INSIGHTS

May 20, 2024

Manager Perspective

Receiving an Inheritance

Congratulations on your inheritance.

It’s essential to develop a plan to manage an inheritance. Consider it in the context of your entire financial position. Use it to increase your retirement savings or fund other future goals. Work with your investment manager to invest it for the long haul. And over time, it will grow.

Spending an inheritance is easy. Studies show that about a third of people spend their entire inheritance within the first two years. They do so because they lack a plan. Further, needs and wants are terms often used interchangeably but which have different meanings and implications. A need is food, water, shelter, clothing, and health care. A want is something you desire or wish for but you can live without, such as entertainment, travel, or luxury items. Knowing the difference between needs and wants can help you make better spending, saving, and budgeting decisions.

Here are some steps you can take to help ensure that you spend your inheritance thoughtfully and have the resources you need for a secure future.

C. Angus Schaal, CFP^®

Senior Managing Director

Take Time to Make Smart Decisions

First, don’t make spending decisions too quickly. Set a waiting period after you receive your money before you make any big purchases. During this time, make sure to:

• Take stock of your finances.
• Examine your priorities.
• Don’t make any promises.
• Make a plan.
• Seek advice from objective, trusted, qualified investment managers such as Tandem Wealth.

Understand Debt-Related Decisions

Don’t be too quick to pay off debts. Paying off high-interest credit cards or mortgages may be a good use of your inheritance, but not at the expense of having an emergency cushion or having enough retirement savings. If you suddenly become unemployed or have a healthcare emergency, you will need access to cash regardless of whether your house is paid off. It is where long-term planning is crucial, and quick decisions can be detrimental.

Pay Attention to the Details

Details matter when it comes to money. From where you keep your cash to how you invest to calculating the impact of taxes, there’s a lot to keep track of, and it matters. Heirs who spend too quickly may do so partly because they don’t seek professional guidance to help them understand how to maximize their money over time. Consult with advisors and other professionals that you trust.

Tandem Wealth is happy to share our experience and expertise as you consider your next steps.

Disclosures:

Tandem Wealth Advisors LLC (“Tandem”) is an SEC-registered investment adviser. The information published herein is provided for informational purposes only and does not constitute an offer of investment advisory services. All information is subject to change without notice. Nothing contained herein constitutes financial, legal, tax, or other advice. No investment process is free of risk, and investors may lose all their investments. Past performance is not indicative of current or future performance and is not a guarantee. The opinions expressed in this document may not fit your risk and return preferences. The information provided is obtained from sources believed to be reliable, but we cannot attest to its accuracy. Past performance is not necessarily indicative of future returns. Certain information contained herein constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue,” or “believe,” or the negatives thereof or other variations or comparable terminology. Due to various risks and uncertainties, actual events, results, or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. Nothing contained herein may be relied upon as a guarantee, promise, assurance, or a representation of future events or conditions. Additional copies of Tandem’s ADV Part 2A and/or Privacy Policy are available upon request by phone at 602-297-8600 or by email at [email protected].

Source:

marketwatch.com/story/one-in-three-americans-who-get-an-inheritance-blow-it-2015-09-03