Take Your Time and Consider Goals When You Inherit
Transcript:
Katie Nealis:
I inherited a decent amount of money, how should I allocate it?
Easan Arulanantham:
So, first thing I do is slow down. You don’t make any rash decisions. Like, if you got enough money, you quit your job, buy a new Ferrari and just go into the sunset. Fortunately, not all of us can do that. And so I would start with a plan, you know, what are your goals? And if you don’t have a plan, maybe you need an advisor to help you there. Are there any tax implications? What’s your investment strategy? Are there any adjustments you need to make to your insurance or your state plan. And so some of the first things that most people do is you can kind of pay down those high interest debts, you know, credit cards, any kind of existing high interest, you have loans, and top up your emergency fund, and then you can start allocating some of your money for kind of your goals. But remember to also live a little bit and have some fun with your money.
Tom Vaughan:
Yeah, it’s, it’s, it’s interesting, too, because I handle a lot of inheritances over the years. And it depends on how much you know. So if it’s a small inheritance, it might be totally different plan than if it’s a big inheritance, you know, he might spend a small inheritance and some lifestyle things that you’re really interested in, but you probably shouldn’t do that, if it’s big, because that could, you know, really set you up for the rest of your life. also depends on what you inherit, right? So if you inherit IRAs, in today’s world, for example, those are great assets, and there’s usually some good money in those, but you have to take it out over 10 years. So then you get into whole tax planning category two, which is really interesting. Because you know, when you take it out, and what’s the best way, and again, if it’s small, it might not matter. But yeah, I just inherited a million dollar IRA, well, you better really think about how you’re going to get that money out of there, you know, to try to reduce taxes as much as possible.
So, you know, there’s, there’s some different pieces that are very fascinating about inheritances as a whole, it’s, you know, unfortunately, four out of five people in America have spent their entire inheritance in five years. That’s the that’s the average. And we’ve seen that some in our practice some crazy things that have happened, you know, and, you know, remember, a guy flying in from Colorado was a sign of a client, you know, coming into our lobby, because he just put a down payment on a Corvette and he needed the money, you know, and it’s kind of we’re not a bank, you know, we don’t have the money is not sitting there, you know, wasted his trip. You know, it’s the paperwork has to be filled out, you know, so, you know, obviously, his plan wasn’t, you know, financially sound probably, I don’t know how much money you can make on a Corvette unless it’s the right one. But anyway, for the most part, you know, we see a lot of really intelligent things happening within our clientele. Our clients are really smart. They’re really really good with money and it’s why they’re, you know, have the wealth that they have, and they’ve passed that along to their children. Which I think that’s a that’s the best inheritance you can give your kids is how to handle the money. That’s that’s a huge issue.