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I have an inheritance: What should I do with it?

Your relative has left you a portion of his or her life's savings. Now you have choices to make. Do you invest, pay your bills, give some to charity or just have a good time spending it?

Everyone's situation is different, but the first thing you may want to do is think before you announce to everyone that you have received an inheritance. You may find people coming out of the woodwork with investment opportunities, or relatives requesting loans. Be cautious about who you tell about your inheritance. If you need advice and have a trusted friend or family member, you may want to speak with them.

Who should I talk to about investing? The easy answer is: a financial planner. However, if you plan on having a financial planner, your best bet might be to find one who charges by the hour. Some financial planners make commissions on investments, so it is in their best interest to sell you certain investments. This is a conflict of interest, and not always to be trusted as the best source for your money.

Don't make quick decisions. Think it through. Whatever you decide to spend your inheritance on, you don't want to quickly squander all of it away and then have regrets. Take a breath and step back. Do some planning, give it some time and then take a second look at your plan. This is not the time for spontaneity.

Consider your tax consequences. Know your state's policy on inheritance tax. In Kentucky, immediate family members, such as spouse, mother, father, brothers and sisters do not have to pay an inheritance tax on property or funds inherited. However, nieces, nephews, cousins, aunts, uncles, grandchildren and other relatives have an exemption amount, and then are taxed a percent for anything of value over that exemption amount.

If you have questions about any inheritance matter, you should seek an estate attorney. They can provide you with legal advice so you do not make any disastrous mistakes. You might even think about setting up your own will or trust from your inheritance for your future generations.

Source: NerdWallet.com, "How to Responsibly Handle an Inheritance," Virginia C. McGuire, June 11, 2015

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