NEW YORK (MainStreet) —When you come into a lump sum of money, Ponzi schemes and yachts aren't the only bad investments out there. Here's a look at eight things you should never do when you inherit money.
1. Delay paying your taxes.
If you inherit a lump sum, you could have a huge tax liability on your hands, says Kurt Fillmore, president of Wealth Trac Financial Group.
"If someone leaves you an IRA and you cash it out all at once, you're going to have to pay those taxes," he says. "You may think, 'Oh, I have a lot of money, we won the lottery,' but then you will have spent everything without thinking about the future. "
When you get an inheritance, you may be going through a grieving period, notes Will Waldner, an attorney in New York City. Taxes may be the last thing on your mind. But it's something that needs to get settled quickly.
"It's human nature to want to try something creative or buy something new," he says. "But now is not the time to start a new business or buy a luxury car. It's the time to be patient, pay your taxes and just let things sink in."
2. Pay off your house.
When there's ample money in the bank, it can be very tempting to pay off your house and sit back and enjoy not having a monthly mortgage, Fillmore says. Although this can be fulfilling emotionally, it's not the smartest decision financially.