We were talking to a great friend the other day about inheritance. His grandfather passed away and left him a sizeable chunk of money that he wasn’t expecting.
What became clear right off the bat, though, was how immensely bittersweet the topic of inheritance is, and how much respect it demands. Not only that, but it is also clear that this topic has one foot firmly placed within the realm of taboo.
Not talking about it, though, can be dangerous. They were his words, not ours. You suddenly have this money, which kind of translates as freedom, this chance to better your situation and use it as a way to remember a loved one, but that needs real consideration. That’s when we began discussing how to best invest an inheritance package with, you know, real long-term growth.
This is not an uncommon thought, apparently. That’s something we found out when doing a little bit of research, speaking to beneficiaries, probate solicitors, tax experts, and accountants. As such, we have come up with a list of things to consider when looking to invest an unexpected inheritance package.
Look At The Bigger Picture
One of the first things you need to do is look at your careful and decide how this cash fits into the picture. It could be that you have debts with high-interest rates or credit cards to pay off, in which case it makes sense to invest some of your inheritance in paying this off.
However, if it is a mortgage or a student loan that you are considering paying off then we suggest you stop. Why? Because these are debts with low-interest rates and tax deductions, and that means your inherited cash could be better used elsewhere.
How Much Of A Cushion Do You Have
This is always worth going through with a comb of any size because it could play a biggish factor in how much you rip from the wad and put to one side. For example, if you don’t have a cash cushion of any kind at the moment, then we suggest you put a sizeable chunk of your inheritance in a savings account you can easily access.
This may sound a little too sensible, but sensible is good when you’re talking money. If you want some guidance on how much you need to tuck away, the unwritten rule is a minimum of three months worth of expenditure. This is essentially a ‘just in case things go belly up’ account.
What Vehicle To Drive
It is pretty much always worth speaking to an accountant. Period. This is because choosing which investment vehicle is primed to suit you – and your very bespoke situation – can be a tricky thing to get your inexperienced head around. They will be able to tell you about how you can use your inheritance to bump up your 401(k) retirement plan and hit the maximum contribution.
They may suggest you set up a Roth IRA and go through the best way to do this. Perhaps they will suggest high-interest saving account with your children named as beneficiaries on the account to avoid this inheritance going into probate should anything happen to you. There are a lot of options, which is why calling in the professional is never a bad shout.
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