When people in California receive a large inheritance they are often overwhelmed. Deciding what to do with the money or other assets can be difficult, especially while grieving a personal loss.
The first and most important thing to know is that there is no hurry to make any decisions. Many people feel pressure to do something immediately, especially when others ask about your plans. If the money is safe in a federally insured bank account, you can wait as long as you want to decide what to do with a large inheritance.
Experts
Consulting a financial expert is a great option when you’ve received a large inheritance. They should be familiar with estate planning, the various assets involved and balancing your long term and short term financial goals. It is a good idea to find a fee-only financial planner. This means that you pay the financial planner an upfront fee and they don’t earn a commission by getting you to invest anywhere. If they don’t have financial incentives, it can be easier to trust their advice.
You can ask them about every part of your financial plans. This includes paying off high-interest debt, a common goal with a large inheritance. Your low-interest debts or your mortgage may be more complicated. It is possible that you could earn more on long-term investments than you would have to pay on a low-interest debt. Some people would prefer to have the low-interest debt off their minds and that is a perfectly good choice as well.
A financial planner can go over your financial history and your long-term personal goals. They can also help you decide what you feel comfortable splurging on or spending in memory of the deceased.
Your estate
Your inheritance is now your estate. Once you’ve made decisions about your large inheritance, don’t forget to update your own estate planning documents.
Taxes
Federal estate taxes shouldn’t be an issue unless the estate is extensive. Estates worth more than $12.06 million will need to worry about this as of 2022. However, other assets like homes and IRAs may be more complex. Again, this is where a financial expert may be able to help you navigate your options in the least expensive way possible.
A large inheritance comes with complicated emotional and financial decisions. Giving yourself time to decide what’s best for your financial health is an important part of the process.
