Receiving an Inheritance? Here Are Some Common Mistakes To Avoid, According to Experts
The period after the death of a loved one can be a confusing time, especially when an inheritance is involved. It is usually a period of mixed emotions as a person deals with their loved one’s loss and an inheritance. You may be grieving the loss of your loved one while at the same time feeling joyful because of the inheritance. Because of this mix of emotions, it can be hard to be objective and make the right decisions. It is easy to make inheritance mistakes. In a previous article with the same title, we discussed six mistakes to avoid when receiving an inheritance. These mistakes are failing to get expert advice, failing to account for taxes, not following a realistic plan, making decisions too fast, spending the inheritance too quickly, and being too charitable. In this article, we share more mistakes to avoid when receiving an inheritance.
Mistake #1: Letting Your Emotions Cloud Your Judgement
Feeling a strong connection to inherited assets or possessions is natural and understandable. For instance, a family home, business, or heirloom may have a sentimental value. It may be tempting to want to hold on to inherited assets or possessions. However, you should not let your emotions dictate your decisions, as that could lead to family conflicts, missed opportunities, unnecessary expenses, and long-term financial strain. For instance, sentimentality can prevent you from liquidating assets that don’t serve a practical purpose in your financial plan.
To avoid this mistake, allow yourself time to grieve and process your emotions before making huge decisions. You can also highly benefit from seeking advice from professionals such as financial advisors or estate planning attorneys.
Mistake #2: Not Diversifying Investments
After receiving an inheritance, it is vital to build a plan to manage and invest your new wealth. Experts recommend diversifying your investments. Concentrating a lot of your inheritance in one area exposes you to greater financial risk. Having a diversified portfolio can enable you to preserve and grow your wealth over time.
Mistake #3: Failing to Update Your Estate Plan
An inheritance can significantly change your financial situation. However, it is easy to forget to update your estate plan accordingly after receiving an inheritance. Do not make this mistake. Whether it’s updating or revising your will or creating a trust, update your estate plan according to your wishes.
Mistake #4: Doing it Yourself
Unless you are an expert in estate planning, finances, investments, taxes, and retirement, you should consider seeking professional help. Consider a professional team comprising an accountant, an estate planning lawyer, and a financial advisor.
Mistake #5: Not Paying Off Debts
After inheriting a large sum of money, prioritize paying off your debts. By clearing your debts, you can avoid unnecessary financial strain and better manage your newly acquired wealth. Paying off debts will relieve financial stress and improve your long-term financial health.
Mistake #6: Not Saving Enough
Receiving an inheritance can lead to you thinking about the many things you can do with your wealth. However, it is crucial that you save enough. After taking care of debts, create an emergency fund and put in enough money to live on for about half a year.
Contact The Probate Guy
If you’ve lost a loved one and need help with the probate process, contact the dedicated California probate attorney, Robert L. Cohen – The Probate Guy – today to schedule a telephonic consultation.
Southern California Probate Lawyer Serving Orange, Riverside, Anaheim, Whittier & Beyond.
