Estate Planning
December 15, 2023

What to Do With a $500K Inheritance

Stewart Willis

Inheriting a large sum of money can completely change your life. It opens up countless opportunities, and you might ask yourself, “What to do with my $500K inheritance?” A large inheritance also comes with a range of responsibilities and uncertainties.

How you handle this newfound wealth will determine its long-term impact on your life. So, what are the best steps to take to ensure this inheritance money benefits you long-term?

Seek Professional Financial Advice

When you receive an inheritance, your first thought should be to seek out a qualified financial planner. Be careful to do your due diligence to find a fiduciary to help you with your inheritance money. With many financial considerations and intricate details, seeking professional advice is not just a suggestion—it’s an absolute necessity.

Financial advisors, tax professionals, and estate planning attorneys possess the expertise and knowledge needed to provide you with tailored guidance about what to do with a $500K inheritance. By enlisting their help, you can confidently navigate the intricacies of your financial windfall and make informed decisions that will safeguard your newfound wealth for years to come.

Certified financial advisors can recognize individuals who experience sudden financial windfalls and don’t know what to do with inheritance money. They know what problems can arise. Make sure to be mindful of your spending habits.

Don’t fall into the trap of lifestyle inflation. Resist the urge to drastically change your standard of living or make large purchases without a financial plan. Instead, consciously focus on investing your inheritance in a way that aligns with your values and brings long-term satisfaction.

Assess Your Current Financial Situation

Before making any important financial decisions, have a clear understanding of your current financial situation. This entails thoroughly evaluating your debts, assets, income, and expenses. By gaining insight into your net worth and overall financial health, you can establish a solid foundation so you know what to do with a $500K inheritance.

Plant growing in a jar of coins

Create a list of priorities for what you want to do with your inheritance. If you have debts, especially those with high interest rates, it’s wise to pay these off. Also, think about your long-term financial goals. Would you like to own a house, pay for education, or have retirement savings?

Maybe you want to know how to invest $500k for monthly income. If you’re wondering what to do with inheritance money, consider charity. You experience a great sense of fulfillment and explore the potential tax benefits that come with it. Ensuring your inheritance aligns with these objectives will help make them more achievable.

Understand the Tax Implications of Your Inheritance

Tax implications are a significant aspect of inheritance money, particularly regarding investment income. That’s why you should consult with a tax professional who can assist you with what to do with a $500K inheritance. If your income suddenly increases, you may be disqualified from Medicaid, student aid, and other government programs.

Different forms of inheritance carry various implications, including taxes. If the inheritance involves an IRA or annuity, there are tax considerations to take into account. It’s important to note that not all inheritances are tax-free, and the tax liability depends on the nature of the funds received. Seeking guidance from a tax advisor will enable you to strategize for any potential tax liabilities.

Update Your Estate Plan

It is necessary to update your estate plan, given the changes in your financial situation. This means reviewing and revising your will, trusts, and beneficiary designations to accurately reflect your current wishes and financial status. Don’t forget that having a plan for what to do with a $500K inheritance if you pass away can help avoid the hassle of probate for your loved ones if something were to happen to you.

Invest Your Inheritance Wisely

Investing your inheritance is an excellent way to expand your wealth. Creating a well-rounded investment portfolio is a great thing to do with a $500K inheritance. This should be tailored to your risk tolerance and financial goals, including assets like stocks, bonds, mutual funds, or real estate investments.

Remember to diversify your invested inheritance across different asset classes to reduce potential risks. Select investments that align with your comfort level and time horizon to maximize returns. Investments shouldn’t be made blindly—a financial advisor will help you with what to do with a 500k inheritance to reap the benefits.

Not all investments are suitable investments; you need to consider expenses, fees, and taxes. A financial advisor offers invaluable assistance by providing personalized advice in developing an investment plan. With the team from Asset Preservation Wealth & Tax, you will have a holistic approach to managing your inheritance. We consider the big picture to help clients get the most out of their money.

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Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, Stewart Willis, providing such comments, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment, legal or tax advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Personal investment advice can only be rendered after the engagement of Foundations for services, execution of required documentation, including receipt of required disclosures. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Any statistical data or information obtained from or prepared by third party sources that Foundations deems reliable but in no way does Foundations guarantee the accuracy or completeness. Investments in securities involve the risk of loss. Any past performance is no guarantee of future results. Advisory services are only offered to clients or prospective clients where Foundations and its advisors are properly licensed or exempted. For more information, please go to and search by our firm name or by our CRD # 175083.

Alternative/Private investments are often complex,  speculative and illiquid investment vehicles that are not suitable for all investors and are typically only available to accredited investors who meet certain minimum financial requirements.  Alternative Investments often engage in leverage and other investment practices that are extremely speculative and involve a high degree of risk. Such practices may increase the volatility of performance and the risk of investment loss, including the loss of the entire amount that is invested.  They are, therefore, intended for experienced and sophisticated long-term investors  who also have the financial wherewithal to accept such risks.

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