Estate Planning

5 tips for handling an inheritance the right way

Today, the bulk of financial assets are in the hands of the aging baby boomers. Over the next 10 to 20 years, the aging phenomenon will have a massive impact on inheritance planning. Here are some tips for handling an inheritance or any lump sum of money:

Take your time

Some may look at an inheritance as a financial windfall like winning the lottery or hitting it big in the stock market. Getting and inheritance is a little different because it typically comes at a price of losing someone you love. When someone gets an inheritance, grief and other emotions can prevent that person from making sound decisions.

Related article: Psychology plays a big role when it comes to dealing with money

Any time you get a financial windfall, the best thing to do is nothing (for a while). This is especially true when it comes to receiving an inheritance. Don’t feel the urge to invest it into a portfolio. Don’t feel the urge to give any of it away. And especially don’t fall into the common trap of spending it. Put it away into a high interest savings account and take your time to really think about what you want to do with the money. Try to fast forward your life 5, 10, 15 years and think about what you hope your life looks like as a result of this windfall.

You’ve all probably heard the stories about people who have blown financial windfalls because of ongoing spending sprees within three to five years of getting their windfall. To prevent this from happening to you, just take your time before making any decisions, especially spending decisions.

It may sound a little obvious and a little corny but take some time to make a financial plan before you decide on what to do with a large sum of money.

Related article: What is a financial plan?

Invest for your future

Before you go and invest your inheritance, make sure you take the time to look at the big picture to see how this inheritance affects your longer term financial future. Too many people feel the urge to put all the money into stocks to try and earn big returns only to find they took more risk than was comfortable. Getting a financial windfall with the intent to invest it should put anyone in a better financial position. Hopefully it puts you in a position where you don’t have to take a lot of risks. You’ll only know that if you run some big picture projections.

Related article: How much should you save for retirement?

Pay off debts

Paying off debts might be the best investment you make. Paying down a 6% debt has a pre-tax equivalent of over 9%. I don’t know about many investments that can guarantee a pre-tax return of over 9%. Don’t forget that paying off debts is a winning strategy.

Related article: 5 Reasons to pay off debt

Develop a spending plan

Rarely do many people need help developing a spending plan. In a world built for consumption, there are unlimited opportunities to spend an inheritance. As a result, it is imperative to develop some type of plan before spending.

I’ve always been a believer in having balance and when it comes to a financial windfall, that means saving some for the future but also that some of it gets blown in spending. To satisfy the need for some instant gratification, set aside a certain amount of money just to spend money. Spending often makes us feel good because it is fun so set aside up to 10% just for enjoyment. Take the rest and be more prudent.

Related article: Develop a disciplined spending plan

Create your own legacy

Losing a loved one is always an opportunity to reflect on your own life to create your own legacy. What do you want your life to stand for? How do you want to be remembered? Most people won’t remember you for the car you buy or the new carpet you put into your house or any of the electronic gadgets that are so tempting to pick up. Maybe part of your financial windfall is best used to remember the person that left you the money. It’s certainly a great time to think about your own estate and whether your own will is up to date.

Related article: Everyone has a life legacy – what’s yours?


  1. Tony Ruggiero

    Hello Jim.
    I always read your material. I find it very informative, well researched, arranged,& easy to understand – including the tips on inheritance above.
    I find most useful your article on pension, retirement (I’m 68 & still working)and estate planning.
    Great knowledge & great material by a great person.
    Thank you.

  2. debra

    I always enjoy reading your articles because the advice is simple and straight forward. I’m going to print and post it where I can see it every day.
    Thank you for this timely information – I have an inheritance from my father and I want to use it wisely.

  3. Arlene James

    Hi Jim: thank you for articles that are clear, relevant and very well written. The information you share is written without jargon and it’s thought provoking. I often use the articles as a launch point for discussions with family and friends. The article on inheritance gives great advice, especially the recommendations to recognize the emotional aspects. Thank you.

  4. Wayne

    Re tips spending inheritance
    High interest savings account??? We are in Canada; there ain’t no such thing here.


    Hello Jim,
    I have heard, but cannot confirm the following, so would like check with you. I will be turning 60 in 6 months and I will be taking my CPP at that time. I am not currently working as my husband is on disability. I was told that if a person does not take their CPP either at 60 or 65 and then dies, the remaining spouse does not get anything. I heard that in order for the remaining spouse to receive 1/2 of your CPP, you would already need to be drawing it. Is this true and can you expound on the whole CPP thing. Thanks.

    • Doug Runchey

      Hi Beatrice – This is totally false! Whether or not the deceased is receiving CPP when they die is not one of the factors in determining eligibility for a CPP survivor’s pension. Read this article:

  6. John Stowell

    I follow your advice your very knowledgable and know your facts.

  7. Bobby

    Jim I have become a fan of yours……you do a lot of research before publishing anything. That is what makes me read all of your articles.
    Thanks, Bobby

  8. David Shearer

    I came into 300,000.00 when my mother passed, had a party that lasted 3 years, now broke but had one hell of a good time, good memories many ladies enjoyed the money with me. My house is paid off, im 63 when in my 30 & 40 traveled, worked and saved. Now retired dont save anything, just spend it as i need. You never know when its your time.Spend it all now and enjoy like. Thanks DAVID

  9. George

    Very informative article. People often go on a spending spree and make the wrong decisions when there is a large sum of money involved especially if they didn’t work for it.

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