It's a sad fact that in mid-life we start losing our parents in greater numbers. It's also true that an inheritance often accompanies such a loss. Confusion about what to do with a legacy can add distress to an already emotional situation.
Megan Poore, a financial advisor with Lucien, Stirling, and Gray, provides some tips to help women make better decisions about their inheritance.
For most people, inherited money comes with a host of conflicting emotions – surprise, grief, a sense of stewardship, excitement and guilt, among them. Beyond that, decision making waters are further muddied by an urgent sense to “do the right thing”.
As a financial advisor, I have worked with a number of clients as they go through this difficult process. Money is an incredibly personal subject and, as such, everyone has a different reaction to inheriting money. Nevertheless, I would like to share three tactics for handling inherited money that should apply to everyone.
Give it some time.
Whether the influx of money or property is due to inheritance, the sale of a business or some other event, we seem to be programmed to hurry up and do something! In fact, the best course of action is to take some time to get used to the idea. Speak to someone about what the money means to you and how you might best be able to use it.
I lead my clients through two or more question and answer sessions to help them identify what the money really means to them and how they could best use it. Is it important to honor the legacy of the person who left the money? Or perhaps it makes more sense for the way you use this money to reflect your values? If so, what are your values? What is important to you about money?
Consider how the money can best be used to meet your goals.
Once you have put some thought and discussion into what the money means to you, it is a good time to look at something more concrete. How can this money help you to achieve your goals? Most often, my clients look to the more typical financial planning goals first.
A couple that are clients of mine were able to live off of some of their inherited money for a couple of years while they stashed away much of their income into employer-sponsored retirement plans. It allowed them to mitigate some of the ongoing tax burden of the inherited money, while shoring up their retirement prospects greatly. Another couple I work with opted to focus on their children’s college funds.
Depending on your situation, ideals, and the amount of the inheritance, you could consider the purchase of a bigger home, a vacation home, or gifting to a charity. Time and careful thought will better allow you to let your values drive your spending.
Allow for some enjoyment!
Many of my clients have expressed how hard their benefactor worked for the money as a driving motivator for focusing on “serious” pursuits. I always make a case for using a responsible percentage of the money (perhaps 5-10%) for fun, though. As I have worked with older clients and talked to them about how they would like their benefactors to spend the money, the phrase “they better not have any fun” has yet to come up! Most often, they relish the idea of helping their children, for example, to make life a little easier and, yes, more enjoyable.
One couple I worked with used some of their inheritance money to shore up their retirement plan and to do some home improvements. But they also love to travel. Not the kind of travel I do – to Connecticut to see my sister constitutes a big trip. They would save up for a year or more, and then go on an exclusive 10 day trip to a fabulous island. For them, we created a separate investment account specifically for vacations. Each year, they can take up to 5% of the value of this account and use it toward Europe, South America, whatever destination beckons. They have greatly enjoyed the fruits of good planning, and have benefited from investing time and serious thought before investing money.
Megan Poore is a Senior Advisor Associate with Lucien, Stirling, and Gray, an Austin-based Registered Investment Advisory firm (www.lsggroup.com) . Ms. Poore may be reached at
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Written by weihanteng - Wednesday, December 14 2011
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