What To Know About What To Do If You Inherit a Large Sum of Money, According to a Financial Planner
Though TV and film often present inheriting a large sum of money as a happily-ever-after moment, the reality is usually far messier. The last thing you want to do while grieving a loved one is fill out paperwork or make major life decisions. Yet if you don’t plan wisely, money that could have lasted you a lifetime can disappear faster than you'd expect.
To help ensure your loved one’s gift becomes a legacy of financial stability, you'll want to work with a trusted financial professional. MoneyLion spoke with Jamie Ebersole, founder and CEO of Ebersole Financial, for insights on what to do when you receive a large inheritance.
1. Do Nothing Right Away
Learning you’ve received an inheritance is an emotional experience — whether it follows a death in the family or you learn about it during a financial planning conversation. With emotions running high, Ebersole suggests resisting the impulse to act right away. Breathe. Grieve. Process.
"I recommend that anyone receiving an inheritance do nothing for the first 24 to 48 hours," Ebersole said. "Judgment is usually clouded at this time and there is really nothing to do aside from potentially filling out some paperwork or meeting with a probate attorney."
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2. Make a Plan
When working with clients who’ve come into a significant inheritance, Ebersole recommends sitting down and making a plan — but only when they’re ready. For some, that may be after a month. For others, it can take a year or longer.
That said, certain financial emergencies may require you to make a plan much faster. If your home is at risk of foreclosure, for example, using the money to bring your mortgage to good standing may be appropriate. The same goes for tax liens or high-interest debt that threatens your financial stability.
"Generally, though, waiting until you have had time to properly assess your situation and plan for the use of the proceeds tends to help reduce major regrets in the future," Ebersole said.
3. Think About Your Urgent Needs
Ebersole supports using inheritance money to stabilize your life — especially if you have pressing financial needs.
"This may mean paying bills, funding an emergency fund, paying off a mortgage or paying for college," he said. "Only you will know what is important, and waiting until you have developed a plan will give you the best chance of using the funds to better your situation for the long term."
4. Get Methodical
Managing an inheritance can feel overwhelming, which is why Ebersole recommends breaking the process down into clear, manageable steps.
Get the assets into an account you can access easily:
“This allows you to manage the funds most effectively,” he said.
Figure out what needs attention first:
Review your current situation and see if you need to put out any fires, such as late tax payments, unpaid bills, missed mortgage payments or lapsed insurance coverage. “Rectify that first, since saving for the future doesn’t make a lot of sense if you can’t meet your expenses now,” Ebersole said.
Set aside money for taxes:
“While most assets receive a step-up in basis upon the death of the prior owner, it is possible that the assets may have appreciated since the date of death and there will be taxes to deal with when you sell them,” Ebersole said.
Meet with your CPA and financial planner together:
Ebersole recommends meeting with your CPA and financial planner at the same time so everyone can be on the same page as you plan how you’ll use the assets.
“In that meeting, your CPA should be able to provide insights about potential taxes, and a financial planner can help you think about your goals for the funds,” he said. “They will also provide a reality check in case your dreams are much larger than your bank account.”
With this methodical approach, you’ll have an easier time organizing your thoughts and building your plan — exactly what you need during a stressful period.
5. Take Care of Yourself First
Ebersole understands the urge to be generous with loved ones when you’ve suddenly come into money. However, he cautions against giving money away before securing your own financial foundation.
“Make sure all of your plans are funded before giving your money away,” he said. “No one has a right to the money except you. Don’t be cowed by peer pressure or guilt. Friends who ask for money may not be friends at all.”
The Bottom Line
Receiving a large inheritance can come with a whirlwind of emotions and financial complications. Don’t feel pressured to act before you’re ready. Give yourself time, build a plan with trusted professionals and address your most pressing needs first. With planning and intention, an inheritance can honor your loved one’s legacy and support your financial well-being for years to come.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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