Getting An Inheritance? What To Do So You Don’t Blow It All

Business

Getting an inheritance can be a nice bonus in life and many Canadians – boomers and Gen X are first in line – are expected to get a chunk of change as part of what’s being called the largest intergenerational wealth transfer in history. Over $723-billion of Canadian assets are set to change hands over the next ten years according to a 2017 report from Strategic Insight. But while the thought of ‘free money’ may have many laughing, not everyone will laugh all the way to the bank.

Studies show that one-in-three Americans burn through their inheritance within two years because of financial mismanagement. Often, a lack of financial literacy and not enough communication and guidance between benefactors and their heirs is at fault. But there’s also a psychology to unexpected windfalls and inheritances – a sense of ‘found’ money – that leads many people to spend it more easily than hard-earned income.

Even the more prudent among us can find it overwhelming trying to decide on the best course of action. Should you save it for retirement, put it towards your mortgage, pay off student debt, or donate some to charity? And while everyone would like to splurge on something for themselves, how much should you spend?

The answer is usually a combination based on your individual circumstances and the amount of the inheritance. Regardless of whether it’s a lot or a little, if you’re about to come into money, here’s how to make sure you hold on to it.

Get professional advice.

Everyone understands money, but few really understand finances. It can be a complicated – and even emotional – topic so the first step is to speak with your accountant or a financial advisor that knows about taxation and can help evaluate your situation. One of your biggest expenses in life won’t be your mortgage, it will be the taxes you pay, so you’ll want to minimize or defer those wherever you can. For example, my mother’s estate included several accounts, and I learned that some should be cashed out before others to avoid being taxed right away.

In addition to expertise and planning, advisors will usually act as a sounding board and ‘conscience’ for your spending. If you don’t already have an advisor, ask for referrals from family or trusted friends to make sure you work with someone who has a good track record.

Prioritize your future.

Once you’ve …read more

Source:: The Huffington Post – Canada Business

      

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