The death of a loved one can be a very difficult time indeed. You will have to work your way through a whirlwind of emotions, including sadness, anger, and denial, but you will also have to deal with some financial pressures as well. For example, you are going to need to pay for a funeral and memorial service for the deceased. Most people save some money so that their relatives have a small pot of cash to cover any funeral expenses. Hopefully, your deceased loved one will have done the same. Once you have been through the funeral and said your last goodbyes, you then need to settle the inheritance.
Ideally, the deceased will have left a last will and testament which will detail how they expect all of their money and estate to be divided up between their next of kin. If you are named in the will, you should expect to come into a windfall or might be named the owner of a property. This will be great news for you as it means that your own net worth will increase, but it can also cause some problems as well. For instance, some people struggle to decide what they should do with the money or the property that they inherit. Not too sure yourself? Here are your options.
First Of All – Pay Your Taxes
Depending on how much you inherit, you might have to pay the taxman quite a bit. Depending on the exact amount you have to pay will depend on the state in which you live. Each US state has its own threshold for inheritance tax in place. That means that in some states you might be able to inherit slightly more and not pay tax than you could in another state. So, it’s a good idea to do your research into your own state’s tax and inheritance laws so that you know exactly how much money you need to give to the taxman.
If You Inherit Property
Generally speaking, parents will pass on any property that they own to their children. Of course, you might even inherit some property if an aunt or uncle passes away who doesn’t have any children and you are their only next of kin. No matter how you inherit it, though, you will need to decide what you will do with your new house or apartment. Generally speaking, you have three options.
- Move In. If you are currently renting your home, you might as well give up your tenancy and move into the property that you have just inherited. At least that will free up some of your income to spend on what you want as you won’t need to pay a monthly rent anymore.
- Sell It. If you are happy with your current living arrangements or already own your own home, then you might not have any need for this other property that you have just inherited. In this case, you might be interested in selling it. If the property is quite old and rundown, you might need to carry out some work on it before you put it on the market. This is just so you can increase its overall value and get as much money for it as possible.
- Rent It Out. Don’t want to let go of the property just yet but don’t need to move into it yourself? In this case, you should keep the property – you can just rent it out to some tenants. When it comes to renting out a property, you can either go for long-term or short-term tenants. Long-term tenants won’t be too much hassle as they will usually only need to contact you about any house repairs or maintenance. Plus, you are guaranteed a regular monthly income. The only downside of finding some long-term tenants is that it can be harder to make them leave if you ever need to move into the house yourself. If you think you might want to move into the home in the near future, you will be better off advertising the property as a holiday let on the likes of Airbnb and looking for regular short-term tenants. The main downside of this, though, is that you will have to go into the home after each tenant leaves so that you can clean it and get it ready for the next set of tenants. This can mount up to a whole lot of work!
If You Inherit Money
As well as a property, you might also inherit a sum of money. It can often be easier to decide how to use the cash that you inherit, as there are only two options: save it or spend it. You might also have some ideas of how you want to use the cash, but if not, here’s a quick rundown of some of the decisions that you need to make.
- Use A Financial Advisor. If the person who you inherited the money from was already using the services of a high net worth accountant then it’s a good idea to carry on using their services. When you receive the money, it might already be invested in investments that the deceased individual made through their accountant. So, it’s a good idea to continue using their services as they will already be familiar with the money, investments, and any forecasts for the future. Of course, if you don’t get on with the financial advisor or accountant who the deceased was using, then you might be better off finding your own after a few months.
- Find Your Own Investments. Not happy with how the money is currently invested? No problem – you should be able to easily move them around into some new investments. If you want to move your cash around, it’s worth getting some advice from a financial advisor, but that isn’t totally necessary. In actual fact, there is now a great wealth of financial information and data online that you can use for your own research. Even if you don’t have much financial experience, you will still be able to carry out enough research to figure out which will be the most lucrative investment opportunities for your money.
- Pay Off Your Mortgage. Do you currently have a property with a mortgage on it? If so, then it’s really worth thinking about using your new inheritance to pay off the rest of your outstanding mortgage. Even if the inheritance doesn’t cover it all, it’s still worth paying off a part of the mortgage as this will help you pay it off as quickly as possible. The lower you can get your mortgage payments also means that you can effectively bring down the interest that is paid onto your payments, making it much cheaper overall.
Don’t fancy saving your inheritance? If that is the case, you will need to think about spending it. There’s a right way and a wrong way to spend your inheritance, though. After all, you don’t want to squander it away and regret it later! Read on for the best way to spend your cash.
- Pay Of Your Debt And Credit Cards. One of the best ways to spend your cash is to put it towards paying off all your current debt. Not only will this get all of your debtors off your back, but it can also help to improve your credit score which will be good for your financial situation overall. As well as paying off your debt, you should also spend some of your inheritance on your credit card bills. Before long, you’ll have a clean slate again and will be well and truly in the black!
- Treat Yourself. Of course, you don’t have to be totally sensible with all of your inheritance. Why not treat yourself and your family? Just make sure that you don’t use the whole lump sum to buy a frivolous treat – you should only allocate a small part of the money for buying a treat. This makes sure that you don’t waste all of your money by splurging too much. Don’t forget that if you go a bit mad and splurge more than you should, you might end up spending more than just your inheritance, which could see you end up in more debt!
- Think About What You Need. When you do spend your inheritance, it’s a good idea to use it on things that you need. For instance, have you been thinking about buying a new family car recently? If so, getting this inheritance could be a good chance to put some money towards it so that you can buy a vehicle that is big and safe enough for you and your family. As well as useful items, such as a car, you should also consider carrying out some important jobs with the inheritance, such as household repairs and maintenance.
As you can see, there are many different things that you might want to do with all of your inheritance. Just be sure to use it wisely!