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3 Tips to Make an Inheritance Last

Laura Blumenstiel, JD Oct. 22, 2024

Most people believe that receiving a large inheritance from a loved one would be life-changing. However, one study found that about a third of Americans who had received an inheritance eventually experienced a decrease or no change in their wealth. This means that they most likely spent every dime they received. For baby boomers who received an inheritance of $100,000 or more, nearly one in five spent it all!

If you're expecting to receive an inheritance, there are several steps you can take to ensure that your funds will last a long time. Here are three of them:

  1. Don't make hasty decisions

  2. If you're still working and can afford it, put away more for retirement

  3. Hire a team of professional legal, financial and tax advisors

1. Don't Make Hasty Decisions with an Inheritance

Once you receive your money, don't make any hasty decisions about what to do with it. While you craft your long-term financial plan, consider taking some of the following actions:

  • Park the funds in a safe place such as a savings account, money market account, or certificate of deposit. Be aware that the FDIC insures these types of accounts only up to $250,000 per depositor, per insured bank, for each account ownership category.

  • If you don't already have an emergency fund, set one up to cover 3-6 months of expenses. If you already have an emergency fund, consider adding more funds to cover one year of expenses.

  • If you're married, consider whether you want to keep your inheritance in your sole name or in a joint account with your spouse. This decision may center on whether you want to protect your inheritance from being considered a marital asset if you ever get divorced in the future.

  • If you have children, consider whether you would like them to receive some of the inheritance during your lifetime. You could incur negative tax consequences if the gift isn't structured properly, so make sure to talk with a qualified estate planning attorney first.

  • If you have significant debts or liabilities, consider using a portion of your inheritance to pay the balance off or lower it.

2. Consider Putting The Inheritance Money Away for Retirement

The amount of money you'll need to retire can vary widely depending on your lifestyle and unique situation. A qualified financial advisor can help you determine how to best use the inheritance to meet your retirement goals. Perhaps you may consider putting funds towards a Roth IRA or a whole life insurance policy.

3. Hire a Team of Professional Advisors

 You will need a team of professionals to help you develop long-term plans to make your inheritance last.

A Certified Financial Planner can help you review your current finances and analyze future possibilities. The qualified advisors at our sister company, Advocate Wealth Solutions, can help you plan for retirement, minimize taxes, and manage debt. They are also steer you in the right direction when it comes to protecting your assets via life insurance and/or long-term care insurance.

A tax professional will help you analyze cash flow and create a plan to minimize capital gains and other income taxes. Luckily, we also have a sister company for that, Ohio Tax Advocates. Not only can we prepare your tax returns every year, but we will also analyze your taxes to help determine how you can save next year.

Lastly, our experienced estate planning attorneys at The Law Offices of DuPont & Blumenstiel can help you craft a will and/or trust that help ensure your assets are protected for years to come. Whether your goals are eliminating estate tax, creating a family legacy, or protecting your inheritance from creditors, we're here to help.

Give us a call at 614-389-9711 today to schedule your appointment with a qualified estate planning attorney.