Posted by The TaxAdvocate Group, LLC

How to Maximize Your Inheritance

How to Maximize Your Inheritance

You might have recently a friend, an acquaintance, or someone you know who has just blown his or her large inheritance. You may have also seen someone who became a lottery winner after receiving a life-changing sum of money went bankrupt (or worse than that) just a few years after. You need to keep reading if you don’t want to be one of them.

People usually treat the money that comes to them unexpectedly compared to the money they have earned according to research. It is even possible for the most financially sharp consumers to be blinded and trapped by the unexpectedly newfound wealth. Getting a bigger house, splurge on new cars, going on their dream vacation maybe some of the pressures many will feel. Others will also consider quitting their job completely or taking a hike. 

After receiving an inheritance, many people will regret their decision to rushing into major purchases. Others will also realize that they made a terrible investment that is completely inappropriate or useless for their own financial needs and goals, and some of them will also find out they gave away much of their money. 

There is a high chance you may find yourself worse off than you were before you became instantly wealthier via your inheritance if you don’t seek a financial expert’s guidance to develop a plan for your inheritance or take the time to do so yourself. 

Below are some tips to maximize your inheritance

Don’t quit your day job yet

It’s common to have a boss who seems to do nothing but make their employees’ lives miserable, and because of that millions of Americans work in jobs they dislike. Telling your boss to shove it or making a big statement like that may be very tempting. Make sure you have a plan what to replace your source of income and you already thought it through before making such bold movement. 

The number you actually need to provide a nice, comfortable, standard living for the rest of your life is so easy to underestimate. The earlier you want to leave the workforce, that number typically grow bigger and bigger. Compared to someone who leaves the workforce at 75, if you retire at 40, you are retired for a longer time. 

To replace your income, you will likely need a retirement nest egg worth at least $2 million if you make $100,000 per year. You may also encounter expenses such as health insurance which will be considered as some unexpected additional expenses. Do you think you will spend more or less money without going to work every day? It is a question you should think thoroughly.

 Well, this article is not forcing you not to really quit your current job. Everyone needs to have a financial plan to make this change successful and financially advantageous.  The road maps should include life changes you wish to make and spending plans to account for the splurges. 

Pamper yourself using your money

You need to do something nice for yourself if you have lost a loved one. Though you should not break the bank by doing so. To keep you from making some bigger mid-life crisis types of purchases that can put your financial security at risk is the goal of this small indulgence. 

For you to splurge in whatever will bring you joy, set aside a certain amount of money that you can use. Where you want to spend it and on what should be calculated first-hand. You may find one small splurge turns into many without that seemingly simple step. A large portion of your inheritance could be gone before you actually know it. 

To maximize your inheritance, consult your financial team

Consider getting a fabulous financial planner if you don’t have one yet. An inheritance can be overwhelming and stressful especially if you are not used to dealing with large sums of money. For you to reach your various financial goals faster and easier, and to develop a strategy to make the most of your inheritance, your financial planner can be a big help.

Don’t forget about taxes

Triggering the federal estate tax after receiving an inheritance large enough to do so is very rare. Check with your financial planner about this topic since estate taxes will vary at the state level. You may owe taxes on some of your newfound wealth but that depends on which type of assets you inherit and how they are held.

You should plan ahead if you have an inheritance or windfall coming your way. It will be too tempting to just leave a huge sum of money sitting in your bank. A high chance of making a financial mistake if you will rush around to meet various IRS or tax filing deadlines and this will also increase the level of your stress. 

The TaxAdvocate Group, LLC
Contact Member