If you were born after 1980, you might see your wealth multiply five times in the coming decade. Understanding how to handle this newfound money is essential for future success.

Have you fantasized about hitting the jackpot or receiving a hefty inheritance from a distant relative? This dream could become reality, but in an unexpected way. Over the next ten years, millennials are anticipated to receive an astonishing $68 trillion from their Baby Boomer family.

This projection brings hope to many young adults currently facing financial challenges. If accurate, millennials will become five times wealthier by 2030, solidifying their status as the richest generation in history when their parents pass on this wealth.

So, what should millennials do with this fortune? Some might blow it all, while others could hoard it in savings. Neither approach is wise for managing a substantial inheritance. It's crucial to take a thoughtful approach to spending and saving. Here's how to maximize your wealth.

Stay Composed and Seek Guidance

What's your first step after receiving an inheritance? Place it in a savings account. Safeguarding your funds until you decide your next move is a vital initial action. Once the money is secured, connect with a financial advisor for insights on your options.

Maintain Your Budget

Many underestimate the funds needed for lifelong comfort. (You might live longer than anticipated due to advancements in healthcare!) Before celebrating your fortune and leaving your job, evaluate what this inheritance means for your financial plan. It could allow for an early retirement or a new home. Keep budgeting your income and tracking your expenses to ensure you can live comfortably without financial worries.

Consider Your Tax Obligations

Before sharing your inheritance news, remember to factor in taxes. As of 2021, federal estate taxes only apply to estates valued over $11.7 million, so most of us won't be affected. However, six states impose inheritance taxes with varying rules on exemptions and owed amounts. For instance, if you inherit $150,000 and the state taxes amounts over $100,000, you'll only pay tax on $50,000.

Additionally, most states require tax payments to be made within a few months after the death of the benefactor. In Iowa, for example, you must submit the inheritance tax return and payment by the ninth month's end post-death. Keep these details in mind as you navigate the process, ensuring your financial planner keeps you informed.

Make Thoughtful Investments

Have you ever owned a house? Perhaps you want a new car or a master's degree to enhance your career prospects? With your inheritance, you might achieve these dreams, but it's essential to prioritize wisely. Making impulsive large purchases could deplete your funds quickly.

Evaluate which significant investment could offer the best return. Purchasing a home can generate equity and serve as a valuable asset for future generations. Alternatively, pursuing advanced education may lead to higher earnings. Assess the advantages and disadvantages carefully before making decisions.

Reinvest for Growth

One effective way to grow your wealth is to reinvest your inheritance. If you're new to investing, read up on the basics here. You have endless possibilities, but if you prefer security, consider index mutual funds or bonds if you're open to some risk.

To reduce risk, avoid concentrating all your investments in a single area; diversify across various asset classes and stock types. Once you're familiar with the stock market, explore options like real estate, cryptocurrency, and other assets. Adding a significant portion of your inheritance to a retirement account—one that you can't access until you're at least 65—can also be a smart strategy. You might use a traditional IRA to start building your savings or invest in a cash-value life insurance policy for tax benefits and borrowing options.

Indulge Responsibly

If receiving an inheritance came with the loss of a cherished person, treat yourself kindly. Allocate a modest amount for a long-deserved vacation or to purchase items that bring you joy. Invest in hobbies or acquire a meaningful piece of jewelry that reminds you of your loved one.