You got lucky. You just got an inheritance of Rs. 30 lakhs from an rich aunt about whom you had (stupidly) forgotten. What will you do with it?

Here are some sensible tips:

As soon as it comes move it to a liquid fund…and let it remain there for 45 days for a start. Then do the following:

  • share the news only with your wife / parent(s)
  • even your children need not know so much in a hurry. Relax.
  • think of what to do by reading various websites, magazines, etc. DO NOT ASK ANYBODY for ideas.
  • If there are other cousins who have got cheques do not STILL TELL them unless they already know this

How should you use the Rs. 30L? First of all you are lucky to stay in a country with zilch Inheritance tax and so you have no worry on that count.

  1. Do nothing for 45 days, but if you are still excited about the amount increase this ‘cool down’ period to about 3 months. It is in this period that you will consider a world tour, a bigger house, a bigger car,….so just cool down well.
  2. Keep a low profile: Lets say your net worth is Rs. 30L and the inheritance is Rs.2 crores – I am sure there is a temptation to quit your job and do some business. Right? Wrong. Just because you got funds, it does not make you a businessman or a fund manager. If you have been a security guard, peon, clerk, manager, Vee Pee, doctor – that is your MAIN PROFESSION…continue to do it.
  3. At what age have you got it: If you got it at age 55 it might just go to dramatically enhance your retirement, but if you got it at a younger age there could be more claimants in terms of multiple goals like repaying student loan, home loan, daughter’s marriage, etc.
  4. Create your adviser team: turning to family members who are NOT in the financial advisory business makes no sense. You will need a financial adviser and an Income Tax consultant. You will need a lawyer to make a will, etc. So silently create your team of advisers without revealing any thing to them about the inheritance.
  5. After all this is done see how much you have (current net worth) and how much you have inherited.

Let us assume case 1 when you are 32 years of age, have a net worth of Rs. 85 lakhs, and you have inherited Rs. 4 crores. I am sure it sounds interesting to quit your job and go on a world tour? No this amount sadly does not allow you to fall out of the job market and do exactly what you can afford to do.

So you should use 1 crore to pay off all your housing loan, and car loans.

Put away Rs. 1 crore in a fund with about 65% or MORE in equity – this is gone for a period of 28 years.

Put away Rs. 50L in a debt mutual fund with a low duration + Rs. 50L in a Multi cap equity fund.

Splurge Rs. 1 crore over a period of say 5 years – let it remain in a combination of liquid funds, debt and equity funds till you do not exhaust it.

Let us assume case 1 when you are 55 years of age, have a net worth of Rs. 285 lakhs, and you have inherited Rs. 4 crores. I am sure it sounds interesting to quit your job and go on a world tour? Well, hold on do not be in a hurry. Clearly this amount allows you to quit your job and do whatever you want to do, but you also need to see what you will do to keep yourself occupied.

Assuming you had a Rs. 5 L car loan, pay it off fully and consider buying a new car.

Put away Rs. 1 crore in a fund with about 65% or MORE in equity – this is gone for a period of 10 years. This is your retirement fund which will be used to buy an annuity at your age of 65.

Put away Rs. 50L in a debt mutual fund with a low duration + Rs. 50L in a Multi cap equity fund. This fund is going to be used for a draw down from your age of 60 till your age of 75. By 75 this amount would have grown well too.

Splurge Rs. 1 crore over a period of say 5 years – let it remain in a combination of liquid funds, debt and equity funds till you do not exhaust it.

See what is missing?

  • Loans to friends, children, siblings, etc…NO SCH LOANS PLEASE.
  • A dramatic asset acquisition saying ‘I can afford it’
  • Acquiring a bigger house in a posh locality where people look at you with jealousy and contempt!
  • Tom Tomming about this to everybody and attracting attention.

Go, have fun. You have funds.

 

 

 

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  1. Whatever be the inheritance I would splurge less than 10 percent.

    45 day cooling off period is a great strategy whenever we receive a lumpsum amount. Be it in business or inheritance.

  2. Subraji early morning sapne mat dikyao. For most of us unexpected inheritance nahi unexpected liabilities are the norm :):)

  3. Managing the corpus in correct and proper way is always tough task for many people.

    People who have knowledge about finance do not have huge corpus
    People who don’t know about finance and investment have corpus

    Happy Investing!

  4. If you get an inheritance make sure you leave a similar amount (inflation adjusted) for people you love. Any extra, enjoy!

    And one more thing, you got a windfall, think of the under previliged a bit and make a small donation at least. No it won’t hurt you, it’ll in fact make you even more aware of the responsibility you shoulder now.

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