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If I inherit $100,000, what should I do?

Receiving a sudden and unexpected inheritance of $100,000 is quite a gift, especially if you already have your retirement planning settled and the extra money is nothing more than that, extra money. The question is, what should you do next?

When it comes to what the receiver of a $100,000 inheritance "should" do, it seems that every financial advisor will have a different idea. A lot will tell you to pay down your credit cards, pay down your mortgage or try to pay off your car, and perhaps invest the rest for retirement. One of the key points here is to establish a relationship with a trusted financial advisor who you've done your background research on, discuss your financial needs and goals, see what kind of advice you receive and decide whether you want to follow it.

Another key point is that you may want to speak with an estate lawyer, and also a tax lawyer. Taxes could be an issue relating to the inheritance. For example, what if the $100,000 isn't cash, but it's a family cottage. In this case, the recipient of the cottage may want to think about the tax consequences of keeping the cottage. If the cottage has risen in value considerably since it was purchased, the recipient will want to know whether inheritance tax and capital gains tax will need to be paid on the cottage. These taxes could be prohibitive and necessitate the sale of the cottage or taking out a mortgage on the property to pay them off.

Yes, receiving a large inheritance is definitely something to be thankful and grateful for, but money requires a responsible and informed attitude in order for its recipients to keep it. In many cases, a consultation with a skilled and experienced lawyer is all that Canada heirs require to stay grounded, responsible and informed with regard to their newly received assets. At Garton & Harris, we have highly experienced estate lawyers on staff to speak with new clients about every aspect of their inheritances.

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