Receiving an inheritance is both an honor and a responsibility, and Northwest Iowa probate and trust administration lawyers constantly see individuals who are just not ready to take that on appropriately. Watch this video for some chilling facts about passing down wealth.  Unlike items of sentimental value, such as jewelry or family heirlooms, a financial inheritance was likely meant to be used toward your own monetary goals. The temptation to simply spend away an inheritance as “bonus” money can be strong, but there are a whole lot of very practical means by which to manage the funds for your own future.

Receiving an Inheritance

When you receive an inheritance, you should look at how it fits into your overall financial plan. Are you saving for a particular purchase, working toward paying off debt, or building a retirement fund for yourself? These are all potential uses for the money which has been left to you. You should also be aware that inheriting the funds may have tax implications.

The types of inheritance you receive can certainly vary, with stocks, bonds, bank accounts, and insurance benefits all being possibilities. The different types of sources and dispersal of funds may be governed by certain rules or laws. For example, many people are surprised when their trusts and estates attorney tells them they have a limited amount of time to withdraw funds from an inherited retirement account, like a 401(k), 403 (b), or and IRA. The rules and regulations won’t be the same for every type of account, but if you don’t find out what they are, you can end up paying a lot of penalties and fines out of the money you’ve inherited.

There may also be times when you feel you don’t need the money as much as another beneficiary and are willing to forego your share. This might be for altruistic reasons or simply to protect your own tax situation. In this case, you should work with an estate planning specialist to properly disclaim your inheritance. Doing something along these lines can allow the money to “flow” through you and to another beneficiary, possibly even one of your own children.

Managing Your Inheritance

There can be many complications to work through when it comes to managing your inheritance. One of the best ways to minimize confusion is to work with a qualified attorney.

Always make sure you remember:

  1. The type of inheritance;
  2. Your future goals;
  3. Your tax situation; and
  4. Whether or not you “need” the inheritance.

Each of these items will come into play when determining the best route for you to take.