What Do I Do With My Inheritance?

Insurance has always been structured for the purpose of passing on good memories when one passes on and making sure that livelihood of their loved ones whom they are leaving behind, are undisrupted by this unfortunate event. But what happens when you are the recipient of these inheritance?

As much as people do not know what to look out for when they first consider insurance planning, they too do not know what to do with the sum of monies when they receive in a sizeable sum, e.g. $100,000.

What would be the best use of these monies?

  1. Down payment for a property
  2. Down payment for a car
  3. Clear outstanding debts
  4. Leaving a further legacy for the next generation beyond yourself OR
  5. Simply saving It up without any purpose

There is no one correct answer for the above as it all depends on individual perspective.

Down payment for a property

Many people view getting a property is creating an additional asset in their financial portfolio. I cannot agree more to this. This is especially so if it was rented out, creating a source of passive income. This is only possible if and only if it is a debt-free property.

A property that is bought with a mortgage loan, will still have debt repayment until the loan is fully repaid. In the case of one that has been rented out, the rental income is used as illustrated below

Click above image to enlarge

Down Payment for A Car / Going for a Pick Me Up Travel

Losing a loved one is never easy. A trip overseas or buying a luxury item could be a choice to help with the emotional loss. These temporary relieve helps but it also means that the money is spent away.

I once had a client who spent a whole month away in Australia after she lost her husband to heart attack. When she came back, she told me that she had spent a whole lot of money and has to start working again although she hasn’t fully gotten herself back yet.

Clearing Outstanding Debts

Sometimes with a messy plan, people involuntarily may leave behind debts for their family. E.g. Business owners may not have drawn up proper planning to safeguard their family from the debts incurred from their business.

Debts will never be written off in the event of the borrower’s demise, thus family members have to shoulder on the responsibility of repaying. This is where insurance pay outs will be used to pay off the debts.

Leaving a further legacy for the next generation beyond yourself

The legacy that your loved one had left behind does not have to stop with you. With proper planning, it can be passed to your next generation. This can be done via insurance plans which not only provides coverage like death but create a source of income for both you and your future generations.

Do you remember the name of your grandfather? You probably do as most of us had the fortune of growing up with the love of our grandparents surrounding us. Do you remember the name of your great-grandfather? Well, if he has leave behind an inheritance no matter the amount, I am very sure you will remember him!

Simply saving It up without any purpose

This way of savings is not savings without a purpose. But rather, this is a way of ensuring that your loved one will never be forgotten. There is never a right or wrong answer to savings. As long as it is a means to ensure that your money is growing with interest and more importantly, providing guarantees to your capital input wherever possible.

What Kinds of Insurance Instruments Can You Use?

Every insurance instrument is created with a specific purpose;

  1. To give one money when he/ she is sick or unable to work
  2. To provide a lump sum of money for a particular purpose that the saver has set up for
  3. To provide a regularity of income during retirement years
  4. For consumers who wants more than the interest that the banks can offer them in Savings Account / Fixed Deposits
  5. To provide a lifetime stream of income

The list goes on.

One way to think about the different types of insurance options that can help you save is to think of them this way:

Click above image to enlarge

Besides knowing the categories of savings plans, it is more important who are the group of people that you would want to benefit from the planning. There is never a wrong plan but only wrong planning. Identifying this makes it much easier for you to know which are the possible solutions that you can focus on.

Click above image to enlarge

In financial planning with my clients, I have concluded that clear and concise decisions are made only when we ask ourselves the right questions, and these right questions can only be identified when you work together with your trusted financial adviser.

To make that first step, have a better understanding what are the different kinds of savings options that you have with the “Savings Plan Decision Chart”.

Remember, every single financial goal begins with an end in mind. Stay safe!

Article by Pamela Chong
Email: pamela.chong@gen.com.sg

The writer is an Associate Manager representing GEN Financial Advisory Pte Ltd.


If you want to know more about Inheritance Planning or any other enquiries, you may contact me through whatsapp, schedule an appointment with me or fill up the form below and I will get back to you as soon as possible.


Pamela Chong
Associate Manager

RNF No. CMP200166160


March 2021
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