Estimates of how much wealth will transfer from baby boomers to younger generations over the next
two decades start at $30 trillion and move higher from there. According to the Federal Reserve, about
half of all inheritances are less than $50,000. Another 30% range from $50,000 to $250,000. The rest
are receiving more, sometimes much more.

The skills required to manage money from an inheritance differ from those needed to earn money. And
the intelligence and thoughtfulness you bring to managing your newfound assets will determine
whether it is a help or a hindrance. Receiving unexpected money affects our emotions in ways, both
good and bad. It may relieve financial stress, represent new opportunities, or facilitate long-held life
goals.

It may also introduce temptations that weren’t present before, or bring long-dormant connections to
your front door, perhaps literally. In all these cases, take the time to process the news and think critically
about what you want to do next. Following are five steps to follow to manage your windfall.

Assemble your advisory team
While the estate settles, your first meeting should be with a trusted advisor, perhaps a family member,
or someone removed from the emotional excitement, like a financial advisor, accountant, or lawyer. You
may need expertise and guidance to determine how to take some proceeds. An unrelated advisor can
bring a detached perspective to the funds and advise on steps to consider. Ideally, you would have a
trusted group of advisors offering counsel, allowing you to take in their suggestions, filtering the best
and most sensible ideas to the top for action.

Consider taxes
Some inheritances will come with tax obligations depending on your decisions or where you live. If this
applies, calculate and set aside associated taxes in a separate account. In doing so, they will be available
when it comes time to pay the IRS. Further discussions about the next steps will only consider the net
amount you will keep. Inheritances often transfer through retirement accounts. Pay taxes only when
due and avoid penalties by educating yourself on inherited IRAs’ tax rules.

Create or update your estate plan
If you had an estate plan before, update it. Account for the additional resources for which you are now
responsible. If not, now is the time to create those documents that spell out your wishes for the assets
when you are gone. Gifts originally intended following your death may not be accelerated during your
lifetime.

Keep your job, at least for now.
In most cases, it is best to have a new job lined up before you quit the old one, even after receiving life-
changing money. Additional resources offer more options, but if you have considered a job change
already, wait to make any permanent job decisions until your settle on a financial plan.

Set aside some just for fun
Use most of the money to cover daily expenses and invest in your future. But a little fun is okay too.
Keep this to less than 10%, and be diligent about tracking your spending and sticking to that limit.
Celebrate your good fortune by doing something you enjoy with the ones you love.

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