An Inheritance Received, One Decision at a Time

Over the coming years, the largest wealth transfer in our history is expected to take place — this time between baby boomers and their heirs.

Yet when they receive an inheritance, many people give little thought to planning for this sudden arrival of funds. Here are the moves that shield that money from impulsive spending and put it to work in your best interest.

Think before you act

The first principle is simple: never make a decision in the heat of emotion. Receiving an inheritance also carries its share of grief — the loss of a loved one — which makes us more likely to drift from our goals.

We recommend temporarily parking the funds in a high-interest savings account, giving yourself time to think about what you want to do with them. It creates the step back you need before acting.

Take stock

The second move is to draw up an inventory of your consumer debts — credit cards, line of credit, personal loan, car loan — and identify which ones cost you the most because of their interest rate.

With that picture in hand, you can build a strategy around your priorities, along with short-, medium- and long-term goals.

Optimize

Making the most of an inheritance calls for strategic planning: pay off the costliest debts, top up your unused RRSP and TFSA contribution room and, if you have children, invest in an RESP.

There is no magic recipe. Every situation should be analyzed according to your stage of life and your profile. Someone close to retirement will not have the same goals as someone younger.

Three tips

• Use a small portion of the inheritance to make a long-held goal or dream come true: a family trip, buying a boat.
• When a sizeable inheritance arrives, requests from those around you spike. Don’t give in to the pressure: ask your financial planner to manage those expectations.
• Beware of purchases that would significantly increase your expenses: a luxury car, an expensive home. Aim to keep the same standard of living as before.

A plan that crosses generations

Receiving an inheritance also means receiving the responsibility of making it last. Book a meeting with our team — a confidential conversation, with no obligation, to build a strategy worthy of what you have received.