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Receiving an Inheritance Thumbnail

Receiving an Inheritance

By Angela Dorsey

Receiving an inheritance can be one of the most stressful events in someone’s life. If you receive one, it means you’ve lost someone close to you, and you may feel a whirlwind of emotions. On the one hand, you may be grieving for the person you lost, while on the other hand, you may feel thankful that they left you this gift.

While everyone handles losing a loved one differently, there are some ways to help you make the best decision in this situation and honor the person who gave you this money.

Pause and Process

While you grieve the loss of your friend or family member and appreciate their life and your memories of them, don’t feel pressure to take immediate action with this gift they gave you.

There’s nothing wrong with keeping things “as is” while you figure out your next steps. You don’t need to make any big, life-altering decisions right away. Oftentimes, the best decisions are the ones that have been thought through carefully.

Review What You Have and What You’ll Receive

I am a big believer in having a clear accounting of what’s going on in your financial life. Not only can it help you financially, but it can also relieve stress and allow you to enjoy life more fully. 

When you are ready to think about the financial implications, you should first consider making an inventory of everything you currently have in your own name.  

How much do you have in assets, including bank accounts, investment accounts, and real estate? How much do you have in debt, including credit cards, mortgages, car loans, and student loans?

Then add in what you’ll be receiving from the inheritance. Will you receive it in cash that can go straight into your bank account? Or will you receive an asset (like an IRA account, real estate, or investment account)? If it’s the latter, you will need to work with the executor of the estate to get everything properly transferred into your name. 

Once you have a firm grasp of where you stand financially, you’ll be able to make the best decisions on what to do next.

Chart a Plan of Action

When you’ve had enough time to process everything, as well as take an inventory of your financial situation, it’s time to consider what to do next. There are a number of things that might immediately come to mind, like buying that car you’ve had an eye on, going on a luxurious vacation, or helping out a family member.  

There is certainly a place for all those things—as long as they’re seen in the context of your overall plan. I encourage you to think about how you can use this money to benefit you not just now, but also years (or even decades) in the future.

That might mean you invest a portion of it so you can retire to a life you love while using the other portion for more immediate needs (like eliminating credit card debts, giving to charity, or going on a vacation). 

Without knowing all the details, it’s tough to say what the best course of action is for your specific situation. However, if you take your time, organize your finances, and think through the best course of action, you can improve your decision-making and make the best use of this significant gift. Also, be sure to have your own estate planning documents in place.

We Can Help

If you would like help charting the best plan of action for your inheritance and your financial future, we’d be happy to assist you.

At Dorsey Wealth Management, we are here to help you navigate life’s challenges so you can start living your retirement dream in style now. If you’re currently a client, you can reach us at (310) 370-7776 or angela@dorseywealth.com to discuss how this inheritance will impact your retirement goals. If you’re not a client and would like to learn more about what to do with your inheritance and plan for your financial future, schedule a free introductory 30-minute phone call to get started today! 

About Angela

Angela Dorsey is the founder and financial advisor at Dorsey Wealth Management, a fee-only financial planning firm based in Torrance, California, helping successful women and couples prepare for retirement. Angela earned a BS in computer science from Loyola Marymount University, an MBA from UCLA Anderson School of Management, and spent 20 years as a Senior Compensation Specialist in large corporations before becoming a Certified Financial Planner™ (CFP®) and a Registered Investment Advisor (RIA). That background gave her the tools to couple with her passion for empowering women to make the best financial decisions possible. Angela lives in Torrance, California, with her husband. She enjoys spending time at the beach or surrounded by nature. To learn more about Angela, connect with her on LinkedIn.