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If you come into an inheritance...

If you are a mom and you come into an inheritance, what’s your first instinct?

Probably to spend it on your children. Before you do, consider your long-term financial picture. You may well receive a medium-to-large inheritance someday, and when that day arrives, you’ll need to decide how best to use it. Consider some options:

Do nothing, at least at first

The grief of losing a loved one is a lot to handle in the beginning, so know that you do not need to make any urgent moves with an inheritance, as least not at first. Eventually, if you are inheriting an investment vehicle such as an IRA or a 401(k) plan, you will have to make some decisions about liquidation or withdrawals. And because these accounts may carry tax obligations, it’s a good idea to consult with your financial advisor fairly soon after you receive your inheritance. But if a big part of your inheritance simply consists of cash in a bank account, there’s nothing wrong with moving the money into a cash management account at a financial services company until you decide what to do with it.

Collaborate with your financial advisor

You’ll likely want some guidance on how to use your new assets to strengthen your existing investment strategy. Do you have any gaps in certain areas? Can you use the money to help diversify your holdings? Diversification can’t guarantee profits or protect against all losses, but it can help reduce the impact of volatility on your portfolio.

Use it for your own retirement or children’s college savings

If your inheritance is large enough, it may permit you to max out your IRA for years to come, and possibly free you to have even more of your salary deferred into your 401(k) or similar employer-sponsored retirement account. You could also use the money for other long-term goals, such as funding a tax-advantaged 529 college savings plan for your children.

The joy of giving

You also might use part of your inheritance to donate to charitable organizations you support. Due to recent changes in tax laws that caused many people to stop itemizing their deductions, charitable groups are in more need of support than ever.

Your future goals

Use this opportunity to review your goals. Is your inheritance large enough for you to adjust your planned retirement age? And if that age may indeed change, what about your other plans for retirement? Will you now be free to travel more or pursue other hobbies? Will you need to modify the way you invest, possibly by taking a less aggressive approach? Again, a financial professional can help you answer these questions and give you sound guidance in the decision-making.


Brought to you by:

515 Taggart Dr. NW, Ste #130 Salem, Oregon

(503) 585-1464

Caitlin Davis, CFP®, AAMS®

Financial Advisor, Edward Jones


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