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Five things to do with an unexpected inheritance


Practical money matters by Nathaniel Sillin

UNEXPECTED money from a friend or relative can be a great surprise or a potentially difficult financial lesson. How you plan for unexpected money issues overall can be a key to how well you’ll handle a sudden windfall.
Many people don’t do so well. A recent study from Ohio State University suggests that adults who inherit money save only about half of what they receive.
Researcher Jay Zagorsky reported that only about 11 per cent of the study participants had received an inheritance, with the median amount around only $11,340. He believes awareness of the high-spending numbers suggest it is time for a campaign on saving inherited wealth.
Want to get there early? Here’s a plan for dealing with an unexpected inheritance or any other surprise money issues in the future:
1. Start by taking control of your current finances. Why wait for an inheritance? In 2013, the Gallup organization reported that only one in three Americans actually prepared a written or computerized household budget.
If you’ve never prepared a budget before, know that it is the traditional starting point for all personal-finance decisions.
2. Start saving now. The long-term purpose of budgeting is to find excess dollars so you can save and plan for the future. Even if it’s a few dollars a week as other resources go toward everyday expenses, get into the habit of regular savings and investment now.
Consider activating a direct deposit to build those amounts automatically. If an inheritance comes along, you will already have savings habits in place and account relationships set up to receive the money.
3. Line up qualified advice. Skilled financial or tax experts can help you review what you’ve done so far with your money and suggest ways to make your personal savings or investments go further.
Having these relationships in place before an expected – or unexpected – windfall is valuable. They’ll know your situation and the best ways to handle new money. If an inheritance arrives, consider a certified financial planner, certified public accountant and an attorney involved in trust or estate matters for your financial team.
4. Evaluate your relationships. Money can change people for better or worse. That is why you see so many troubling news stories about people who have had an unexpected windfall.
The best approach to sudden money is to go quietly and immediately into the planning phase – don’t make announcements and involve only your key loved ones who need to be part of the process.

A woman sitting on a sofa with shopping bags
5. Don’t go on a spending spree. If you’re lucky enough to receive an inheritance of significant size, planning doesn’t mean quitting your job, buying a car or moving out of your current place, at least not immediately.
Involve members of your financial team in your planning. After any tax or estate issues are settled and the money is free for your use, extinguish long-standing expenses, build an emergency fund and then establish savings and investments that are appropriate for you and your loved ones.
Once details are complete, do have some fun, but try to keep the cost below 10 per cent of the total inheritance amount.
Bottom line: Inherited money can help build a financial future. Seek some advice, plan thoughtfully for taxes and investments and save a little bit for fun or luxury. Without proper planning, windfalls don’t always last as long as you might think.
Editor’s note: You can find the Ohio State University study and budgeting advice online through the links included in our electronic version of this article at
Nathaniel Sillin directs Visa’s Practical Money Skills For Life financial education programs. Follow him on Twitter at His articles are intended to provide general information and should not be considered legal, tax or financial advice. Always consult a tax or financial adviser for information on how the law applies to your individual financial circumstances.

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