About WiserAdvisor University
WiserAdvisor University is designed to provide you with
high-quality information about investing and finance straight
from those who know best: financial professionals.
The University includes hundreds of informative articles on
dozens of topics of interest to individual investors like you.
If you find an article informative and would like to be contacted
by a financial advisor, we encourage you to fill out our simple form.
The WiserAdvisor service is free, objective, accurate, and confidential,
and will match you to qualified financial advisors who can help you reach your investment goals.
About WiserAdvisor.com
WiserAdvisor.com is an independent and unbiased matching service designed to help individuals find the best financial advisors for their unique needs.
This easy-to-use system prides itself on its simplicity and accuracy. After you fill out a simple form, our algorithms search through the thousands of advisors in our system and provide you with up to three advisors who are best able to help you accomplish your goals.
|
|
|
|
Other Articles
|
|
|
|
|
Estate Plans and Your Family
Investing an Inheritance or Windfall
By Danny Noonan
Wealth Advisor, Carson Wealth Management Group
Receiving an inheritance my not be as pleasant as winning the lottery – after all, an inheritance means a loved one has died – but both raise the question of how to invest a sudden windfall.
Most windfalls require payment of taxes. In an inheritance, the estate generally pays the taxes, but other types of windfalls, like lottery winnings, require the recipient to pay the taxes. Ask your tax advisor what taxes will be applicable. The federal estate tax is scheduled to be repealed in 2010. However, Congress must take action to remove it, or the exclusion rates will be back in 2011.
After Uncle Sam takes his claim, you may be tempted to splurge on luxuries you couldn’t previously afford – and you may regret it later. Make a list of those indulgences – remodeling the kitchen, buying a sports car or boat, taking a trip – and then set it aside for a few weeks. Re-evaluate your list and choose those you still feel good about.
Paying off debt may be your next inclination. Reducing debt versus investing depends on your circumstances, including:
The amount of money you are inheriting
The amount and type of debt
Your age
Your risk tolerance
Your return expectations
Your financial goals
In general, pay off debts that have higher interest rates than what you would earn by investing. Investing probably outweighs paying off mortgages, because they are tax deductible, and student loans, because they tend to have low interest rates.
Investing an inheritance follows generally the same process as investing your earnings:
Establish your financial goals. Your overall goals may have changed because of the windfall.
Determine your risk tolerance.
Determine your need to access the money.
Pay yourself first by investing for retirement.
If your circumstances include an ex-spouse or creditor who may have a claim against any windfalls you receive, you may want to consider a trust. The language of the trust gives you, the heir, the control and benefits without outright ownership. Additional income earned by the trust assets is also protected.
The difficulties in specifying a trust as the recipient of your inheritance is that it must be done before the donor dies and the donor’s will must state bequests to you go instead to the trust. For many people, this is a difficult discussion to have with a relative, particularly a parent. A trusted advisor – investment advisor, accountant or attorney – may be able to help explain the benefits.
Securities offered through Linsco/Private Ledger. Member NASD/SIPC and an Investment Advisor
Click here to submit request>
Go Back to Topic Page>
If you are an advisor and would like to see your articles published, click here
Article reprinted by permission. Unauthorized reproduction of content prohibited.
|
|
|
|
