Six Steps to Take if You've Recently Inherited Money From a Loved One

It’s important to deal with the emotional aspect first before tackling the financial one.

Older woman working at home and looking worried.
(Image credit: Getty Images)

Inheritance can often feel like a double-edged sword. While a large influx of money can be a welcome blessing to those who may be in debt, are looking to purchase a home or a business or are wanting to start investing toward retirement, inheritance also often means the passing of a loved one and a period of emotional turmoil and grief.

When paired together, these two major life changes can cause even the most financially savvy person to make a few mistakes. While emotions are high, it’s unwise to make any major financial moves. Instead, allow time for grief and healing before moving forward.

Once you feel ready to take action, consider the following advice from the financial experts of Kiplinger Advisor Collective. Below, they discuss the next steps you should take after inheriting money from a loved one and some of the mistakes they’ve witnessed others make along the way.

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Avoid spending as a coping mechanism
“Losing a loved one is a deeply emotional experience that can disrupt rational decision-making. In the fog of grief, I've witnessed some individuals make impulsive purchases as a temporary form of comfort or escape. Instead of acting on impulse, which often leads to regret, many inheritors would benefit by placing the funds in a high-yield savings account until the emotional dust settles.” — Dennis McNamara, wHealth Advisors

Give yourself enough time to process
“I think that people don't allow themselves the time and space to process both the emotional and financial impact of the inheritance. Susan Bradley, founder of the Sudden Money Institute, so eloquently states, ‘When life changes, money changes. And when money changes, life changes.’ People need the time to identify, quantify and qualify their individual life and financial goals.” — Marguerita Cheng, Blue Ocean Global Wealth

Invest in the future
“Many people will emotionally spend inheritance on pure expenses, such as cars, vacations and other consumable goods. This has instant gratification, but from a financial perspective, it is an expense and not an appreciating asset. Use this inheritance as an investment for the future, such as setting aside a down payment on a house, opening a brokerage account or even thinking about continuing education.” — John Bodrozic, HomeZada

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Consider how to maximize the funds
“A lot of people don’t do their research on how to maximize these funds. Instead of just putting it all into savings or just spending it, people should consider different ways to allocate it. For example, they could start paying off debt, or they could consider ways to invest it.” — Angela Ruth, Due

Seek help from a trusted professional
“One mistake I’ve noticed is that people don’t hire a financial adviser. If someone who doesn’t have an advanced understanding of financial management inherits money, it’s a good idea to hire someone to help manage it wisely. A financial adviser can help people make the most out of inheritance, as well as save them the time and stress of managing it alone.” — Justin Donald, Lifestyle Investor

Understand the nature and intent of the inheritance
“Most people simply retain inherited assets in the form they receive them. If it was a mutual fund, they keep it as is, or they store art and antiques. When capital passes from one hand to another, it's key to understand the nature and intent of those proceeds. Was it intended for specific uses, or is an investment aligned with their risk tolerance? Determine its best use and deploy it accordingly.” — H. Adam Holt, Asset-Map

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The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

Kiplinger Advisor Collective

Kiplinger Advisor Collective is the premier criteria-based professional organization for personal finance advisors, managers, and executives.