Inheriting Money is Complicated

When we realize that we have inherited money, most of us have the thought, “Wow, I want to make sure that I am responsible with this money but I have no idea what to do!”

A good first step is to determine the answer to the following question: “What do I want this money to do for me?”There is no right or wrong answer to this question and the answer will be slightly different for everyone.  For example, our client Mary contacted us upon inheriting money from her father.  She wanted to be sure that she was being responsible with this money and for the first time in her life to feel financially literate.

After some careful thought and discussion, it was clear that Mary wanted her inheritance to help her accomplish 3 primary goals:

1. Provide her family with some income now. Mary wanted to take a step back from her current career and pursue her dream of entering a different field.
2. Grow her money for retirement. It was very important to Mary that she and her husband would have financial security throughout their lifetimes.
3. Pass money along to her daughter. Ideally Mary wanted to be able to keep the principal intact so that she could leave a legacy.

As you can see, Mary had important goals that she wanted to address with her inheritance. She was not sure how or if she could obtain these goals, which leads us to the next important point.

After you have determined your priorities, the second step is to decide how your money should be invested. Keep in mind that investments are really just tools to help you accomplish everything that is important to you; this is why you need to start by determining your goals.

Many times people who inherit from a family member (especially a parent) think their money should be invested the same way that their parent chose to invest. This may not be a good idea primarily because your investment portfolio should be designed to fit you.  Your financial picture is likely different from the person from whom you inherited the money.

For instance, when Mary first walked into our office she thought that all of her money should be invested in municipal bonds and Exxon stock because that was how her father had invested his money. After some education, Mary came to the realization that because her financial life and priorities were different from her father’s, her investment portfolio should also be different.

As you can see, inheriting money is complicated. If you find yourself having a difficult time making decisions you may be inadvertently trying to please or adhere to the philosophy of someone else.  My suggestion is to give yourself permission to let go of the past and confidently seek the advice you need.  If you are ready to seek the advice you need, contact us today.