The death of a loved one is never easy to endure. However, learning that your dearly departed has left you an inheritance can be a balm to your soul. Consider these six strategies in order to make the most of a financial windfall.

Don’t Count Your Chickens Before They Hatch There can be a long waiting period between the time your loved one passes away and the time you receive any sort of inheritance. There must be an assessment by the executor of the estate to cover any outstanding debts and liabilities before monies are distributed. Sometimes hard assets such as vehicles and houses must be sold to settle the decedent’s debts from final arrangements, etc. This all takes time. Don’t make any decisions until you actually take possession of the inheritance.

Determine Tax Liability, If Any Some things inherited are generally tax-free like a Roth IRA or a payout from a life insurance policy. Other investment assets such as workplace retirement plan or an individual investment account may have some tax consequences. Unless you are the surviving spouse, retirement assets are taxable when taking distributions. Speak to your accountant or financial advisor to determine the taxability of your inheritance. You don’t want to be surprised with a tremendous tax bill when you file your next tax return.

 Decide if the Inheritance is Life Changing If the amount of money you inherit is a multiple of your current annual salary, it is considered a life-changing inheritance. As such, the most prudent course of action would be to consult with an independent, fee-based financial advisor who is trained to walk you through the best options and strategies personalized for you. If your inheritance is more or less, it would help your financial situation greatly to implement the three remaining strategies.

Establish a Cash Reserve A cash reserve is money set aside for emergencies and for opportunities. The amount of money you should have in a cash reserve should be three to six months’ worth of your household income or expenses. An urgent situation may include paying for a new furnace, last minute plane trip or expensive car repair. An opportunity may be a last minute vacation deal or a great price on an investment of some sort.

Pay Off Your Liabilities Debt of any sort eats away at your positive cash flow. Make a list of everything you owe and make it a priority to pay off what you owe. High- interest debt is anything in the double digits and is typically revolving debt such as credit cards. Those should be paid off before debt associated with an asset such as your education or your home.

Save for Retirement With pensions going away and people living longer lives, the responsibility of remaining financially solvent in retirement has grown enormously. If you can max fund a ROTH IRA for the current tax year, do it. The maximum annual direct contribution to a Roth IRA is $5,500 unless you are age 50 or over, in which case it is $6,500. You may make a contribution anytime from January 1 to the tax filing deadline. Roth IRA Income Limits for 2018 (for single filers) Phase-out starts at $120,000; ineligible at $135,000 (for married filers) Phase-out starts at $189,000; ineligible at $199,000.

Receiving an inheritance can change your financial life for the better even if it’s relatively small. Remember to address saving, paying off debt and having a little fun, too. A shared experience such as a dinner or a vacation is a fantastic way to memorialize your loved one.

Shannan Denison, CRPC® is a registered representative and owner of Denison Financial. Securities are provided through International Assets Advisory, LLC a member of FINRA. She can be reached at 616.264.3443 or email her at [email protected]. The information contained herein is obtained from sources believed to be reliable, but its accuracy or completeness is not guaranteed. This article is for informational purposes only and is not a solicitation or a recommendation that any particular investor should purchase or sell any particular security. All expressions of opinions are subject to change without notice and are those of Shannan Denison and not necessarily those of Denison Financial/International Assets Advisory. Investments, financial strategies or general financial information listed herein may not be suitable for all investors. Past performance may not be indicative of future results.  You should discuss any tax or legal matters with the appropriate professional.