and Medicaid spend-down. The attorneys also help those in Arizona to apply for and receive Medicaid assistance and Veterans Benefits. Our Arizona offices are located in Phoenix, Mesa, Scottsdale, Tucson, Prescott, Flagstaff and Arrowhead. Contact us today at 888.222.1328 to schedule an appointment!
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.