At some point in time, you are very likely to inherit a lump sum of money. The amount may be $20,000, $200,000, or even $2,000,000. If you already have plenty of resources or find the extra money you receive is not material to your current financial position, this post may not apply to you.
However, if the amount of money you receive is will have an impact on the future of you and your family, the information you find here may prove beneficial. How you handle amounts you receive may positively impact your future and the future of those you love. Money can be used as quickly as it is received. Proper planning and decision making can leave you in a positive position.
Inheritances are generally not taxable to the recipient. They are typically paid by the estate before you receive your share. Basically, what you receive is yours to do with as your wish.
The inherited money may come from the loss of a parent of loved one, for from a distant relative. Be circumspect and do not let your emotional needs drive your financial decisions during this time.
It has been my experience personally, professionally and through general observation that there is a strong urge to reward oneself, family members or even friends when you receive a large sum of money. Some of these expenditures may include impulse purchases, large gifts to family members, vacations, etc.
Most of these purchases will bring momentarily pleasure but will not bring about lasting change or financial security. It would be wise to consider taking amounts you receive and using them in a ways that will enhance and your long-term financial security. This could be the one chance that you have to easily improve your financial stability.
Here are a few specific recommendations that I would like to make that you will not regret:
- Do not make any immediate decisions about what you will do with your money as soon as your receive it. Decisions made about your money at the time of receipt will likely be emotional and emotional decisions do not mix well with large sums of money.
- Speak with a business professional with some sort of professional designations. I would suggest speaking with either a CPA or an attorney who are compensated by the hour and do not charge fees based on commissions or the amounts of money in your possession. I would rule out financial advisors or stockbrokers from your first discussions. There could be a time and place to include them in your planning it may not be in your best interest until you have done some long-range planning.
- Your primary focuses should be on capital preservation and on reduction of debt. One client that I worked with recently decided to pay off her home. In so doing, she gave herself a monthly cash infusion that equaled the amount of her house payment. Had she lived it up, taken a few vacations, put a down payment on a new car, given some gifts she may have lost the flexibility to make a major and lasting lifestyle change such as having a home paid for free and clear. She now has an extra $1,500 per month of discretionary income that she may not have had if she had not made a rational decision. Maybe you did not receive enough to pay off your home but did receive enough to pay off consumer debt such as credit card amounts or a car payment. Think about what will benefit you over the long haul.
Receiving a lump sum can improve your life or make your financial situation more chaotic. Please call our office if you would like help with determining how receipt of a lump sum can improve your life on a more permanent basis and not just deliver a quick fix or high.
Wesley Kent Hill (404) 228-8103 or e-mail me at whillesq@gmail.com.
The Hill Firm, LLC 