Received an Inheritance? Learn the First Steps to Take.
ClearPath Financial Partners President Ryan Kittredge and Partner, Financial Planner Molly Brown talk about steps to take if you receive an inheritance.
Often the best initial step upon receiving an inheritance is to pause, do nothing immediately, and take inventory of all assets and paperwork. Ryan and Molly say the most common mistakes made by inheritors include making emotional purchases, cashing out taxable retirement accounts without understanding the consequences, and prolonged inaction, especially regarding co-owned property. They tell us that each asset type must be handled according to its specific rules, especially regarding taxes. They warn that ignorance of these rules, particularly for retirement accounts, could lead to severe financial penalties. Ryan warns, “…by simply signing the form and saying, ‘Oh yeah, send the money over here,’ can have a tax bomb in conjunction with it.” As Molly says, “It’s obviously, it’s great to get an inheritance, but it’s a bit of a headache to get through the process.”
Ryan and Molly point out that an inherited asset’s role in the deceased’s portfolio should not dictate its role in the beneficiary’s. They urge inheritors to evaluate assets like concentrated stock positions based on their own financial goals, not on emotional attachment.
Seeking advice from an independent fiduciary can be critical to navigate the process, as financial institutions holding the assets may have internal sales teams whose goal is to retain the money, which may not be in the beneficiary’s best interest.