First Things First When Inheriting Wealth

Steps to takeEven experienced financial advisors can get caught up in the complications of dealing with an inheritance. After receiving an inheritance from his mother that included stock in a mining company she favored, it took Ken Moraif months to sell the shares, even though they were losing value. "I had to get over the thought that this is selling my mom," says Moraif, senior advisor with the wealth management firm MoneyMatters.net. "It's a very strong emotion."

On average, American retirees planning to leave an inheritance anticipate giving about $177,000 to their heirs, according to a 2013 report by HSBC. A fifth of legacies left to children in the U.S. were expected to exceed $390,000. Such sums of money can provide huge benefits. But the chunks of cash that often coincide with emotional loss can also open up complicated investment choices. US News & World Report's recent article, "What to Do When You Get an Inheritance," reminds us that even though there's no "one-size-fits-all" plan, there are several items you should consider before putting money into the stock market.

First, get good information and consider assistance from an expert: speak with an experienced estate planning attorney, one who worked with those giving the inheritance. Heirs should find a CERTIFIED FINANCIAL PLANNER™ practitioner who works for a registered investment advisor with a fiduciary duty to their clients. They aren't commissioned salespeople. If the inheritance involves a larger sum, it can be administered via a trust that needs to be funded properly due to tax ramifications and expenses.

For heirs in their 50s or 60s who inherit a portfolio from octogenarian parents, they should assess the portfolio's appropriateness. Then it becomes a basic financial planning exercise based on an heir's risk profile, financial goals, tax bracket and retirement target. Pay off debt and start saving before thinking about investing in the stock market.

There's no investment one can make, short of taking on substantial risk, which will earn as much as the 16% some may be paying on credit card debt. After paying off credit card debt, look at other debt, like high-interest college loans. Paying off loans is like earning a risk-free rate equal to the interest rate on the loan. You can also pay down a mortgage, but many folks have already refinanced at an attractive rate, given the low interest-rates. Next, establish savings. Depending on how secure a person's job is, keep an emergency fund of three to six months of living expenses in a savings account, certificate of deposit, or short-term Treasury bills. Also, use the money to maximize, increase, or start retirement savings through an employer-sponsored retirement plan or IRA.

Reference: US News & World Report (November 5, 2015) "What to Do When You Get an Inheritance"


Like this article?

Share on facebook
Share on Facebook
Share on twitter
Share on Twitter
Share on linkedin
Share on Linkdin
Share on pinterest
Share on Pinterest

Leave a comment


We have a LOT more where that came from!

We hate spam too. We will never share or sell your information.

Call Now ButtonCall Us Now https://jsfiddle.net/7h5246b8/

Request a free consultation

We hate spam too. We will never share or sell your information.

We've been putting together as many resources as possible so that we can continue to help:

  • If you’re a current client with a signing appointment or a prospective client with a consultation and would prefer that meeting take place in your own home, we can accomplish that with a little bit of pre-planning on our part and with the addition of a laptop, smartphone, tablet or other computer in your home to facilitate this virtual meeting. For those of you that need to sign legal documents, that too can be accomplished with the use of a webcam (FaceTime etc.), so that we can witness and electronically notarize all of your important legal documents.
  • We launched the rollout of our on-demand webinar early so that new clients and our allied professionals can view the important component parts of ‘an estate plan that works’ at their convenience.  That is available on our website.
  • Live video workshops will be produced as quickly as possible and certainly ahead of our previous schedule; we will keep you posted as these events become available. Given the ‘boutique’ nature of the firm, we rarely have more than ten people in our office including team members at any one time. During this period of ‘social distancing,’ we promise to have no more than 8 people at any time.   This allows us to comply with the Governor’s directive to limit in-person gatherings.
  • The best way to communicate with us is still by phone during regular office hours of 8:30 to 5:00, Monday through Friday, or, you can email any of our team members (that is, their first name followed by @zarembalaw.com).  We will respond to these emails as quickly as possible.
  • Please continue to follow the directives of our local, state, and federal agencies. For your health and in consideration of our team who is assisting you, if you’ve scheduled an office appointment or planned to drop off paperwork and are experiencing a fever, dry cough, or shortness of breath, please contact your primary care doctor for guidance and then our office to reschedule.

Thank you, Walt and the Zaremba Team

Update to our Process

The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.