You’ve Inherited A Lot of Money – Now What?

When a loved one dies, some of us may expect to inherit money. This could be money tied up in property or funds in a bank. Some of us struggle to know what to do with this inheritance – should you invest it, and if so where? Below are just a few tips on how to handle money that you have inherited.

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Don’t spend it all straight away

There’s nothing stopping you from splashing all the money straight away. After all, it’s your money. However, you may want to consider all the choices that you have rather than splurging half of it on an impulsive shopping spree. It could be money to spend on travel or it could be money to spend on a down payment on a home. Compare all your options before spending your money.  

Find out if you have to pay tax on your inheritance

In the case of large amounts of money, you may have to pay inheritance tax. The exception is money that was given to you before your loved one died – this could be money left in a trust or even a property that was transferred over to your name before your loved one passed away. If the money is liable for tax, it could be important that you pay this tax first before spending it all.

Prioritise paying off your debts

If you have debts, it could be sensible to pay these off with your inheritance. It may not be as exciting as using the money for other purposes, but it will save you a lot of money in the future, possibly giving you a lot more disposable income to use. Paying off debts could be particularly necessary if you’re falling behind on payments or it’s affecting your credit score.

Get professional advice when investing

There are many ways you can invest your inheritance from savings accounts to stocks and shares. It could be worth getting professional advice using a service such as Equilibrium so that you can find the best place to invest these funds. After all, you don’t want to gamble away this money or put it in the wrong saver where it may only accumulate minimal interest.

Give money to family and friends

There may be family members and friends that can benefit from the money you’ve inherited. For instance, you may have kids that you can give the money to. If there was conflict within your family, realise that some people may have been deliberately left out of a loved one’s will – if you share your money with these people, realise that it may be going against your loved one’s wishes. That said, it is your decision how you spend your money.

Consider giving some to charity

 If you’ve inherited a lot of money, you may feel like giving some to charity. This could be a charitable cause that you feel strongly about or a cause that affected your deceased loved one (a great way of honouring them). Take your time to compare charities that are out there using sites like Charity Choice. You may even consider setting up your own charity if you inherited a particularly large amount of money. 

Leave Your Kids Finance They Can Fall Back On

We all hope that one day our kids are going to be in a position where they can stand on their own two feet. We hope that they are massively successful with incredible financial gains of their own. But consider, just for a moment, that they’re not? Should you leave them to fend for themselves? Ideally, you want to be in a position where you can provide them with some support while you’re still alive and after they have gone. So, let’s look at some of the ways to do that.

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Buy A Second Home

If you have the money, you should consider investing in a second home. You can use this in two ways. Either, you can purchase it as a secondary investment, sell it on and make some extra money to leave your kids one day. Or, you buy it and keep it, and one of your children can live there. This actually makes a lot of sense because today homes are so expensive that the young struggle to even get a foot on the property market. Instead, they’re stuck on the outside and with home prices currently nine times the average salary it’s probably not going to get any better.

This doesn’t have to be a freebie. You can charge them rent or they can slowly pay you off for the home that you’ve bought, and they are living in. it doesn’t even need to be local. You could buy a property in a beautiful international location. Invest in overseas property, let your kid live there and see if they can make a new life for themselves with better financial prospects in a new location. After all why not?

Invest In Gold

You might also want to think about investing in gold or precious metals. The reason for this is that these investments will generally not depreciate in value. They will stay at their current market price which is useful in an economy that is rather unpredictable. You might have seen those slogans online that say things like send in your cash for gold. They are not doing this for the goodness of their hearts. They know how valuable gold can be in the right economy and you should too.

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Grow A Business

You may also want to think about growing a business that you can pass onto your kids one day. Why not set up a startup after you are thinking about retiring. It can be a great way to keep you entertained, earn a little money and be a solid legacy that you can leave behind of course. One suggestion would be to acquire a franchise, ideally, one that is societally positive like a Homecare Preferred Franchise. The best part is that once you do pass on your kids can take the reins of the company and have their own profit machine.

It’s a great possibility and one that you should certainly consider. As you can see then, there are numerous ways to protect your children financially, both before and after you have gone. You will be able to provide them with a way to survive even if they don’t gain all the success you hoped for them.

Are Your Kids Ready For Their Inheritance, Or Will They Blow It All In Vegas?

Parents often worry about their inheritance. Most of the time, they’re concerned about the amount of tax that they’re going to have to pay. But they’re often frequently worried about how their children will manage their money once they’re gone. After all, they’ve spent their whole lives building wealth – it would be a shame for it to all disappear overnight thanks to financial mismanagement.

Other parents are worried that gifting a lump sum to their kids will rob their children of ambition. What’s the point of working hard and trying to find fulfilment if you’ve already won the lottery? As a result, more and more parents are looking for ways to prepare their children for suddenly coming into contact with wealth.

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One example of parents trying to avoid issues around inheritance can be found in the example of CNN anchor, Anderson Cooper. Cooper is the son of successful fashion designer, Gloria Vanderbilt, who is believed to be worth more than £150 million, according to Forbes. Anderson went on the Howard Stern show in the US and told the radio host what he thought about inheritance. He said that he didn’t believe in inheritance and called it a curse, saying it was an “initiative sucker.”

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So what should parents do if they’re concerned with leaving their children an inheritance?

Give Your Children A Financial Test

Parents can gift up to £3,000 a year, tax-free, to their children. Here’s an idea: use these smaller gifts to see how your kids react to receiving a large chunk of money. Do they wisely squirrel it away or invest it? Or do they blow it all in Vegas? It’s a good idea to see exactly how your kids react to having a relatively small amount of money before they inherit the entire $10 million estate.

Get Kids Involved In Your Personal Foundation

A private foundation can be a great opportunity to build wealth and teach kids about money. There are stories all over the internet of parents selling their businesses for a fortune and then using personal foundations to disburse that money over time. In one example, a man sold his business overnight for $25 million. He then created a personal foundation disbursing 5 percent of its balance each year to his children. Each child, however, had to donate 1 percent to their own cause, which the man hoped would increase their work ethic.

This is a good idea for your kids too. When they approach probate purchasers in the future, they’re more likely to put their money into a personal foundation, if they see themselves as stewards of the family estate.

Give Without Giving Cash

There’s an alternative to giving money directly, of course. An estate planning attorney, Jeff Lewis, says that some of his clients have used their money to pay down the mortgages of their children, rather than giving them money directly to do what they want with. Parents can use their annual gift allowance to do things in their children’s lives that will help them to be more financially free and reduce some of the annoying financial responsibilities that come with living independently.