Inheriting a lot of money can be scary, and even if you have a lot of investing experience, there are plenty of tax and legal pitfalls that can trip you up. IMAGE SOURCE: GETTY IMAGES.
What do people do with their inheritance money?
The first thing many people do when they inherit money is to look for ways to spend it. Some buy new clothes, a flashy car, a European vacation, a beach house, and on and on until the money runs out.
Do you have to pay taxes on inheritance?
An inheritance tax is a state tax that you pay when you receive money or property from the estate of a person who has died. Unlike an estate tax, this tax falls on the beneficiary to pay.
How long does it take to spend an inheritance?
Even the most financially savvy person can quickly spend an inheritance, and while you might think “not me,” studies show that one in three people spend all of their inheritance (and more) within two years. That’s frightening when you consider it takes a lifetime of saving to build up an inheritance.
What should you do with a large inheritance?
If you end up withdrawing all the money at once and you have to invest a lump sum or you inherited cash, pay particular attention to this next bit of advice. It can be incredibly tempting to start spending your inheritance right away, but it can be smarter to establish a “spending timeout” instead.
How long does an inheritance last one person?
A sum that can last one person a lifetime might last another just a few years, months or even weeks. If you’re lucky enough to inherit a large amount of money when you’re young, here are six tips that will help ensure that your fortune lasts at least as long as you do.
When to hire a financial advisor for an inheritance?
Young adults who receive large inheritances should hire a financial advisor first thing. If your parents had one, they are usually a better option because they already understand the situation. You may even know them personally.
