Receiving a large inheritance can be a life changing event. However, ensuring that the change is positive is dependent on what you do with the inheritance and who you work with.
An important question to ask is: what can be considered a large inheritance?
The contents of this article are for educational purposes only. They are not intended to be a source of professional financial advice. You will find experts on financial planning and financial management here. More on disclaimers here.
A million dollars in cash or cash and assets is a really large inheritance, but this may not make much of a difference for someone who is already millions of dollars deep in debt.
As such, while there is an objective angle to the size of an inheritance, there are also very different and subjective situations where a "large inheritance" will have different and subjective meanings.
In general, a large inheritance is considered to be a sum of money or assets that is significantly larger than the individual's typical annual income.
Specifically, for some individuals, a large inheritance may be considered to be $100,000 or more, while for others, it may be several million dollars. Also, as hinted at already, the actual meaning of a large inheritance also depends on factors such as an individual's debt level, current lifestyle expenses, and financial goals.
Regardless of the size of an inheritance, it is important to seek professional help to ensure that the assets are managed and invested in a way that aligns with your goals and values. Working with professionals such as a financial advisor or a certified financial planner will be the difference between a person who became better off and a person who got off worse after
receiving an inheritance. If you received an inheritance from a parent, chances are that inheriting their financial advisors won't be a good fit for you.
Advisors such as Bay Street Capital Holding's William Huston and Ekenna Anya are sources of hope even for an inheritor who is millions of dollars in debt. They will help you understand the financial and practical implications of the inheritance and can help you create a plan for growing that wealth and get out of debt.
Choosing to manage inheritance without the professional help of a certified financial planner may be a sort of financial suicide.
Receiving a large inheritance can come with financial dangers if not managed properly. Here are some common financial dangers to be aware of:
You might be thinking the best thing to do with your inheritance large or small, is to invest (if it involved a large liquid percentage), but let's apply the brakes. To avoid these financial dangers, it is important to seek professional advice from a financial advisor, accountant, and attorney to help you understand the financial and tax implications of the inheritance and to create a plan for managing the assets. They can help you make informed decisions and ensure that the inheritance is invested in a way that aligns with your goals and values.
Seeking professional advice is an important step when receiving an inheritance. Here are some professionals that you may want to consider consulting with:
A financial advisor can help you understand the financial and investment implications of your inheritance, create a plan for managing your assets, and invest your inheritance in a way that aligns with your goals and values.
An accountant can help you understand the tax implications of your inheritance and ensure that you are in compliance with all relevant tax laws.
An attorney can help you understand the legal aspects of your inheritance, including any restrictions or conditions that may apply to your inheritance, and can help you review and update your estate plan.
An insurance agent can help you understand the insurance implications of your inheritance and can help you review your existing insurance policies to ensure that they provide adequate coverage for your assets.
It's important to consult with a team of professionals who can work together to ensure that your inheritance is managed and invested in a way that is aligned with your goals and values.
It's also important to do your own research and take the time to fully understand the inheritance and to be comfortable with the plan of action that you and your professional team decide to take.
When meeting with your financial advisor to discuss an inheritance, it's important to ask them a variety of questions to ensure that you understand the financial and tax implications of your inheritance and that you're making the most of your assets. Here are some questions you may want to consider asking:
Besides setting up a retirement account or an emergency fund, your advisor can provide guidance on how to invest your inheritance in a way that aligns with your goals, risk tolerance, and time horizon.
Your advisor can help you understand the tax implications of your inheritance, including any property taxes or capital gains taxes that may apply if you sell assets, and how to minimize your tax liability.
They can also help you secure a fair market value for these properties if you choose to sell them off.
Your advisor can help you create a plan for paying off any debts, such as credit card balances or student loans, using your inheritance.
Your advisor can help you create a plan for saving and investing your inherited money to ensure your future financial security.
Your advisor can help you understand how your inheritance fits into your overall estate plan and how to ensure that your assets are distributed according to your wishes.
Your advisor can help you think through how you want to use your inheritance to make a positive impact on the world, whether it's through charitable giving, investing in causes you care about, or creating a family foundation.
Your advisor can help you review your insurance coverage to ensure that it's adequate and that your assets are protected.
Your advisor can help you review and update the beneficiaries of your accounts and policies, particularly if your inheritance has changed your financial situation.
Remember that your advisor is there to help you make informed decisions about your inheritance, so don't be afraid to ask any questions you may have.
Estate taxes and inheritance taxes are two different types of taxes that may be relevant when someone passes away and leaves an inheritance to you.
These are taxes that are imposed on the value of the assets in an estate before they are distributed to the beneficiaries. In the United States, the federal estate tax applies to estates above a certain threshold, which is currently $11.7 million per person in 2021.
These are taxes that are imposed on the assets that a person receives as an inheritance, after the estate has been distributed. Only a few states in the United States have inheritance taxes, such as Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
Other taxes that may be relevant when receiving an inheritance include income taxes on any interest, dividends, or capital gains generated by the inherited assets, as well as taxes on real estate or other tangible assets.
It's important to consult with a tax professional or accountant to understand the tax implications of your inheritance and to ensure that you are in compliance with all relevant tax laws.
It's also a good idea to review and update your estate plan, including your will, trust, and other estate planning documents, to ensure that they reflect your current wishes and that your inheritance is distributed according to your plan in a way that minimizes taxes.
While working with professionals is important, it is much more important to work with a team of professionals; that is, professionals who coordinate their actions together. You shouldn't be getting counter advice or services.
If you are looking to work with a qualified team of professionals, reach out to Bay Street Capital Holdings where a team of financial advisors, financial planners and real estate gurus are there to answer your questions and meet your financial management needs. They also have attorneys and accountants who provide all the legal and accounting help you need.
Bay Street Capital Holdings is a Black-owned, independent investment advisory, wealth management, and financial planning firm headquartered in Palo Alto, CA. They manage portfolios with the goal of maintaining and increasing total assets and income with a high priority on managing total risk and volatility. Although many advisors may focus on maximizing returns, they place a higher priority on managing total risk and volatility.
Our founder, William Huston founded Bay Street after 13 years of supporting the United States' largest retirement plan ($650B) Thrift Savings Plan. He is recognized as Investopedia’s Top 100 Financial Advisors for 2022. In California, Bay Street Capital Holdings is the only Black-owned firm out of the twenty firms that received this recognition.
In Scottsdale Arizona, Ekenna Anya-Gafu CFP, AAMS is recognized among the Best Financial Advisors for his responsiveness, friendliness, helpfulness, and detail. Bay Street was founded to advocate for diverse and emerging fund managers and entrepreneurs.
In 2021, Bay Street was selected as a finalist out of over 900 firms across the US in the category of Asset Manager for Corporate Social Responsibility (CSR).
https://smartasset.com/investing/how-does-inheritance-work
https://balancewealth.uk/big-life-events/receiving-an-inheritance/
https://www.investopedia.com/articles/personal-finance/092515/i-just-inherited-money-now-what.asp
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