Receiving an inheritance can be both a gift and a responsibility, whether it comes in the form of money, investments, property or sentimental assets. And inheritance often survives with a swirl of emotions, whether it’s grief, gratitude or guilt, it’s a moment that invites you to pause and think carefully about how to honour both the gift and the giver.
It’s also a good chance to make some smart, lasting financial choices. It may be tempting to make big moves right away, but taking a thoughtful approach can lead to more meaningful results over time. Let’s take a look at 10 things you could consider doing with an inheritance, from practical steps to long term planning.
1. Get some advice.
Before you make any major decisions, it’s wise to speak with a financial advisor. Inheritance money can come with any tax implications you may not be aware of, and depending on the size or the nature of the inheritance, there may be legal, investment or estate planning considerations to address. An advisor can help you to evaluate your current financial situation, set some goals, and create a strategy that aligns with your values. Even a single meeting can give you clarity and confidence moving forward.
2. Take a minute to breathe.
When you’ve been told of an inheritance, you don’t have to act right away. In fact, one of the smartest things that you could do is absolutely nothing for a while. You need to let the wave of emotion coming to you settle before you do anything. Deposit any funds you receive into a secure high yield savings account and then take time to consider what your options are. Your grief can easily cloud your judgment, and waiting a few weeks to determine what to do is often the best course to take.
3. Pay down your debt.
If you have credit card debt, personal loans or other high interest liabilities, it’s the time now to use part of your inheritance to pay them down. Not only will this free up your monthly budget, but it can also reduce stress and improve your credit score. You can start with the highest interest debts that you’ve got and consider whether you want to wipe them all out at once or keep some cash in reserve. Once you’ve done that, that should give you some clarity on what your next steps will be.
4. Build or strengthen your existing emergency fund.
An emergency fund is a financial safety net, one that too many people go without. Ideally, you should have three, six months worth of living expenses saved in an easily accessible account if your inheritance allows you to create or top off this fund. It’s a low risk and very smart move that offers Peace of Mind in uncertain times.
5. Invest your money for the long term.
If your basic needs have been covered and your debts are in check, then investing a portion of your inheritance helps you grow your wealth over time. This could mean putting money into a retirement account, a taxable brokerage account, or real estate. Depending on your level of comfort and your time horizon, you might want to explore stocks, index funds, or even real estate investment. Diversifying your investment portfolio is a great idea, but that’s why you need that financial adviser to help you so that you can minimize your risk while allowing your inheritance to work for you.
6. Put some money into your retirement account.
If you’re behind on your retirement savings, and most people are, an inheritance could be a great opportunity for you to catch up. Think about maxing out your IRA or increasing contributions to your 401K. Even small increases can make a big difference thanks to compound interest, and it’s one of the best gifts that you can give for your future self.
7. Be thoughtful enough to help others.
You could use a pot of your inheritance to help your family or give back to a cause that you could do to your heart.It can be deeply fulfilling to do this, so maybe a loved one needs some help with tuition or medical bills. Maybe you want to give a child a down payment on a future home. Maybe you want to set up a scholarship in the name of the person who left you. The inheritance giving doesn’t have to be large scales to be meaningful, it just matters that it’s intentional.
8. Buy something you’ll always remember.
While it’s important to be wise with your money, it’s OK to enjoy a part of your inheritance as well. Consider using a portion of it for something more memorable, like a family trip or a piece of artwork. Ideally, it’s something that connects you to the person who left you the money in the 1st place, which turns their legacy into a lasting memory.
9. Carefully upgrade your life.
If you have a solid financial foundation, consider making improvements that enhance your daily life. This may mean renovating your kitchen, upgrading your car, or moving to a better neighborhood. Just be cautious with it because inheritances can disappear quickly when people start living beyond their means. Any upgrades should be sustainable long term.
10. Preserve the legacy that’s paid you.
Think about ways that you can preserve and honor the legacy of the person who left you, the inheritance. This can take many forms, from creating a photo book to planting a tree. You may also consider how you’ll pass something on to future generations, whether it’s through estate planning or living in a way that reflects their values.
Inheriting money or assets is powerful. It’s financially, emotionally and spiritually rewarding. But it’s not just about what you do with the money. This is an opportunity, so you should approach it carefully. With thoughtful planning, you can use an inheritance to build stability, create joint and carry a legacy forward.