A man in his fifties buries his father in the spring. By the autumn he has inherited cash, an investment account and a share of the family house in Toronto. His sister wants to sell the house. His children have asked, carefully, whether he might help with a down payment. He could clear his own mortgage tomorrow. He is holding more cash than he has ever held at once, and a portfolio his father built that he does not understand. Everyone has an opinion about what he should do. So does he, depending on the day.
An inheritance can create new options for you and for the people you care about. It also tends to arrive when permanent decisions are hardest to think through, in the middle of grief, paperwork and family, with expectations attached that nobody says out loud. So the first principle of inheritance financial planning is a reassuring one: you do not have to decide everything now.
The first job is to create space. Understand what you have actually received, deal with the few things that carry real deadlines, and decide what you want the money to change. What to do with the inheritance comes after that, and it is a far easier question once the others are answered.
What should you do first after receiving an inheritance?
Start with what you have received. “Inheritance” sounds like one kind of money. It rarely is. Cash, investments, real estate, a business interest, registered accounts and insurance proceeds can all arrive through an estate, and each one brings its own decisions.
An inherited portfolio may hold assets you would never have chosen. A house has a market value and an emotional value, and the two do not move together. A business interest can bring obligations along with worth. Even cash needs a temporary home while the larger questions get answered, and a boring, accessible one is a choice.
In our experience, tax is usually the first worry and often a smaller one than people expect. Canada has no inheritance tax. Tax owing at death is generally dealt with by the estate before anything is distributed, although anything you keep, such as a property you later sell, will have a tax future of its own. (Source: Canada Revenue Agency, deemed disposition of property) Rather than holding on to an inherited asset you do not want because of assumptions about the tax implications, find out the actual tax position first: work with an expert and ask the question. It is often better than people fear, and it is always better to know.
Managing inherited money starts with an inventory, not an investment recommendation:
- What arrived
- What it is worth
- What is liquid
- What costs money to hold
- Which items carry a real deadline rather than a felt one
Estate paperwork, a property’s carrying costs and a business’s obligations come with real deadlines. Whether to renovate, invest, gift or buy usually does not.
Should you wait before making decisions about an inheritance?
Usually, yes. The idea we return to most often after an inheritance is optionality: keeping the ability to choose later, on purpose, until you know what you want the money to do. There can be a cost to waiting. In our experience, there is more to gain from making permanent decisions once you know what you want them to achieve.
A large amount of unresolved money makes people uncomfortable. Cash feels as though it should be invested. A house feels as though it has to be sold or kept. Debt suddenly looks easy to erase. Doing something feels responsible.
Sometimes waiting is the responsible thing, and it helps to know where the urgency is coming from. Some of it is your own discomfort. Some of it is family. And some of it comes from well-meant advice to put the money to work right away. Investing is part of our work, and we still think the first months are for understanding, not allocating.
The decisions worth slowing down are the ones that are hard to undo:
- A large purchase
- A major gift
- An illiquid investment or long-term commitment
- A holding company set up or collapsed because money arrived
- Any promise to family that will be remembered as one
Sudden wealth planning follows the same rule whether the money came from an estate, a sale or a windfall: reversible decisions first, permanent ones when you are ready. Preserving your ability to choose is not indecision. It is the plan, for now.
How do you decide what to do with an inheritance?
Start with what you want it to change. One of the easiest ways to use an inheritance is slowly. The mortgage gets smaller, the renovation gets nicer, travel improves, the portfolio gets topped up, a child gets some help, and nothing on its own feels reckless. A few years later the money has been absorbed into the life that already existed, and the person is not entirely sure what changed. That can be a perfectly good outcome, if it was chosen.
An inheritance is one of the few moments in a financial life when enough capital arrives at once to change the shape of what comes next, not just the balance sheet. It might mean retiring three years earlier, or helping your children while you are alive rather than leaving them more later. It might mean very little should change. What matters is that you decide whether it does, before the money quietly becomes part of everything else.
That decision comes before any account. People often start with product questions: pay off the mortgage, fill the TFSA, top up the RRSP, invest it all, keep more cash. The eventual answer may include investments inside or outside registered accounts, debt repayment, property, gifts, charitable giving, or a corporate structure or alternative investment where a situation calls for one. Those are tools, and which ones belong depends on the job the inheritance is meant to do.
Clearing the mortgage gives one person lasting security; for another it ties up money that a bigger goal needed. Neither is smarter. So the useful question is not where this money should go. It is this: what should be different because I received it?
Why does inherited money feel different?
This is the part the numbers cannot see. People attach meaning to inherited money because of where it came from: a parent who saved for a lifetime, the sale of a family home, a grandparent’s quiet generosity. Picture someone who would spend $20,000 they earned without a second thought and feels guilty spending $5,000 of an inheritance. Picture someone else who cannot spend any of it, because keeping every dollar intact feels like keeping the person. And a third who spends quickly, because that is what Dad would have wanted.
The family house is where all of this comes together: in Toronto it can be the largest asset in the estate, and the one everyone has feelings about. One sibling may want to sell while another cannot imagine strangers in it. Selling can feel like closing a chapter before you are ready. Both positions are legitimate.
Then there are the people who know the money arrived: a child already imagining what it might mean for them, a sibling who received more, a relative who hopes for some help. Equal gifts are not always fair gifts when children’s circumstances differ, and giving quickly because saying no feels selfish is a decision made under pressure. All of this is human, and a good plan makes room for it. The person who left the money built a financial life for themselves. You now get to build one for yourself.
Give the money jobs
More money should mean less financial anxiety, and with a plan, it can. In the first months after an inheritance, though, there are more decisions than usual, and each can feel weighty because the money represents what someone spent a lifetime building. It is natural to want to move quickly, or not at all.
The purpose of the plan is to turn one enormous decision into several manageable ones:
- Some of the money creates security.
- Some is invested for later.
- Some improves life now.
- Some helps other people.
- Some stays untouched until the answer is clearer.
Once the money has different jobs, every dollar no longer has to solve every problem, and that is usually when the anxiety starts to lift.
A financial advisor’s job after an inheritance is not to tell you where to put the money. It is to help you decide what the money is for, to work alongside the accountant and lawyer already involved in the estate, and to hold the sequence so that nothing permanent happens before you are ready.
The man at the beginning does not need to decide this month whether he keeps the house, clears the mortgage or helps his children. He needs to be sure that when he does, each choice belongs to his own financial life rather than simply extending his father’s. An inheritance can improve a balance sheet in an afternoon. The harder work is making sure it improves the life around it.
If you have recently received an inheritance and are not sure where to start, NexGen can help you work through the decisions one step at a time.