Are you ready to inherit? The ins and outs of a complex financial matter
An expert shares how to prepare for leaving and receiving.
If you received an inheritance tomorrow, would you know how to handle it properly? It may seem simple to spend a little extra money, but added finances can be difficult to manage or bring about stress. In fact, personal finance expert Rubina Ahmed-Haq suggests you might not be as prepared as you think you are. A 2016 study reported that the baby boomer generation is set to inherit roughly $750 billion over the next decade. Given the country's aging population, it is estimated that Canadians between 50 and 75 are poised to be the recipients of, "the largest intergenerational wealth transfer in Canadian history." And while many of these people may end up with some extra finances or assets, they have no idea how to manage them — which could mean they end up paying higher fees or taxes than necessary. To give us some insight into handling inherited wealth, Rubina stopped by The Goods to share her recommendations for tackling a deceptively tricky task.
Are you ready to receive an inheritance? It's not as simple as it may sound! Here are Rubina's 3 key factors to consider for when you come into some added wealth:
Lower your expectations
Your inheritance might not be as big as you think it's going to be. There may be taxes, lawyers fees, debts, etc. that you don't anticipate. Don't bank on the money to help, see it as a bonus to help add to your financial wealth.
Pay off your debt
Use the money to pay off your highest interest debt first, such as credit cards, lines of credit, or even your mortgage. If you've taken a high-rate mortgage, this is your opportunity to pay a lump sum which could help you lower monthly payments going forward.
Spend with intention
Keep in mind that you're inheriting somebody's life savings that they've worked hard to earn — you're not winning the lottery. Rubina recommends spending it with intention. She suggests you may even want to have the conversation with the person who you will be inheriting from to see how they'd spend the money. Exercise caution when it comes to spending on things like vacations and cars, and consider opting for meaningful purchases instead of consumable things.
On the flip side, are you ready to transfer your wealth? Many people believe that once they have a will ready, that's all they need to do, but Rubina cautions that's not necessarily true. Here are her top 3 things to consider if you're preparing to leave someone a sum of money:
Have a conversation
Talked to your loved ones about your will — and not just once. Your family should always be aware of who stands to receive what. It's a reality of life and it's easier to have when you're in good health.
Make a will
Take the time to write up this essential legal document and make sure that someone actually knows where it is. Don't stop there, make sure your wishes are always current by keeping your will updated as life and family change throughout the years.
Choose your executor wisely
Rubina says to always choose someone who loves and cares about you, and who cares about your legacy. While executors can't change your will, you do need someone reliable who will be able to take the time to ensure that your assets are properly distributed.