As the first part of this article discussed, even though you may have mixed feelings about receiving an inheritance, you're likely to do so at least once in your life. After you get over your initial grief at the loss of a parent, grandparent, or other loved one, you'll be able to begin the process of rationally thinking about financial matters. Once you've taken an inventory to determine what and how much you're likely to receive, you can turn to the question of how you're going to integrate your inheritance into your financial planning.

In thinking about how an inheritance may affect the way you manage your finances and plan for the future, there are a number of factors to consider. You should think about exactly what assets you're likely to inherit, any estate planning or financial strategies your parent used, your own financial condition, and anything your parent may have suggested as a use for the money.

What you get
The first consideration in figuring out how to handle your inheritance is what type of assets you'll receive. In many cases, you're likely to receive mostly cash, along with some heirlooms and other tangible property that often has more sentimental value than financial worth. The reason for this is that the most convenient way for the executor of an estate to distribute assets to heirs is to liquidate marketable securities like stocks, bonds, and mutual funds. Because of a provision in the tax laws, selling securities shortly after a person's death usually doesn't create substantial capital gains tax liability.

However, in some circumstances, it may be easier to distribute certain assets rather than liquidating them, and so you may receive shares of stocks and mutual funds or individual bonds. You'll want to keep a few things in mind before deciding whether to keep or sell these assets. First, your parent had a different set of financial goals and resources from yours, and so assets that helped your parent meet those goals may not be appropriate for you to hold. For instance, if your parent had more than enough money to meet every possible need, then you may receive conservative assets like municipal bonds and bank CDs. If the size of your inheritance isn't sufficient to meet your goals, however, you may prefer to sell these assets and reinvest the proceeds more aggressively.

Second, look at your parent's assets to see whether there are any special circumstances that affect your decision in any particular direction. For example, shares of some mutual funds, such as the Sequoia Fund (FUND:SEQUX), are no longer available to investors, but you may be able to retain shares that you inherit from current shareholders. Similarly, if you inherit mutual fund shares that are only available by paying a load, then you should think carefully before selling them. If you later decide you would have preferred to keep the shares, then you may have to pay another sales load to get back into the fund. Other instances of investments with limited access include investment limited partnerships and hedge funds, which are usually subject to minimum income and net worth restrictions.

Finally, look for duplication between investments you inherit and assets you already own. For example, if you inherit shares of an ETF that focuses on a particular area, such as Vanguard Energy ETF (AMEX:VDE), while you already own an ETF in that area, such as iShares Oil & Gas Exploration ETF (NYSE:IEO), you may find it easier to consolidate your holdings by selling one and using the proceeds to buy shares of the other.

What you have
How your inheritance will fit into your financial plan also depends on how much money you've managed to save on your own. If you don't have much debt and own a solid set of investments in your portfolio, then you may not really need the money you inherit for your own long-term financial viability and therefore can consider either spending a substantial amount of your inheritance or setting it aside for the needs of other family members or for charitable purposes. On the other hand, if you're waist-deep in credit card bills and haven't yet managed to get started with 401(k) contributions at work, then you may well need every penny of that inheritance to get yourself into better financial shape.

Receiving an inheritance is just one example of a life-changing event that presents a good opportunity for you to take a close look at your financial situation. If you have faced challenges in getting your financial affairs in order, you may be able to use an inheritance to set the stage for better discipline and a better financial plan for the future. If you've done a good job of figuring out where you stand but have lacked the resources to be able to do everything you want to do from an investing perspective, an inheritance can provide you with the investing capital you need to buy stocks that you may have followed for years but never had the money to purchase. And if you're so well off that inherited money is just gravy, then you may find that you have to change your financial strategy to avoid issues that wealthy people must address, such as estate taxes.

To use inherited money wisely, you have to consider your own needs. However, you also have to look at your parent's wishes and any specific conditions on your inheritance. The final part of this article looks at these issues in more detail.

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Fool contributor Dan Caplinger has gone through parental inheritances twice with relatively few bumps along the way. He doesn't own shares of the companies mentioned in this article. The Fool's disclosure policy is like a family friend.