You received an inheritance — now what?

An inheritance can be an amazing financial gift for you and your family, but it can also come with some complex emotions. If the new windfall is the result of a loved one passing away, you’re likely grieving. Even if you receive a living inheritance — assets gifted while the wealth owner is still alive — there may still be negative feelings associated with this new money. One study found that a significant number of heirs say they feel sadness, pressure, anxiety, and guilt over an impending inheritance.¹ On one hand, your loved one is giving you something wonderful; on the other, managing that money can be daunting.

Receiving an inheritance may become more common in the future: About $124 trillion is expected to change hands over the next two decades as baby boomers pass on their wealth to their heirs. This transition of assets is being called “the great wealth transfer” and members of the Gen X and millennial cohorts are set to receive more than $80 trillion in inheritance.² Further, these heirs will certainly need help managing their newfound wealth. According to our research, only about a third of the members of the Gen X and millennial generations say they are great at managing their finances.³

Receiving an inheritance can certainly be a turning point in your life, but the results will depend on how effectively you manage these newfound assets. With a few helpful tips, you can manage them wisely.

1. Press pause

It may be tempting to jump right into spending your new wealth, but in the event of an unexpected inheritance, the important thing is to delay any significant new purchases. You may feel the “urge to splurge,” but you’ll thank yourself later for taking a more level-headed approach. Give yourself at least 30 days to get used to the idea of your inheritance — without spending any of it. 

2. Make a list of ideas for how to spend the money 

It's possible that you have a clear plan for how to use the funds, but more likely your head is spinning with ideas for spending this cash. Try to channel any impulses through pen and paper (or thumbs and phone). Make a list of all the things you’d like to do with the money, whether it’s a bucket list vacation or adding to your family’s emergency fund. Review this list a few times during the month to gain clarity on what you really want.

3. Work with a financial advisor 

While it’s a good idea to enlist the guidance of a financial advisor at any income level, it’s particularly helpful following an inheritance. An advisor can help you create a long-term strategy tailored to your unique financial goals and may help set you on a path toward increasing your financial wellness. People with strong financial health are four times more likely to work with a financial advisor than those who don’t.⁴ A financial advisor can work with you to determine how much money you should save for a financial cushion, to put toward debt, or to finance a dream (such as starting a business).  

4. Honor the giver’s legacy

One way to feel good about how you spend an inheritance is to honor the legacy of the person who gifted it. Did they value education? If so, they likely would be pleased to see the gift go toward your student loan payments or your child’s education. Did they love skiing? Maybe it’s time to plan a trip to experience an activity they cherished.

At first glance, the thought of receiving an unexpected inheritance sounds positively life-changing. And it’s true, another person’s generosity can make a difference in your financial life. But remember, there may be an emotional side to it. Take the time to absorb the impact of your newfound money. Don’t spend impulsively; decide how you’d like to spend it over time. With thoughtful preparation, you can have something to remember your loved one by for years to come.