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What to do when you receive money from a wealth transfer
When it comes to protecting your assets, there’s no such thing as being “too prepared.” When you are a beneficiary of wealth, it may not seem like there’s any planning to be done until you’ve actually received the assets. However, it’s important to have your own house in order so when the time comes, you’re ready. “The biggest mistake is to receive a windfall and not have a plan in place,” said Jeanne Krigbaum, Chief Wealth Planning Officer with 1834, a division of Old National Bank. “It’s sometimes like winning the lottery and if you’re not prepared – both mentally and financially – you can blow through it so quickly.” With that said, we’ve put together a few tips to help you through the process.
3 things every beneficiary should do
Whether you expected to receive an inheritance or it came as a surprise, your first step should be figuring out how the assets fit with your current needs, said Krigbaum. To do that, she suggests the following:
1. Understand your new assets. Inherited assets come in many different forms – life insurance, cash, retirement accounts, investment assets, real estate, etc. The asset type and timing of its receipt (i.e. outright in a lump sum or distributed to you over time) is important as you consider its impact to you and your overall financial situation.
2. Consider your financial goals. Understanding your budget is fundamental to any financial planning, so start there. “Your financial plan should be comprehensive, taking into account all sources of income, short and long-term spending, as well as savings goals,” said Krigbaum. While you won’t always know the value of an inheritance in advance, understanding your personal cash flow will help you make informed decisions about how to best use those assets when they are received.
3. Create or update your Estate Plan. After you have a financial plan in place, you’ll want to shift your attention to your estate plan, said Krigbaum. Do you have your own will, revocable trust (optional), power of attorney and healthcare directive in place? It’s important to get your own estate plan in place so you can be better prepared to receive the inheritance that’s coming your way.
A wealth transfer event can make a big difference in the life of a beneficiary. With the right planning, you can feel prepared when the assets are received, and thoughtful about how they are utilized. The steps above can help, but you should also consult with a Wealth Advisor, who can help you create a customized financial plan based on your own needs.
If you need any further help, reach out. We’re always here.