Inheriting wealth can be a life-altering event. While it may seem like a straightforward financial boom, it comes with its own set of complexities and emotional nuances. Whether it is a modest sum or a significant estate, managing an inheritance responsibly requires careful thought and planning. Here are three key considerations to keep in mind when you find yourself to be the beneficiary of inherited wealth.

Understand the Tax Implications

An important part of estate planning is how to make sure that your estate beneficiaries will be able to avoid paying income taxes on inherited assets that appreciate in value prior to your death. For instance, while life insurance proceeds are typically tax-free, some inherited retirement accounts are not and can lead to a hefty tax bill if not managed properly. You should consult your tax advisor if you inherit a retirement account like an IRA or 401(K). 

Invest Wisely

Before making any significant financial decisions, take a step back and assess your overall financial picture. Inheriting assets creates a pivotal moment to reassess your financial landscape. This is also an opportune time to establish an emergency fund, clear debts or enhance your retirement savings. 

Plan For the Long-Term

Inheriting wealth can impact your life goals and retirement plans. You might also consider the benefits of estate planning, including setting up trusts, wills and health care directives to manage and protect your wealth. Additionally, donating a portion of your inheritance can create a legacy that aligns with your values while also providing tax benefits. 

For more information, contact our office at Askew & Associates, P.A. by calling 954-546-2699.

Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns.