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Take your time, plan wisely when you inherit


Last updated 10/10/2018 at Noon

Dear SharonAnn

My favorite aunt passed away last year, and I inherited $2,500,000 after her probate. The check came last week. It has been a nightmare! I am a pharmacist and know a lot about medicines but very little about managing money.

I am puzzled. How could anyone know about this bequest? Lots of sales calls are coming in. What am I supposed to do next? Suddenly I am everyone’s new best friend. My aunt’s advisors are reaching out to me, and they have offered everything from annuities to real estate. But they live in Chicago, and I live in Edmonds. My bank even called with an investment proposition.

I am confused. How do I get up to speed on my choices? How do I make smart decisions for my best future? I’m single, and retirement is looming within five years. Yes, I’m grateful for the fortune, but I am scared to death that I’ll blow it.

Signed: Puzzled, Confused & Scared

Dear Puzzled,

Most people would love to be in your shoes. It’s like winning a lottery. People don’t understand the weight of responsibility and the onslaught of random advice.

I always picture those who inherit or win a lottery as innocent lambs out in the field with lions stalking all around. You need a tall fence, a protective barrier right away. 70 percent of lottery winners are broke within five years.

Refusing to make hurried decisions is a good protection. Since there is no real urgency for spending, you have some time to breathe. Take it. The money in your bank account will not rot if you delay investing. Your concern covers more than investing money. It covers your dreams over your lifespan.

Your financial life could outlive you. Do you have children/grandchildren? If so, they could benefit eventually. A key first step is making sure your estate plan is updated. Your attorney will talk you through the advantages of a trust. You will also need powers of attorney for financial and health matters.

One reason you are being bombarded by random advice right now is your aunt’s estate was probated. Probate is a public matter, and the public can see what is happening in an estate. Salespeople can get names from probate records and track you down to offer something. Probate can be avoided with proper estate planning.

As far as getting up to speed on your choices, you will want to find a financial advisor or coach who gets to know you first. You will have some goals that you are probably thinking about right now. Your financial advisor should help you draw up a roadmap and plan of action. You are never too old or too busy to learn more about wise money management IF you set your mind to learning.

What do you want for your life? The clearer your goals, the more personalized recommendations can be made. For example, will you want a home on the water somewhere? Retire early? Travel extensively? Bequeath money for your grandkids’ college fund? Donate to a worthwhile cause?

In these scenarios you will need to pull in professionals to help you evaluate. Oh yes, and taxes. Each scenario has different tax implications. While you are not taxed on your inheritance, you will be taxed on the earnings from it. Should you pay off your existing mortgage? Finance a new purchase or pay for it outright? Is there a tax-advantaged way to help with your grandkids’ college?

If you look at your financial picture as a puzzle, each piece must fit together to make the big picture that you want. So, take charge of your life, find trusted helpers, count your blessings, and understand what you are signing.


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