Inheriting wealth is a complicated topic that can cause stress and confusion. Proper asset management. With research and planning, you can make the best financial moves for your present and future.
Here are a few essential steps for inheriting wealth:
1. Transfer the Asset to Your Name
The first step in inheritance management is moving the money into your name or account. Depending on the type of inheritance you receive, you have to take specific steps to acquire it.
During the process of probate, the court uses legally-defined procedures to distribute the inheritance among heirs. Probate can take a few weeks or a few years, depending on the inheritance type and nature of the will. The inheritance type also impacts the length of probate.
For example, your inheritance might arrive in a direct deposit of cash. Direct cash often has more straightforward procedures for transfer. Once you obtain the money, you can deposit it into an insured bank or credit union to keep it safe. The Federal Deposit Insurance Corporation (FDIC) insures all deposits in case of a bank failure, which protects your assets. If you inherit a massive sum, you can use several bank accounts to secure it.
If your inheritance is another asset type, like retirement plans or real estate, the probate process can become more complicated. You work with the estate executor to transfer the assets to your name.
Probate advances are also an option to speed up the transferral process. This solution offers quick access to a portion of your inheritance while the estate undergoes probate. You can work with third-party providers to evaluate your candidacy for a probate advance.
2. Speak With a Financial Professional
After the asset becomes yours, you face significant financial decisions. A sudden large sum of money can change your life, providing many financial opportunities.
While it’s tempting to splurge right away when inheriting wealth, you can gain the most long-term benefits by speaking with a financial advisor. These professionals can help you define financial goals and suggest ways to use your inherited assets. They can explain the benefits, consequences, and considerations of choices like:
Paying Back Your Debts
Paying your debts off is a smart way to use your inheritance. You might have accumulated debts from student loans, credit cards, car loans, house mortgages, or other financial investments. These debts can make it harder to improve your financial situation by limiting your ability to get new credit. High interest rates can also add up and make it harder to pay off the complete amount.
You improve your financial standing by using your inheritance assets to eliminate these debts. With the debts gone, you can work toward other investment goals without making monthly payments.
Investing in Other Opportunities
A financial advisor can also help you identify other investment opportunities for your assets. If you receive your inheritance in the form of real estate, stocks, or retirement plans, you might be unsure of how to proceed with the assets. The advisors can help you decide how to grow or sell these accounts, depending on your financial needs.
They can also guide you through the process of investing inheritance funds. Rather than spending it immediately, you can put it toward other opportunities that yield long-term growth. A financial advisor might recommend investing in options like:
- High-yield savings accounts: High-yield savings accounts offer higher interest rates on deposited money, letting you earn more in the long run.
- Retirement plans: Many employers offer retirement plans as part of employee benefits. You could boost your retirement savings significantly by placing a portion or all of your inheritance into these accounts. A financial advisor can help you define the best account and strategy for investment.
- College savings plans: If you have children or grandchildren, you might maintain a college fund for them to use when they grow older. Inheritance funds are an excellent way to start or grow these savings plans.
Using the Money for Other Wants
Some people use inheritance funds to upgrade their lifestyle or purchase other in-the-moment wants. Financial advisors can help you evaluate these choices and explain how they would impact your finances.
For example, you might use inheritance funds for large expenses like:
- Weddings: Weddings have many costs, from initial invitations to your reception. You could use a portion of your inheritance to make these expenses more manageable.
- Property purchases: You could also apply your inheritance to new real estate. For instance, if you inherit property, you could sell it and put the returns toward a new home.
- Vacations: A large inheritance sum could help you reach a dream vacation destination with your family.
Handle Your Assets in a Way That Benefits You
While inheriting wealth can feel overwhelming, you can prepare with proper research and discussion with financial experts. Options like probate advances help you obtain your inheritance more quickly. Then, you can apply the funds to anything from student loan repayments to vacation costs.
