If you have a large amount of inheritance money, then you can do anything with it. You can purchase a vehicle, go shopping or go on a overseas tour. But the best way to use inherited money is to invest. If you are young and have inherited a large amount of money. Consider investing the money to get good returns. Think twice before spending your inheritance money. Inheritance money is a treasure trove. Rather than spending, consider various financial instruments like stocks, bonds, real estate, commodities and mutual funds. Investment of your inheritance money is a sound alternative to spending.
Clear your debts
Before spending your inheritance money take into account your current income and expenses and future expenses. If you have any debts, clear them with your inheritance. Outstanding debts will only drain your savings. For example, your credit card bill is taxed at 24-36% on the due amount. This is perhaps the costliest loan of your life. Clear all such loans with your inheritance as quickly as possible. This will save you from the compound interest computations on your loans. Loans should be arranged in descending order according to the interest rates and then paid. Subsequently, investments should be the next priority. When facing difficultly in choosing an investment plan, take the help of a financial advisor. A financial advisor will help you with the available options.
Diversify your inheritance money
Diversify your inheritance money in the various investment options available. Diversification reduces the risk and gives a better chance of positive returns on investment. Investment in real estate is a good example. Investment in real estate will yield better returns when compared to other investment options. One example would be the regular returns in the form of monthly rental.
According to the current Indian income tax law, tax is not applicable on inherited property. Tax is applicable only on the sale of a property. If you sell your inherited property, then tax is applicable on the sale of the property. The value of the property is not taxed, according to the Indian tax law. Tax is only applicable if you have more than one property and the valuation is more than Rs.30 lakh. The income of the inherited property is taxable.
Savings for Emergency
Alternately, one can choose to save money for a rainy day. This would be a portion of your inheritance that you have set aside for any emergency. One can also deposit inheritance in a savings account or in a pension fund. Think of buying a car or the overseas tour after you have invested and cleared your debts.
Inherited money is a treasure. Rather than running through it quickly, investing the money is a sound option. Take a step back and relax when you stumble on an inheritance. Think carefully and assess all your options. You can also give yourself a break to recuperate from your deep loss. Once back to emotional stability then you can work on the best possible utilization of your new-found inheritance. When it comes to inheritance, planning is imperative before one acts.
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