If you inherit $1 million—or any amount—this is the first thing you should do, says financial planner

With the $80 trillion-plus great wealth transfer on the horizon, some members of the millennial and Gen Z generations are poised to each receive hundreds of thousands or millions of dollars, courtesy of baby boomer parents and grandparents who have amassed unprecedented wealth over the past few decades. And while inheriting $1 million—or any significant sum—is far from the worst problem to have, surveys find younger generations aren’t ready to manage it. For most people, a sizable lump sum inheritance is a once-in-a-lifetime experience, and they will have plenty of questions about what to do with the money. Katherine Fox is a certified financial planner who specializes in helping millennial and Gen-Z inheritors. She calls conversations between family members about inheriting wealth a “huge blindspot.” Many families simply don’t discuss their estate plans, whether because the conversations would be uncomfortable or dredge up too many bad feelings. Whatever the reason, the result is many young people who are inheriting money now have “no base knowledge of what to do with that amount of wealth,” because they’ve never had any of their own. Fox, who inherited a significant sum herself, is here to help. The first thing heirs should remember is that they can always do things with their inheritance in the future, but they can’t undo mistakes, she says. Especially if still early in the grieving process, it’s prudent not to do much of anything with the money until they can emotionally handle making a plan. (Financial advisors give similar advice to lottery winners.) It’s best to take a few months, or however long is needed, to think through any life-altering decisions. Once ready to make a plan, it’s important to decide what needs to be done immediately—like paying taxes—and what can be delayed. Then, she suggests paying off any high-interest debt; not necessarily a mortgage, but things like credit card debt, student loans, or an auto loan. With what’s left, Fox suggests implementing what she calls the 90-5-5 rule: Earmark 5% for a “fun and frivolous fund,” 5% for charity, and 90% for a future goals fund. This will sate the desire to splurge a little, pay it forward, and help set up long-term success. “Recognize you have jumped into an entirely new financial position,” Fox says. “Sit down and write out what are your goals in the short-, medium-, and long-term, and try to understand how much you need to have in each of those buckets to reach your goals. That is the framework to understand how you want to invest that money.” Avoiding ‘fear-based’ estate planning Fox started her career in the traditional wealth management industry, where, she says, planners can be overly focused on things like putting guardrails on what kids can do with the inheritance and minimizing taxes. Those aren’t necessarily bad things, but they are “fear based,” she says. And they can create a disconnect between the generations. “There’s a lot of fear of, ‘don’t share too much with your kids because they’ll quit their jobs,’ or, ‘put all your money in a trust so your kids can’t do whatever they want to,'” she says. “But when advisors are shoe-horning families into these fear-based conversations, it does everybody a disservice.” Instead, Fox recommends families have periodic conversations about their values, and that parents be open with their children about any possible inheritance. The best estate plans include the heirs in the planning process, she says. That can help avoid confusion, bad feelings, and even more stress during the grieving process. But, perhaps more importantly, she says younger generations should initiate the conversations as well. Don’t start with diving right into the financials, she says, as people can get defensive. Instead, start with broader questions about estate planning. Has the older generation thought about where they will live when they get older? Do they have long-term care insurance? What are their priorities in retirement? “When you have worked the muscle more, move into the money piece,” she says. Understand what there is to transfer, how it will transfer, and to whom or what organization. “When they die, you don’t want surprises. That can cast an unpleasant light on your relationship with a parent, and you can’t correct that and go back and talk to them.”