How a beneficiary invests inherited funds depends on the amount and the beneficiary’s unique needs. A beneficiary may simply add to existing mutual fund investments or take advantage of a new opportunity. Here are a couple of examples of mutual fund investing decisions.

A grandparent named a grandchild as a beneficiary of their Tax-Free Savings Account (TFSA), and the grandchild, age 26, receives $40,000. The grandchild opens a First-Home Savings Account (FHSA) and contributes the annual maximum of $8,000 in a balanced portfolio of mutual funds. Having enough contribution room in their TFSA, they invest the remainder in mutual funds in their TFSA. The grandchild will withdraw $8,000 annually for four years to contribute to their FHSA, making the maximum $40,000 lifetime contribution.

A husband passes away, and his Registered Retirement Income Fund (RRIF) assets roll over to his wife’s RRIF. The husband’s RRIF included fixed-income and equity mutual funds, but the surviving spouse doesn’t keep that asset allocation in her own RRIF. With her substantial inherited assets and low risk tolerance, she invests only in money market and bond funds.