Tips for When You are Receiving an Inheritance

Experts predict that over the next several years approximately $84 trillion will transfer from baby boomers to their heirs and beneficiaries. There is a lot of literature about how to assist those folks on the best way to leave that money to their families, but there is not as much literature about how those on the receiving end can make good decisions when receiving an inheritance. Here are some of the things you may wish to consider if you are inheriting assets.

1. Don’t be afraid to redeploy the assets. Most of the time when I am discussing plans for leaving behind an inheritance and I ask a client if they want to pass on any instructions or requests from how their heirs invest the money, they say no. The responses vary but are usually along the lines of “I’m gone at that point, so it doesn’t really matter to me.” If they did have a desire that you hang on to an asset, they probably would have expressed that to you very clearly. Also, they may have held onto an asset that had appreciated just to avoid paying capital gains if they sold it. As an inheritor your capital gain may be only from the date of death, so you may be in a much better tax position to sell it than the person leaving it to you was.


2. Having said that, it always amazes me how much “smarter” the generation receiving the inheritance thinks they are about investing than the generation that actually accumulated it. I encourage you spend time talking with the advisors who worked with your parents or grandparents - or whoever left you the money. You may learn about what strategies they used to help your relatives accumulate wealth. They may be better equipped to help you continue that pattern than you might think. And some of the investments you inherit, might, in fact, be good investments to hang on to.


3. Examine and understand the nature of the investments you are inheriting. If it’s cash, this process may be pretty straightforward, but if it’s not, give some thought to what might be required of you to maintain that asset going forward. If you were inheriting rental properties for example, have you ever managed real estate before? Have you ever used a property manager before? If not, perhaps selling those properties and redeploying the assets might make sense. If you were inheriting a stock portfolio, do you have any experience with that? If not, would the advisor that helped build the portfolio be willing to help you? It never hurts to ask.


4. Are the inherited assets appropriate for your age and risk tolerance? If you inherit assets from older relatives, were those assets invested in a way that might have been appropriate for seniors, but not for someone at your age? Perhaps more risk and growth assets would be more appropriate for you, or maybe the allocation of those assets might need to be adjusted for your life circumstances.


5. Can you keep the principal of the inheritance intact? There are many stories of lottery winners who spent all of their winnings within several years. The statistics may be somewhat better when it comes to inheritances, but there are still lots of stories of inheritances that were squandered due to overspending or mismanagement. Read the fable about the Golden Goose about how greed for more can cause you to lose everything. Re-read it every day for the first year or two of receiving the inheritance. Make a list of things you want to do with the money….maybe it’s paying off debt, or maybe it’s a purchase that you want to make. This will help you prioritize what is most important to you. Once you have done those things that are high on the list, consider only spending the earnings on the principal of what is left. This will help honor the legacy of those assets you received and help keep you from blowing through all of those funds quickly.


6. Finally….don’t forget that Golden Goose thing….keep reading it again and again and again.

Any opinions are those of Southern Springs Capital Group and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification. Individual investor's results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

As Financial Advisors of Raymond James, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Southern Springs Capital Group is not a registered broker/dealer and is independent of Raymond James Financial Services.

David Jackson, MBA, CFP®, C(K)P™, is the Managing Partner at the Southern Springs Capital Group. For more information on Southern Springs Capital Group, visit www.southernspringscapital.com. Our offices are located at 2555 Meridian Boulevard in Franklin. We can be reached at 615-905-4585.