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The First 10 Steps to Take When you Receive an Inheritance Lump Sum
Published Date : April 5, 2024
Inheriting a lump sum can be a life-changing event, and it’s essential to approach it with careful consideration and planning. As experienced financial planners, we understand the weight of this situation and the importance of making informed decisions. As a starting point in your decision-making, let’s discuss the first 10 steps to take when you receive an inheritance lump sum that can help you make the most of your newfound wealth.
1) TAKE A MOMENT
Receiving a significant sum of money can be overwhelming emotionally. Take some time to process your emotions and reflect on the responsibility and opportunities ahead. Avoid making impulsive decisions and give yourself the space to think clearly.
2) EVALUATE YOUR CURRENT FINANCIAL SITUATION
Before making any major financial moves, assess your current financial standing. Take stock of your income, expenses, debts, and existing savings. This evaluation will help you gain clarity and make informed decisions in line with your financial goals.
3) SEEK PROFESSIONAL GUIDANCE
Inheriting a lump sum can introduce complex financial considerations. Engaging a trusted financial advisor can provide you with professional guidance tailored to your unique circumstances. They can help you develop a comprehensive financial plan and navigate the potential tax implications associated with your inheritance.
4) ESTABLISH AN EMERGENCY FUND
Creating or replenishing an emergency fund is crucial to ensure financial stability. Set aside three to six months’ worth of living expenses to cover unforeseen circumstances like medical emergencies or unexpected job loss.
5) SET CLEAR OBJECTIVES
Determine your short-term and long-term financial goals. Whether it’s buying a home, starting a business, or funding your children’s education, identifying your priorities will guide your decision-making process and help you allocate your inheritance toward achieving these goals.
6) PAY OFF HIGH-INTEREST DEBT
If you have outstanding debt with high interest rates, such as credit card debt or personal loans, consider paying them off as soon as possible. This will save you money in interest payments and free up your finances for other investments or goals.
7) INVEST WISELY
Depending on your risk tolerance and financial goals, explore different investment options that align with your objectives. Consider diversifying your investments to spread out risk and seek out professional advice to make informed investment decisions.
8) REVIEW YOUR RETIREMENT PLANS
Inheriting a lump sum provides an opportunity to assess your retirement plans. If you haven’t already, start contributing to retirement accounts like IRAs or 401(k)s. Maximize your contributions to take advantage of tax benefits and work towards a more secure financial future.
9) PLAN FOR TAXES
Inherited assets may incur tax obligations. Consult with a tax professional to understand the potential tax implications and develop a tax-efficient strategy. Proper planning can help avoid tax surprises and ensure compliance with legal requirements.
10) CONSIDER PHILANTHROPY
If giving back to your community is important to you, explore philanthropic opportunities. With your newfound wealth, you can make a difference by supporting causes that align with your values. Consult with an advisor or seek guidance from reputable charitable organizations to ensure your contributions have the desired impact.
Receiving an inheritance lump sum presents both exciting opportunities and significant responsibilities. By following these first 10 steps, you can approach your newfound wealth with confidence and lay the groundwork for a secure financial future. Remember, patience and seeking professional guidance are key to making informed decisions that align with your goals and values. With careful planning and careful consideration, your inheritance can have a lasting positive impact on your life and the lives of others.
Articles and Commentary
Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.
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All video presentations discuss certain investment products and/or securities and are being provided for informational purposes only, and should not be considered, and is not, investment, financial planning, tax or legal advice; nor is it a recommendation to buy or sell any securities. Investing in securities involves varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular client’s financial situation or risk tolerance. Past performance is not a guarantee of future returns. Individual performance results will vary. The opinions expressed in the video reflect Sand Hill Global Advisor’s (“SHGA”) or Brenda Vingiello’s (as applicable) views as of the date of the video. Such views are subject to change at any point without notice. Any comments, opinions, or recommendations made by any host or other guest not affiliated with SHGA in this video do not necessarily reflect the views of SHGA, and non-SHGA persons appearing in this video do not fall under the supervisory purview of SHGA. You should not treat any opinion expressed by SHGA or Ms. Vingiello as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of general opinion. Nothing presented herein is or is intended to constitute investment advice, and no investment decision should be made based solely on any information provided on this video. There is a risk of loss from an investment in securities, including the risk of loss of principal. Neither SHGA nor Ms. Vingiello guarantees any specific outcome or profit. Any forward-looking statements or forecasts contained in the video are based on assumptions and actual results may vary from any such statements or forecasts. SHGA or one of its employees may have a position in the securities discussed and may purchase or sell such securities from time to time. Some of the information in this video has been obtained from third party sources. While SHGA believes such third-party information is reliable, SHGA does not guarantee its accuracy, timeliness or completeness. SHGA encourages you to consult with a professional financial advisor prior to making any investment decision.
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