Cypress Wealth Services
January 2022
Many people dream of one day receiving an inheritance, planning what they’d do with the money and how it could impact their future. But when it comes down to it, the news that an inheritance is coming your way is usually accompanied by conflicting emotions—everything from grief to shock to gratitude to confusion. Losing a loved one is hard, but inheriting money can be a blessing. An inheritance can improve your financial situation and offer peace of mind, and it can also remind you of your loved one’s legacy and how much they cared for you.
The unfortunate reality is that sometimes people who receive an inheritance don’t know how to properly manage it. In worst-case scenarios, inheritors blow their inheritance in a matter of years or even months, sometimes falling into more debt as a result of overspending.
You want to use these new funds wisely and avoid risking the legacy your loved one left for you, so it’s critical to approach your inheritance thoughtfully and strategically. Allow yourself time to work through this transition and explore the options available to you. As you navigate this process, keep the following in mind.
Before making any decisions about the money, you need to process the loss of your loved one. Failing to deal with your grief can result in emotional spending that compromises the money you’ve just received. If you give yourself some time, you may become more sensitive to your loved one’s wishes or have the chance to clear your head of complex emotions.
If your loved one spent their life building and protecting their wealth, they probably hoped you’d do the same. Letting your inheritance sit for a minute can help you overcome the initial temptation to splurge on something like a fancy vacation or expensive new home. If it’s important to you to honor their legacy, don’t forget to take care of your own emotions to protect the wealth they’ve gifted to you.
It’s probably a good idea to consult with a tax planning or financial planning professional so you understand what type of inheritance you’ve received. Common types of inheritances include:
Knowing the type of inheritance you’ve received impacts how you access the funds, any taxes that may be associated with it, and what your options are to move forward.
For example, if you inherit a home but don’t want to live in it, you may need to learn more about potential capital gains taxes before deciding to sell the property. If you find that a capital gains tax would be too costly, you might explore another option, such as renting out the house or living in it temporarily as you assess your situation.
Likewise, inheriting a retirement account comes with its own set of considerations, particularly if you inherit the retirement account from a non-spouse. Regardless of the inheritance you receive, it’s best to contact a tax planning or financial professional who understands the intricacies of inheritance situations.
Once you understand the type of inheritance you’ve received, you’re better equipped to align your plans for the inheritance with your other financial goals, such as:
As with any major financial decision, consulting a professional is the most important step. Experienced and objective advice can help curb temptation and ensure you’re not misusing the inherited money, and a trusted financial professional can also help you optimize the inheritance to build a better financial future for the long run.
We at Cypress Wealth Services want our clients to live confidently with their future in mind. Our goal is to align your most important priorities, such as your financial needs, family values, and charitable interests, with your financial resources in a way that is tailored specifically for you. If you want to partner with a financial planner who has your best interest in mind, call our office today at 866.888.6563.
Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high net worth individuals, families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services is uniquely qualified to serve a broad range of client needs, and their experience and expertise act as a foundation for their client service process. The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring to their loved ones the wealth and legacy a person has already built. With financial advisors in Palm Desert, CA, Tustin, CA, and Anchorage, AK, the firm serves clients across the country in Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning, and more. For more information, visit www.CypressWS.com or call 760.834.7250.
