What to Do If You Receive an Inheritance
If you ever receive an inheritance, you may feel many different emotions—sadness from losing a loved one, uncertainty over what to do with your inheritance, or gratitude for the inheritance. In this blog, we’ll go over the steps you can take to receive your inheritance with confidence.
Figure Out Everything that You’ve Inherited
To get started, you’ll want to take note of everything that you’ve inherited. This will make deciding what to do with your inheritance a lot easier. Are you inheriting cash, real estate, investments, retirement accounts, or family heirlooms? There will be different rules when inheriting each of these.
With cash, you typically won’t owe any income taxes. Inheriting real estate can take a lot of time. It usually has to pass through probate, a legal process. If the property still has a mortgage, you may need to pay it off, refinance, or sell the property. The most common option when inheriting real estate is to sell it. When receiving investments and retirement accounts, there are many options you can take. It may be wise to consult a financial advisor to help you determine the best option.
Define Your Financial Goals
What are your current financial goals? Do you have debt you’ve been working on paying down? Would you like to build your emergency fund? Do you want to increase your retirement savings? Thinking about what your financial goals are will help determine what you’d like to do with your inheritance. If you choose to talk with a financial advisor, tell them your goals and they’ll be able to help you take the correct route to reach your goals.
Take Your Time
You don’t need to decide on everything you’ve inherited right away. You should take your time to make an informed decision and learn what’s best for you. Remember that you don’t have to do everything on your own either. If there’s ever a time in your life when talking to a financial or tax advisor could benefit you, this is definitely one of those times. They will be able to give you professional guidance and help relieve some of the stress you may be feeling.
Claiming an Inheritance
Once you’re ready to claim your inheritance, there are a few options for how to claim it. You can:
- Roll it over
- Cash it out
- Leave the money where it is
You’ll want to learn which option is best for each type of inheritance, as there are different rules with each, like we discussed above.
Rolling over is when you decide to transfer the funds to your personal account. You can transfer funds into your IRA or Roth IRA. There may be tax implications associated with this, so you’ll want to be aware of them. You may be able to leave the money where it is for a period of time while you’re trying to figure out what to do with it.
Disclaiming an Inheritance
It probably didn’t cross your mind, but you can refuse your inheritance. It would then be passed down to the next named beneficiary.