What to Do After Inheriting Money

Inheriting money can be an emotionally challenging experience, especially when this inheritance comes right after the passing of a loved one.

You might feel confused and unsure of how you should act now that you’re unexpectedly about to receive a large sum of money. Should you place it into a savings account and just forget about it? Should you spend it all right away or buy gifts for your family?

If you wonder what to do after inheriting money, these tips should help you figure it out.

Take a moment to breathe

When you learn you are about to receive an inheritance cheque, it’s important not to do anything rash. You don’t need to figure out what to do with that money immediately. You can simply deposit it into a savings account and take the time you need to grieve the passing of your loved one, as well as to process your emotions.

When you feel you’re in the right mind to make important financial decisions, consider your goals and options. This will prevent you from quickly spending all of your inheritance on things that don’t matter.

Review your financial situation

Review your current financial situation before you decide what to do with your inheritance.

List your income, savings, debt, and recurring expenses. If you regularly have difficulty covering your bills, your inheritance will mean something different to you than if you earn a high salary and have little to no debt.

When you have a clear picture of your current situation, figuring out what you need and want becomes easier. If you need help, consult with a family office for professional guidance.

Keep your inheritance separated from your marital assets

Suppose you inherit money while in a shaky relationship. It’s a good idea to protect it by separating it from your marital assets. Place it into a different savings account in your name only. This way, if your marriage ends, you should be able to keep all your inheritance instead of sharing it with your spouse.

Be sure not to use your inherited money to pay joint debt or to buy a home with your spouse.

Set different goals and priorities

It’s perfectly fine to finally take your dream vacation or upgrade your home with a part of your inheritance. However, if you want to avoid spending everything in just a few months, take a moment to define your goals and priorities. Depending on your life stage, investing in your or your children’s future might hold more meaning than purchasing a luxury car.

Money for emergencies

Setting money aside for emergencies is important, whether you’re in your 30s or close to retirement. Having an emergency fund that could cover up to six months of living expenses is a wise decision. If you don’t already have this fund, start saving now.

Pay off debt

Paying off your debt can help you achieve financial stability. Use part of your inheritance to pay off high-interest debt first. If you’re thinking about investing some of the inheritance, consider safe investments like a Tax-Free Savings Account, which allows your money to grow without being taxed.

Start a business

If starting a business has been a dream of yours for years, maybe it’s time to pursue that venture. Create a serious business plan and use part of your inheritance to get started, instead of applying for a business loan. On the other hand, if you don’t need extra money right now, think about investing in your children’s future and post-secondary education.

Donate to a charity

Finally, donating to charity can be an excellent way to honour the memory of the loved one who has passed away. Not only will it make a difference in the lives of others but also allow you to claim charitable tax credits. Take time to think about these options before making any decisions with your inheritance.