The moment you find yourself with an inheritance can be both a bittersweet and exciting experience. Due to a certain set of circumstances, you now find yourself with a newfound sum of funds. Maybe, those funds are the difference between you being able to afford that beautiful new home and having to wait a painfully long time before it would be financially feasible. But, being an heir brings with it its own set of important responsibilities. Let’s take a look at some effective ways to manage any potential inheritance of debt, while you also reinvest the gains. After all, you want to capitalize on this moment in your life!
Meet with a financial professional.
Your inheritance package might fall under a certain category that could result in bearing the brunt of sizable federal, and/or state inheritance taxes. By teaming up with a financial pro you’ll best position yourself for planning out the sale of any assets and tax obligations. With that being said, it’s helpful to know that if your inheritance came from your spouse, you might not be on the hook for any taxes!
Also, life insurance proceeds are often exempt from being taxed. If you end up inheriting a typical workplace retirement account (IRA), you’ll have to pay taxes on that. You want to be very prudent in this process. If you end up cashing out a family member’s IRA and putting that money back in your IRA, then you’ll have to pay the full income taxes. This is not always an ideal situation. Before you even meet with a financial pro you can use a helpful service like wealthrocket.com. They have numerous helpful resources, like guides on helping people smartly invest, helpful budgeting app recommendations, and information on the insurance world.
Free yourself of any debt.
An heir can end up being presented with an opportunity to wipe their debt slate clean, and finally, pay off all those credit cards and personal loans with their high-interest rates. Imagine a wonderful reality free from the stresses of monthly payments! A world where you think about your credit report and don’t get clammy hands. This can also be a ripe time for putting away a nice nest egg that would cover living expenses for multiple months if you ever found yourself out of a job. This era of the Coronavirus has taught us that such a devastating development, and a loss of a gig that you otherwise thought was rock solid, can happen when you least expect it.
Map out estate planning needs.
On the off chance that you ended up inheriting a large amount of money, it might be best to adjust the liability limits on your homeowners and automotive policies. It’s all about doing your due diligence. This especially holds true if you had a deceased family member leave you a stunning, pricey piece of jewelry or maybe some fresh real estate. You’ll want to give the umbrella policy some consideration. Those new assets might end up inflating your estate to such an extent that it ends up being on the hook for estate taxes. From there, you might need to look at inheritance loans before probate. Sometimes, the only way you can lock down that stunning piece of jewelry from your late aunt is to lean on a suitable borrower for a private loan, and actually pay off all those taxes. In the end, this is absolutely a worthwhile move. Nobody wants to part with items from an estate that hold deep sentimental value.
Reinvest that inheritance for a brighter future.
You’ve got a wealth of helpful investment services at your dang fingertips. Maybe, you’re ready to finally take a seat at that investor’s table, now that you’ve got the financial assets to do so. Take a look at a Yieldstreet review for some insight into alternative investing. Yieldstreet is an alternative investment platform that managed to capitalize on the loosening of crowdfunding restrictions by allowing folks to invest in non-liquid physical assets. Also, the money that you potentially lend to borrowers can end up yielding greater returns than what you’d see in the typical stock market scenario. Talk about an effective way to encourage that inheritance to bloom further on down the road!
