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5 Mistakes To Avoid When Handling An Inheritance


If you’ve been lucky enough to receive an inheritance, you might be tempted to start spending. After all, a few small indulgences couldn’t hurt, right? Take a deep breath and slow down. Two of the most common inheritance mistakes we see are that people move too fast and spend or give too much.

Instead, develop a plan for the inheritance that helps you meet your financial goals, from rescuing your retirement to financing your kids’ educations to adding to your living space. Reaching your most important financial goals in the long-term is worth putting off a few short-term satisfactions.

Here are five Inheritance mistakes we see, from the latest contribution to

  • Spending mindlessly: Until you have developed a long-term game plan, slow down and try to avoid mindless spending on “just a small indulgence.” A series of those kinds of purchases can morph into a spending splurge that might rob you of your ability to reach your overall goals for the inheritance.
  • Going it alone: Even Americans who manage their 401(k)s or their taxes well on their own can benefit from help. That’s because a windfall, whether it’s an inheritance or even lottery proceeds, is different. Consider assembling a team, including an estate attorney, an accountant and a CFP® professional.
  • Making decisions too quickly: Be careful not to make any big life decisions, like selling a house or quitting a job, too early in the process. Use your team to help create a timeline of goals and remember that an inheritance often coincides with loss. Give yourself enough space to grieve.
  • Becoming paralyzed in the investment process: Sometimes people who receive a lump sum become so worried about “investing at the top”, that they do nothing. Consider dollar cost averaging (DCA), the investment strategy that divides available money into equal parts and then periodically puts the money to work in a diversified portfolio over time.
  • Providing for everyone except you: You love your kids. You love your friends. You love your charitable organizations. That said, until you have developed your plan, push the pause button. There will be plenty of time to provide generous support, without putting your own financial security at risk.

Receiving an inheritance is a great reason to consult a CFP® professional, who can help you tailor a plan that meets your long-term financial goals.


About the Sudden Wealth Financial Advisor

Robert Pagliarini, PhD, CFP®, EA has over 26 years of financial planning and investment management for the suddenly wealthy. Robert is a CFP® Ambassador, one of only 50 in the country, and a real fiduciary. He authored the book The Sudden Wealth Solution: 12 Principles to Transform Sudden Wealth Into Lasting Wealth in hopes to help those deal with sudden wealth and the emotions that come along with it. In addition to his Ph.D. in financial and retirement planning, he earned a Master's in Psychology to better understand and be equipped when helping clients manage a windfall. He has helped clients from across the United States who have received a windfall from an inheritance, lawsuit settlement, business sale, stock options, sports and entertainment contracts to make sense of their sudden wealth. When he is not helping the suddenly wealthy, you can find him writing personal finance books and articles for Forbes. If you're needing help managing wealth, contact Robert directly.

Reach us at (949) 305-0500