Even when you expect to get a family inheritance, actually receiving it can leave you feeling confused and overwhelmed. You might be wondering what to do with the money you inherited while feeling a responsibility to honour the memory of your late loved one.
Receiving an inheritance can be as emotionally challenging as it is financially. You may feel grief, gratitude, and uncertainty as you adjust to this change. It’s important to take time to understand these feelings. They can affect your decisions and how you manage your new financial resources.
If you need guidance, these financial planning tips for family inheritance are for you.
Review your financial situation so you can make better choices
Before you make any decision about how to maximize your family inheritance, review your financial situation.
It would help if you made an inventory of your assets and liabilities. Do you have debts to pay? If so, list them, their interest rates and the amount of their monthly payments.
If you don’t have any debt and your finances are in order, start thinking about your family’s needs. Taking a moment to review your finances and your needs will help you determine the different goals your inheritance can help you achieve.
Consider your short-term and long-term goals
Consider your short-term and long-term goals and determine which ones matter most. Your home may need extensive renovations. You can save money for your children’s education and retirement. Or it may be time to take your dream vacation and finally spoil yourself.
Prioritize your different goals and projects and consider how you might use your family inheritance. You could use part of the money to get out of debt, return to school, start a business, or give back to your community.
Or you could invest it to make it grow. If you’re new to investing, you should know it doesn’t have to be complicated or risky. You can invest some of your inheritance in low-risk assets such as preferred stocks, Certificates of Deposits, and high-yield savings accounts.
Seek valuable advice from professionals
Professionals like a family office will provide the most personalized financial planning tips for family inheritance. Depending on the inheritance you received, it could make sense for you to seek the services of a family office.
A family office offers a variety of wealth management services to affluent families. Whether you want to build a diversified investment portfolio or need advice for estate and tax planning, your family office can help you make the most of your family inheritance.
Take your time before making any decision
Having to manage a family inheritance can be a difficult emotional process. You might feel grateful, but at the same time, you might feel anxious about how this money could change the life of your family and the way other people perceive you.
Plus, you might feel overwhelmed that you must decide how to handle this inheritance while hoping your late loved one would be proud of your choices.
Above all, be sure you take the time you need before making any important decision. Think about your goals and ask for expert advice. If you need to place your inheritance into a savings account while figuring out what to do with it, do it. There is no need to rush into anything.
Create a tax strategy to make the most of your money
In Canada, there is no inheritance tax. Your family inheritance is not considered income; you don’t have to declare it. However, any earnings generated by your investments will be taxable if you invest your inheritance money. This is why it’s important to create an efficient tax strategy, which you can do with the help of your tax advisor or family office.
Donate some of your inheritance to charity
Donating some of your inheritance to charity can be a good way to take advantage of tax benefits. But it can also be done to honour the memory of your late loved one.
Donating money to a cause they believe in can be extremely meaningful to your family. And if you don’t need this inheritance to get out of debt or to achieve an important financial goal, giving back to your community and making a positive difference can be a fulfilling project.
Protect your inheritance by signing an agreement
Finally, remember that this asset belongs to you if you receive a family inheritance. If you and your spouse divorce, your inheritance will generally not be considered marital property. Consider signing an agreement with your spouse to protect your inheritance as a precautionary measure.
