Life Events

Receiving an Inheritance
Receiving an inheritance can be an overwhelming experience. Along with the realization that the inheritance was part of a loved one’s last wishes, comes the desire to carefully manage the bequest.

Make decisions carefully
One of the most important things to do if you receive an inheritance is careful decision-making. Many financial planners suggest taking at least three to six months to decide what to do with your newly acquired assets. If you inherit cash, placing the money in a liquid investment such as a money market or a certificate of deposit will allow your inheritance to earn some interest until you are ready to decide your next step.

Make a plan
Next, consider your financial plan and your goals. In light of your inheritance, they may have changed. Will you put the money toward your child's education, pay off debts, purchase a home or earmark the dollars for your retirement? What you decide to do with your inheritance depends on many factors including your age, risk tolerance, lifestyle and your financial situation.

Receiving stocks or bonds
If you choose to sell stocks or bonds that you’ve inherited you should consult your tax advisor to calculate your cost basis. Generally, the cost basis of stocks and bonds received from inheritance is the fair market value on the date of death. These assets are also automatically long term property regardless of how long you hold them before sale. Also, before selling any stocks or bonds, be sure to consult with your financial professional.

Inheriting an IRA
If you inherit a traditional IRA, you may also inherit a tax liability. Minimum withdrawal regulations may also dictate when and how you receive funds. Simply cashing the inherited IRA and paying the taxes is also an option. Please be sure to consult with your tax advisor before making any decisions.

If you inherit a Roth IRA as the surviving spouse, minimum-withdrawal rules are generally not a concern, but you should consult with your tax advisor before making any decisions. If you inherit a Roth IRA and are not the surviving spouse you must begin to take annual minimum distributions over your life expectancy. However, if the Roth IRA was established less than five years ago, you (as beneficiary) are subject to the Roth IRA rules concerning withdrawals which may be subject to tax. Consult with your tax advisor for more information.

Taking on the family business
While you are more likely to know about this type of inheritance in advance, keeping or selling the business depends on: how involved you are or may have been in the business; if you live near by; and other factors. If you decide to sell the business, be sure to get several appraisals on its value before making a decision.