Mistakes to avoid after receiving an inheritance

Emotions run high when a loved one dies. And when that loved one passes on wealth, those emotions in play can sometimes lead to errors in deciding what to do with the inheritance, says an investment advisor.

Writing for CNBC, advisor Joe Allaria, a partner at CarsonAllaria Wealth Management, urges readers who inherit money to avoid several common emotion-driven mistakes. At the top of the list: don’t spend your entire inheritance immediately.

While that might seem like an obvious piece of advice, but some people – when emotions are running high – make impulsive decisions with inheritances. Some people will immediately start looking at buying a new house, new cars and luxury trips to exotic places.

Allaria cautions heirs to think things through before making an impulse buy: “Just make sure you are on track to reach your basic financial goals before allocating money toward ‘extras.’”

He also urges heirs to avoid rushing into a business investment. Instead, he writes that it’s “crucially important to carefully evaluate the business and do your due diligence before making any decisions.”

Another piece of advice: before you lend family or friends money, “you must truly evaluate your own long-term picture first.” As much as you might want to help, your inheritance will do you no good if you don’t use it to make sure you meet some basic financial goals, such as preparing you for a comfortable retirement.

You can discuss the ways in which you can pass your wealth on to those you care for most by speaking with an attorney experienced in estate planning and asset protection.