Receiving an inheritance is often a bittersweet experience. The financial windfall certainly doesn’t make up for the pain and sadness of losing a loved one. But the inheritance has the potential to make a big impact on your life. However, it’s important to create a plan for your inheritance, especially considering this surprising stat: One-third of people who receive an inheritance, whether it’s cash, property, stocks or an IRA, have negativesavings two years after the event.What happened?
According to a study by Jay Zagorsky, an economist and research scientist at The Ohio State University, many people receiving an inheritance don’t know what to do with it and what options they have, so they end up getting overexcited and blowing through the funds. For people inheriting an IRA, Kate Glidden, advisor at Compass Point, shares this advice to help avoid penalties and fees: “Non-spouse IRA beneficiaries cannot roll assets into their own IRAs. However, they have two other options. First, they could establish an inherited IRA, transfer the funds and take required minimum distributions (RMDs), as determined by their age or the original owner’s age at death. The other option is to decline to accept all or a portion of the IRA assets. In this case, the funds would pass to other eligible beneficiaries.”
If you need help figuring out the next step after receiving an inheritance, come in and chat with your advisor.