Skip to content

Invest Your Inheritance Responsibly. A Guide To Investing Your Gift.

You have an Inheritance.  Now What?

More than $40 trillion will pass between generations by the year 2055 according to the Center on Wealth and Philanthropy (CWP) at Boston College.  That’s a whole lot of hard-earned cash.  For many baby boomers and generation Xers, this gift may actually feel like a burden rather than something to look forward to.  Anxiety creeps up and even feelings of guilt in proportion to the amount of money received.  In a moment when financial situations should seem more relaxed, it can surprisingly be a time when it is difficult to make financial decisions.  If you or someone close is the beneficiary of an inheritance, no matter what the size, these strategies should help guide you to integrate your new wealth successfully into your life

Don’t quit your job yet. Relax.  You may want to first walk into the local Target and let off some steam by purchasing some fancy new leather pants. Don’t.  It is important at this moment to stop and think about how fortunate you are to have nice relatives.  Do not go out and buy that Aston Martin that you just watched on the last Austin Powers movie either.  At this point, instead put the cash into a money market account and think.  If there is any high rate debt outstanding, perhaps this is a good time to rid of that.  Do you have an emergency fund set aside? If not, do this next. Amazingly, a 2000 study by Oppenheimer found that about 40% of individuals who received an inheritance of $50,000 or more spent less than a week deciding what to do with it.  Think about and consider how any decisions might impact the rest of your life.

Consider the pros.  Three of these pros on your list to call should be :

  • Accountant
  • Registered Investment Advisor (wink… Sustainvest)
  • Estate planning attorney.

The only professional service you had before this was using your local barista at the coffee shop. Granted, a good mocha is important, but also the value of good financial, legal and tax advice increases with the amount you inherit.  First, call on a good CPA or accountant to prepare them that you will be visiting them to have tax documents/process in order. Next, find a good independent investment advisor that is aligned with you—not some cookie cutter big firm that plops clients into a model.  Also, because this chunk of change was given to you, creating a financial plan with Sustainable and Responsible Investing (SRI) principles means that you will get market equivalent returns along with feeling good about investing in companies that are integrating sustainability into their model.  And third, start looking for a good estate planning attorney that you feel comfortable with.  All three of the above should make you feel more relaxed and you shouldn’t get that sleazy car salesman feel after chatting with them. They should also be able to disclose their fees to you either via their website or verbally and quickly.

Watch for fees and taxes. If you inherit assets other than cash, the amount you get might turn out to be less than you expect after you sell them. For example, if your parent leaves you a house assessed at $750,000, you’ll probably have to pay a real-estate agent to sell it. At around 6% commission those agents charge, you are looking at a hefty $50,000 charge.  The word “cost-basis” will become well understand by the time you get through the process.  Granted, a lot of taxes are paid by the estate prior to passing to you, but this is why having a good CPA will become very important.  Inherited IRAs are also becoming quite the norm due to retirement plans passing on to heirs.  Inherited IRAs require special handling to avoid missteps that can result in large tax bills. If you cash out a parent’s IRA, say, and roll the money over to your own IRA, the entire amount will subject to ordinary income tax.

Take a vacation.  It’s already known that we American don’t spend enough time with our feet in the sand.  This may be the excuse to do so.  It doesn’t have to be the $3000/night villa in Barbados, but something that will give you and your family some time to relax.  The relative who passed this on to you probably worked very hard to earn this money and most likely wanted their heirs to enjoy themselves but to a certain extent.

If you have any questions regarding an inheritance and how to manage it (especially integrating impact investing or values-based asset allocation) don’t hesitate to reach out to us.

inheritance investing with Dale Wannen Dale Wannen, MBA

Founder Sustainvest Asset Management


Sustainvest Asset Management is a fee-only registered Sonoma County investment advisory firm focused on sustainable and responsible (SRI) investing. We align our client’s investments with their goals and values through sustainable companies. Whether you are a new or seasoned investor, I offer a complimentary consultation on your investment strategy.

Clients include individuals, families, foundations and non-profits with financial planning services including investment management, 401k, 403b or IRA rollovers, trust accounts, non-profit asset management, retirement planning, fixed income investing and managing inheritances.