Receiving an inheritance is often one of life’s most emotional financial moments.
On one hand, it may represent financial security or opportunities you didn't have before. On the other, it usually arrives because you've lost someone you cared about.
That combination can make it surprisingly difficult to make good financial decisions.
The first decisions people make after receiving an inheritance often end up being some of the most important. Here are a few things to consider before taking action.
1. Give Yourself Permission to Grieve
After someone passes away, there's often pressure to immediately settle the estate, divide assets, close accounts, and make financial decisions.
While some administrative tasks can't wait, major financial decisions usually can.
You don't need to have your investment strategy figured out while you're still processing the loss of a parent, spouse, grandparent, or other loved one.
If possible, give yourself time before making significant changes.
2. Understand What You’ve Inherited Before Making Changes
Many inherited assets come with tax considerations that aren't immediately obvious.
Depending on what you've inherited, selling investments or withdrawing retirement accounts may have tax consequences that are worth understanding before taking action.
For example:
- An inherited IRA has its own distribution rules.
- Depending on the circumstances, appreciated investments may receive a step-up in cost basis.
- Certain assets may be more tax-efficient to keep than to immediately sell.
Every situation is different, which is why understanding what you inherited is just as important as understanding how much you inherited.
3. Avoid Lifestyle Inflation
An inheritance can create the feeling that your financial situation has permanently changed overnight.
Sometimes it has. Sometimes it hasn't.
It's tempting to immediately upgrade the house, buy a new vehicle, or make large purchases. Before doing so, take time to understand how the inheritance fits into your long-term financial picture.
4. Review Your Own Financial Plan
An inheritance doesn't exist in isolation.
It may change when you can retire, how much risk you should take, your estate plan, your charitable giving strategy, or even whether certain insurance policies are still necessary.
Rather than viewing the inheritance as "extra money," think about how it can strengthen your overall financial plan.
5. Honor the Gift
For many families, an inheritance represents decades of hard work, sacrifice, and careful saving.
The goal shouldn't be to preserve every dollar forever, nor should it be to spend it as quickly as possible.
Instead, consider how those assets can support the life you want to live while respecting the legacy of the person who left them to you.
Final Thoughts
There's no perfect way to handle receiving an inheritance.
Every family situation is different, and every estate comes with its own financial and emotional complexities.
But one thing is almost always true: you don't have to rush.
Taking the time to understand the tax implications, evaluate your options, and fit the inheritance into a thoughtful financial plan can help you avoid costly mistakes and make the most of a gift that often represents a lifetime of someone else's hard work.
If you have recently inherited assets or expect to receive an inheritance in the future, we would be happy to help you understand your options and how those assets fit into your long term financial goals.
About Aspen Investment Management Inc.
Aspen Investment Management Inc. is a Grand Rapids, Michigan based investment management firm serving individuals and families throughout West Michigan and beyond. We specialize in retirement planning, investment management, tax-aware financial planning, and helping clients navigate major financial transitions with clarity and confidence.
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