Skip to main content

Check out our 2Q2021 Investment Update Video + Blog!

I Stock 1257889974 JAB Blog Inheritance USETHISONE

3 Steps to Help You Make Better Decisions about Financial Gifts, Inheritances

Photo of author, Julie Brown, CFP®.
Julie Brown, CFP®
Financial Strategist

My Mom recently mailed my brothers and I a surprise. No matter how I probed and pleaded, she would not tell us what she was sending, but I could tell she was excited for us to receive it. As I waited for my package to arrive, the range of my imagination was extreme — Did she and Dad plan a family trip to Paris…or did she knit me some new socks? I had no idea what it could be!

Author Julie Brown as a young child pictured with her grandparents.

When I finally received Mom’s surprise, it was so wonderful to see it fall toward the “Paris” end of my imagination. She had sent me a check — a generous gift from my grandparent’s estate.

This wasn’t a change-my-life sort of inheritance, but it was substantial enough that I wanted to make sure I thoughtfully considered how to use it. Of course, the CERTIFIED FINANCIAL PLANNER™ side of me knew the long-term benefits of investing it for my family's future, but I also wanted to indulge my fun-loving side and could not help but envision a dreamy Parisian holiday.

And, in between those two options, lay several other practical uses that also made sense, such as putting it toward a new vehicle purchase, or paying off the new HVAC system we unexpectedly had to have installed, or even just contributing it to our savings account and using it for the next project on our home improvement list.

With so many options, how could I choose what was right for me and my family? In our office we sometimes use a twist on the old adage “Physician, heal thyself;” we encourage each other with “Planner, plan for thyself.” So, I relied on my financial planning skills and sorted through the possibilities to land on a plan that worked best for my situation.

Here are my three steps for making better decisions about financial gifts and inheritances:

Step #1: Make a list of every way you would like to use this money. In my case, the list turned out as follows:

  • Long-term savings goals
    • Roth IRA contributions
    • Kids' college savings accounts (529s) contributions
  • House projects
    • New HVAC
    • Replace siding
    • New furniture
    • Porch update
  • Vehicle down payment
  • Vacation/Travel


Step #2: Prioritize the items on your list. Make sure you are clear on your financial goals so you can rank your items in order of importance to your situation. Here’s a peek at my thought process:

  • Long-term Savings: Taking advantage of every opportunity to save for retirement is high on our list. Ensuring our kids attend college is also an important goal and the time we have to save for this feels like it is flying by. PRIORITY: High
  • House Projects: Between savings and regular household cashflow, we already have an expenditure plan for the new siding, furniture, and porch renovation projects, so we will not use any of the inheritance toward those expenses. However, the HVAC replacement was a major, unexpected expense. Applying a portion of the inheritance toward the HVAC system makes sense because it allows us to pay off the remaining amount owed from our household emergency fund while keeping the emergency fund balance at a comfortable level. PRIORITY: Medium
  • Vehicle Purchase: A new car is something that must happen within the next few weeks. We have some money saved toward the purchase but are expecting to finance most of it. It would be great to increase the down-payment as we prefer to keep our debt as low as possible. Priority: Medium-High (the immediacy of this need bumped its priority up)
  • Vacation/Travel: Someday I’ll enjoy that trip to Paris, but right now these other goals are more important. That said, using some of this money for a fun summer vacation with my family feels like a nice homage to my grandmother, who got a lot of joy out of traveling and spending time with her family. Priority: Low


Step #3: Determine how to apply your inheritance gift to your goals based on your priorities. Here's my final plan:

  • Long-term Savings – 53.3% (40% toward retirement, 13.3% toward 529s)
  • House projects – 13.3% (all toward HVAC payment)
  • Vehicle Downpayment – 20%
  • Family vacation – 13.3%
Pie Chart JAB

This allocation felt like a good representation of our priorities as a household. Long-term goals receive the highest dollar amount to put the full weight of compounding growth to work for our family’s future. Short-term goals (home renovation projects and vehicle purchase) receive the next highest percentage to reinforce our focus on maintaining low household debt. And lastly, a small percentage is allocated to special family experiences.

No matter what the amount of your inheritance or financial gift, applying these three steps will allow you to build a plan you can feel confident about. We firmly believe living a "good life" is living a good life now and in the future.

Perhaps you would like some help working through this process with a knowledgeable advisor. Or perhaps you received a gift or inheritance that is substantial enough to change your life! In either scenario, please give us a call. Our advisors are well versed in helping people maneuver through these complex life situations; we are here to help you Master Your Wealth.

Related Insights
I Stock 1199587565 Life Plan TCP blog

Are You Getting the Best Return on Life?

When it comes to investing, the current standard of return on investment (ROI) can be self-limiting, adding pressure that is counterproductive. So much of ROI is not within our control. It’s important to balance return on investments with return on life (ROL). Return on life is defined as, "How well you are doing in living the life you want, with the money you have.”

Read More
I Stock 858276820 THIEF SAT blog final

Comparison Is the Thief of Joy

Mastering your wealth isn’t about beating someone else’s returns. It’s important to recognize that no two financial strategies are alike. Another person’s financial plan is likely (and should be) built around completely different goals and objectives, and completely different risk tolerances and acceptance of volatility. Your financial plan should focus on whether you are able to achieve your needs, wants, and wishes. Learn more.

Read More
I Stock 513315353 DJM Blog May21

When to Collect Social Security — Now or Later?

The Social Security Administration considers full retirement age at 66 or 67 years old (depending on your year of birth), but workers can start collecting social security as early as age 62. What are the benefits of collecting early versus later? Learn more here.

Read More
Play