Handling an Inheritance INTRO: Many people receive, at some point in their life, an inheritance. This can range from an item that has sentimental value up to a life-altering windfall. Bruce Hagan, certified financial planner with RAI Investments and Corporate Securities Group is with us today to give us some insight and advice on wisely handling an inheritance. Q1: Bruce, what is the first thing someone should consider in this circumstance. A1: Unfortunately, this windfall comes as the result of the death of someone and usually someone very dear to us. As such, emotions may cloud good judgment. Just as we spoke recently about losing a spouse, make sure you’re emotionally stable before attempting any financial planning. Q2: Are there any other reasons to wait awhile before doing anything? A2: There could be. The size of an estate is determined by its value on the date of death, or six months later, depending on the method the executor chooses. If the estate is going to take awhile to legally settle and there are securities that constitute a good part of the estate, the executor may choose to "freeze" the assets of the estate. That way, if during the time the estate is being settled the securities decline in value, that six months after death date can be chosen, thus showing the estate as smaller and possibly reducing estate taxes. This can only be done if the estate’s assets have remained unchanged. Q3: Human nature is probably to go out and splurge and spend some of this money, isn’t it? I’m sure you’re going to tell us not to do this. A3: While you want to resist that temptation to just blow it all, you may want to satisfy that urge by treating yourself to something practical that you really need anyway. If you’ve been wanting to replace that old pizza-stained shag carpet in your living room with a wooden floor, this may be the time to do it. And you may want to splurge on a vacation. Just give some serious thought to what your short-term and long-term goals really are and how this money can help you achieve them. Every dollar you spend is one less dollar to help you realize your goals. Q4: After we’ve siphoned off a little to spend on ourselves, what are the steps to take with the serious money. Should we pay off all or as many of our debts as we can? A4: It depends on the nature of the debt. If it’s a high credit card bill, then you may want to pay that off in full. But even if there’s enough to pay off your home mortgage, you may not want to do that. Mortgage interest is tax deductible and you might earn higher returns by investing the money. Q5: Would we approach investing the money as we would our other savings? A5: Possibly. You will want to reevaluate your financial situation in light of your newfound wealth and you may find a different allocation is now necessary. If you were utilizing all of the income from your investments for your monthly living expenses, you may now take a look at some growth investments. One thing you should avoid is running out and putting it all in the market in one day. Talk with your advisor about dollar cost averaging over say a twelve month period. Optional Question: Q: Any other considerations? A: Yes, think about how this was received by you as a wonderful gift and how you might set aside some of this money now to grow for your heirs or even a charitable contribution. The discussion offered above and in the movie should not be considered an endorsement by Florida State University. They are offered in the educational sense of providing thought-provoking information for our Web audience. Copyright shared with Florida News Channel (FNC), all rights reserved. Broadcast 8/6/99