What to Do with an Inheritance
Receiving an inheritance is a life-changing event. It opens avenues to endless financial opportunities and new experiences but also brings massive amounts of responsibility and critical financial decisions.
If you’re wondering what to do with an inheritance, you’re not alone. You’ve got unlimited choices in front of you, but not all of them are the best choices, and even fewer of them will help make sure this financial windfall will help you achieve your personal and professional goals.
Keep reading for some practical advice on ensuring that your inheritance goes towards the prosperity of your family and your community, or send us a message today and ask us to help you incorporate charitable giving into your financial plan.
Key Insights
- The first significant step after receiving your inheritance should be finding professionals to help you manage it.
- Solidify your short-and long-term financial goals to develop a solid, sustainable plan.
- Don’t make any large or high-risk investments before consulting with a trusted advisor.
- Learn about the tax implications of inheriting money.
- For high-net-worth individuals, giving back to their communities is essential.
Table of Contents
- What is the first thing to do with an inheritance?
- What not to do with an inheritance
- Assembling a team of advisors
- Giving back with your inheritance
- Partner with Greater Houston Community Foundation
What is the first thing to do with an inheritance?
The first thing you should do with an inheritance is slow down and be strategic. Don’t run out to buy real estate or put it all into an index fund; call your advisor or find one, and make sure you’re making decisions that will enrich your life and the lives of those in your community.
- Inventory and understand exactly what you’ve inherited. A comprehensive list of what you now own is essential to deciding what to do next, and understanding the different assets or investments you’ve inherited will help you go even further.
- Solidify your short- and long-term financial goals. You don’t have to know precisely what you want, but you should have a strong sense of your values and an idea of where you want to end up financially before you start writing checks.
- Seek professional advice. While you could head straight to the markets or to your real estate agent, you should first consult with trusted advisors before you make any serious financial decisions.
- Formulate a plan. With the help of your financial planners and advisors, you should aim to develop a strategy that considers your current financial circumstances and long-term goals, integrating your inheritance into a holistic financial plan.
What should you not do with inheritance money?
Sometimes, what to do with an inheritance is as much about what you should not do with your inheritance money.
- Don’t make any hasty or large purchases. Refrain from making significant, impulsive purchases, even if they may seem practical until you have a solid financial plan incorporating your inheritance.
- Don’t make high-risk investments just because you can. Don’t let the allure of new opportunities or the promise of quick returns convince you that you should jump in head-first.
- Don’t make any immediate decisions regarding your career. Or, as they say, “Don’t quit your day job.” You will better understand how your inheritance will change your life and how it won’t after you work on your financial plan with your professional advisors.
In general, you should wait to confer with your advisors before making any substantial decisions. It may make sense to make some large purchases, higher-risk investments, or sizable donations to charities in Houston — but you’ll want to make sure that they complement your overall financial plan and do not jeopardize what you’ll be able to build in the long run.
Assembling a team of professional advisors
Inheriting a significant amount of money means you’ll need professional support to properly manage and ultimately get the most out of your inheritance. You’ll likely need some form of each of the following:
- A financial planner or investment manager
- Tax Professional
- Estate planner
- Philanthropic Advisor
When constructing a comprehensive financial plan, it is crucial to consider the potential tax implications of your investments, as they can significantly impact your tax liability and require strategic planning to minimize tax burdens.
What are the tax implications of inheriting large sums?
Tax implications will depend on the type of asset you’ve inherited, and your advisors will work to minimize your tax obligations by exploring available strategies and options.
| Type of asset | Tax liabilities |
| Cash and brokerage accounts | Inherited cash is part of an estate and taxable if exceeds the estate tax exemption (2024 $13.61 million per individual) |
| Tangible assets like real estate | Subject to income taxes if they are sold for more than their value at the time of the asset transfer. |
| Retirement accounts (pre-tax and tax-deductible) | Withdrawals are subject to the normal federal income tax rate. |
The tax implications of inheriting wealth can be far-reaching, and sorting out individual liability can be complex. It is essential that you have a team of advisors you can trust to guide you through the many crucial financial decisions that await you after receiving your inheritance.
Why giving back with your inheritance is essential
For high-net-worth individuals, giving back is a vital component of their overall financial plan, as it offers a profound sense of fulfillment, creates a lasting legacy, and has a tangible impact on their community. Moreover, philanthropic efforts can yield significant tax benefits, while also fostering a sense of social responsibility and personal growth. By incorporating philanthropy into their financial plan, high-net-worth individuals can not only enhance their financial well-being but also contribute to the greater good.
Family philanthropy
Family philanthropy is an important component of creating a lasting legacy, allowing individuals to create a lasting legacy that transcends their own lifetimes. Greater Houston Community Foundation’s Center for Family Philanthropy can help give young donors the tools they need to create something lasting and impactful.
Whether you’re looking to build out your network of local nonprofit organizations or help your family cultivate a culture of philanthropy, the Foundation’s family philanthropy programming can help.
Next Gen Donor Institute
Greater Houston Community Foundation’s Next Gen Donor Institute (Donor Institute) was established in 2011 to help our next generation of philanthropic leaders take the next step in their journey. The Donor Institute is a year-long program that prepares donors to do the following through hands-on workshops:
- Develop their philanthropic identity
- Review local and national philanthropic landscapes
- Work with a team of professional advisors
- Establish a high-level understanding of policy and program development through theories of change
- Learn to evaluate nonprofit financials
- Create and analyze strategic philanthropy roadmaps
The Donor Institute is intended to help you discover who you are as a donor, illuminate the connections between you and your community, and demonstrate how philanthropy can enhance and strengthen those connections.
All participants in the Donor Institute gain access to our local philanthropic network: a community of donors who share your desire to make a difference.
Continue reading about next-gen philanthropy
Philanthropic consulting with the Foundation
If you’re not sure where to start or how much you should be contributing from your inheritance, partnering with Greater Houston Community Foundation for consulting services might be right for you.
Interested in starting scholarships in Houston and beyond? Want to take advantage of a managed donor advised fund? The Foundation can work with you to determine what works best for your philanthropic and financial needs.
Inheriting any amount of money means critical financial decisions. Get help from Greater Houston Community Foundation.
Receiving an inheritance is often the beginning of a long, exciting journey. Develop a plan and partner with trusted professionals to ensure you take the proper steps and avoid common pitfalls.
Managing your wealth now, planning for the future of you and your family, giving back to the community, and leaving behind a legacy is a big job. Do not attempt to go it alone.
Looking to get started? Contact Greater Houston Community Foundation today at 713-333-2200 or connect with us online to start a discussion.
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More Helpful Articles by Greater Houston Community Foundation:
- What is a Donor-Advised Fund?
- How Do You Start a Scholarship Fund?
- How to Start a Corporate Philanthropy Program
- What is a Private Foundation?
- The Importance of Charitable Giving In Financial Planning