Written by Brad Laird

Receiving a large sum of money, whether that be an inheritance, payout, etc., can dramatically change your financial situation. While it opens doors to new opportunities, it also brings a set of responsibilities and decisions that can significantly impact your financial future. Taking thoughtful steps early on can help you make the most of this windfall while avoiding common pitfalls. Here are some crucial actions to consider when you find yourself in possession of a substantial amount of money.

1. Take a Moment to Reflect

Before making any major decisions, give yourself time to process the situation. The emotions surrounding an inheritance, especially if it follows the loss of a loved one, can often cloud your judgment.

Avoid Immediate Spending: Resist the urge to make large purchases or lifestyle changes right away.

2. Secure the Funds

Ensure that the money is placed in a safe and accessible account.

3. Understand Tax Implications

Inheritances can come with tax obligations based on the type and value of assets received. For example, inheriting a large stock portfolio may generate additional income, increasing your taxable income. Selling inherited assets, such as shares or property, may also trigger capital gains tax on any value gained since the date of death. A Financial/Tax Adviser or accountant can help you understand any taxes implication that may apply.

4. Assess Your Financial Situation

Take stock of your current financial standing to make informed decisions.

Review Debts: List any outstanding debts, such as mortgages, student loans, or credit card balances.

5. Meet with a Financial Adviser

Contact us here at Salt Financial Group with one of our trusted adviers who can provide guidance tailored to your specific situation. Furthermore, our Accounting team can ensure you avoid any negative Tax implications.

6. Set Clear Financial Goals

Define what you want to achieve financially in the short and long term.

Emergency Fund: Ensure you have a fund covering at least three to six months of living expenses.
Retirement Planning: Consider boosting your retirement savings for long-term security.

7. Be Mindful of Lifestyle Inflation

An influx of money can often lead to increased spending habits that may not be sustainable.

Avoid Impulsive Purchases: Give significant purchases a waiting period to ensure they align with your goals.

8. Communicate with Family

Transparency with close family members can prevent misunderstandings and conflicts.

Set Boundaries: Be prepared to handle requests for loans or gifts thoughtfully.

Receiving a large sum of money is a significant life event that requires careful consideration and planning. By taking deliberate steps; securing the funds, understanding tax implications, consulting professionals, and setting clear financial goals; you can make informed decisions that enhance your financial well-being for years to come. Remember, the key is to proceed thoughtfully and utilise available resources to navigate this new chapter responsibly.

If you've recently received an inheritance and are unsure how to navigate the financial decisions ahead, we’re here to help. Contact us at Salt Financial Group, and let our expert team guide you through every step to make the most of your new financial opportunities.

What To Do When You're A Recipient of a Large Sum of Money