By Sandra Block, USA TODAY Updated 4/9/2012 12:29 PM

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How to get the most from an unexpectedinheritance

Chelsea Logan was a month and a half away from her 21st birthday when her fatherdied suddenly from a heart attack. As her family struggled to cope with the loss, shereceived another shock: Her father, a longtime federal government worker, had left her$167,000.

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KEY QUESTIONS PROVIDED BY:

Whether the sum is large or not,there are important questions you'llwant to ask your financial advisor:

1) Where should I invest the money?2) Should I alert my CPA? What if Idon't have one?3) Should I use the money to help payoff debt or invest it for the future?

"To hear that amount at 20 years old is kind ofmind-boggling," Logan, now 23, says.

Logan, a finance major at George Mason University inFairfax, Va., used the money to start her own business."My inheritance has been a huge blessing," she says. "I'man entrepreneur at heart."

VIDEO: Advice on how to manage an unexpectedinheritanceSTORY: How to get on track for saving for retirementSTORY: Tips on how to start early managing your moneywisely

More than $41 trillion will be transferred to heirs over thenext 50 years, the largest transfer of wealth in U.S.history, according to the Center on Wealth andPhilanthropy at Boston College. Much of that wealth willbe passed on to people who are already affluent andpresumably schooled in how to manage an inheritance.But for those who are accustomed to living paycheck topaycheck, even a modest windfall can present dauntingchallenges — and significant risks.

USA TODAY asked financial planners and actual heirs foradvice on how to manage an unexpected inheritance.Their suggestions:

•Take your time. Don't make any major decisions orpurchases until you've consulted with advisers who willhelp you make sound choices about your money, says

Mitch Brill, a financial professional with MassMutual. Some financial planners recommendputting the funds in a money market fund or other low-risk investment for at least a year.

You'll probably need a financial planner, a certified public accountant and an attorney, Brillsays. Your attorney and accountant can help you navigate tax and legal issues related tothe estate. Your financial planner can help you develop long-term strategies for yourmoney, he says.

•Don't quit your day job, at least not right away. While the temptation is strong to tellyour boss what you think of him, your inheritance will last a lot longer if you continueworking, says Mark Bass, a financial planner in Lubbock, Texas.

For example, suppose you inherited $1 million. You couldquit your job and try to live on your inheritance.Alternatively, you could keep your job, invest the moneyand give yourself an annual "raise," Bass says. Under the4% rule — which not all financial analysts agree with —you can theoretically make an investment portfolio lastindefinitely by withdrawing 4% the first year and adjustingwithdrawals by the inflation rate every year after that. Ona $1 million inheritance, that's an initial $40,000 bump-upin pay.

"Some of my happiest clients invested the money anddidn't quit their jobs," Bass says.

•Be discreet. It's not unusual for parents to leavedifferent amounts to their children, so revealing the

amount you've inherited could lead to family discord, says David Bakke, editor of MoneyCrashers, a personal finance blog. Discretion will also reduce the number of unwanted tipsand investment pitches from friends and family members, says Bakke, who received an

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Chelsea Logan, 23, inherited $167,000 when herfather passed away suddenly three years ago.She has since invested the money and usedsome of it to start her own business, Satissimi,selling yoga wear and offering life coaching.

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inheritance from his parents.

At the same time, inheriting a large amount of money can lead to isolation, says AnneEllinger, co-founder of Bolder Giving (boldergiving.org), an organization that helps heirsbecome philanthropists. "I would encourage people to tell some trusted and intimatefriends, especially if it's overwhelming or upsetting," she says.

•Address pressing financial needs first. Before you buy a boat or invest in a business,pay off credit card debt, student loans and other high-interest debt, says JosephMontanaro, financial planner at USAA. Make sure you have a rainy day fund that will coverat least six months of living expenses.

You should also review your insurance policies, particularly liability coverage, Montanarosays. A large inheritance makes you "a more lucrative target" for litigious individuals, hesays.

•Pay attention to taxes. Consider this scenario: You inherit an individual retirementaccount worth $150,000 and decide to cash it out and pay off your mortgage. You're out ofdebt, but the additional income pushes you into a higher tax bracket, resulting in a big taxbill.

These types of missteps are common when individuals inherit IRAs and other pretaxretirement plans, Brill says. Depending on your situation, you may be better off setting upa stretch IRA, a strategy that lets you take annual withdrawals from the IRA based on yourlife expectancy. This allows the inherited IRA to grow tax-deferred for years.

•Be true to your values. In 1981, Christopher Ellinger'sgrandmother left him $250,000. He and wife Anne, then intheir early 20s, were working as community activists andmade very little money. "He got a call saying, 'Yourportfolio's in the mail,' and he said, 'What's a portfolio?' "Anne Ellinger recalls.

Christopher and Anne decided to use the money to learnabout financial planning, socially responsible investingand philanthropy. That led them to create More ThanMoney, a non-profit education initiative for philanthropists,and later, Bolder Giving. Before Christopher's grandfatherdied, they asked him to leave Christopher's portion of hisestate — about $300,000 — to charity. "We knew wealready had enough," Anne says.

Chelsea Logan realized that she wanted to have more ofa say in how her money is invested. She initially investedpart of her inheritance with a well-known brokerage firmbut felt that her financial adviser wasn't interested inlistening to her views. She withdrew the funds and putthem into a no-load mutual fund account, where shemakes her own decisions.

That's not the only change Logan made after she received her inheritance. She initially setout to design luxury travel bags, but after a year and a half was overwhelmed by stress.

Conscious of her family's history of heart problems, she took a couple of months off andfounded a business that focuses on health. Her company, Satissimi, sells yoga wear andprovides life coaching.

Logan says her father, who was only 57 when he died, never took a vacation. "He had allof this money, and he never enjoyed it," she says. "I decided I was going to pave my wayand do something I really love."

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