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How to Handle an Inheritance


If you are fortunate enough to receive an inheritance, consider these steps to make sure the money you receive after a loved one dies is used to its best advantage.

Take your time

Give yourself time to assess the situation before making any purchases, paying down debts, or agreeing to investments. Avoid making hasty emotional decisions. Also, be careful who you tell about your newfound wealth.

Assemble a team of professionals

Your team should include a tax advisor, a financial planner who serves in a fiduciary capacity, and an estate attorney.

Develop a long-term financial plan

Take time to prioritize your financial needs and goals. Carefully assess your financial picture. Analyze your cash flow and planning goals so you can maximize and protect your sudden wealth for both short-term financial needs and long-term financial security.

Financial priorities may include the following:

  • Funding an emergency account. If you are still working, do you have at least three to six months of living expenses in an emergency fund that you could tap at a moment’s notice? If you are in or near retirement, do you have three years of portfolio withdrawals set aside to avoid unnecessary selling of investments during a market downturn?
  • Paying down debt. Pay off high-interest credit card debt immediately. With other debts, including student loans and mortgage debt, assess the cost (interest rate) and tax deductibility of the loan, as well as the impact on cash flow and your future wealth if you were to pay down the debts today, vs. an alternative scenario of investing your savings in a globally diversified portfolio of stocks and bonds to build long-term financial security.
  • Funding retirement savings. Maximize your annual retirement account contributions if your cash flow allows you to do so.
  • Funding children’s or grandchildren’s education.
  • Funding large purchases. Perhaps you have been thinking about buying a new car, taking a vacation, or renovating your kitchen.

Have a little fun

Once you have made a financial plan and allocated the money accordingly, there’s something to be said for treating yourself. Consider using a small percentage as “fun money.”

While a sudden windfall has potential to change your life, it does not need to be an excuse to change your lifestyle. Deploying your newfound wealth wisely can help you climb onto firmer financial footing and lay the groundwork for a more secure future.

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This blog is provided by NewFocus Financial Group, LLC (“NewFocus” or the “Firm”) for informational purposes only. Investing involves the risk of loss and investors should be prepared to bear potential losses. No portion of this blog is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Certain information contained in this presentation is derived from sources that NewFocus believes to be reliable; however, the Firm does not guarantee the accuracy or timeliness of such information and assumes no liability for any resulting damages.

NewFocus is an SEC registered investment adviser owned by Chad Burton and Robert Black which maintains a principal place of business in the State of Washington. The Firm may only transact business in those states in which it is notice filed or qualifies for a corresponding exemption from such requirements. For information about NewFocus' registration status and business operations, please consult the Firm's Form ADV disclosure documents, the most recent versions of which are available on the SEC's Investment Adviser Public Disclosure website at

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