Throughout my time as a financial planner I have seen an inheritance in the form of cash, real property,
jewelry or stocks enrich my client’s life in many ways. Oftentimes, bequests from an estate are intended
to help move my client forward financially, or to keep a prized possession within their family. To fully
realize the value of an inheritance, I always consider how the assets affect my client’s overall financial
I have realized that the key to successfully managing any inheritance is to plan before you act. Certain
types of inheritances may require you to make some decisions right away, but it’s crucial to be
conservative in your actions and allow yourself some time to grieve. Then, work with financial advisors
to maximize the value of your inheritance and decide whether to keep it, share it, invest it or liquidate it.
Your options depend on your personal and financial circumstances, long-term goals and the type of
Cash inheritances are the simplest assets. I can help you determine the impact the money could have on
your short- and long-term goals. This will help you refine your financial objectives, such as your
approach to retirement income, college funding or real estate.
If you receive a cash inheritance, keep in mind that probate information is publicly available, so you may
receive unwanted solicitations for investment schemes. Seek counsel from a qualified and financial
advisor before risking any money. You may want to place the funds in a certificate of deposit or money
market account until you can first meet with your advisors.
In addition, consider placing investments where your exposure to personal or professional liability claims
is limited. You should consider consulting a tax attorney if the inheritance substantially increases the size
of your estate.
Family or Company Stocks
Many people leave their favorite stocks as a birthright to an heir. Perhaps the stocks are emotionally
valued because grandpa worked for the company or they supported grandma’s lifestyle. But when
deciding whether to keep stocks, it’s crucial to determine if they’re an appropriate asset for you relative to
your personal investment philosophy. Consider how the stock affects your investment portfolio’s
diversification profile, risk exposure and tax bracket. If you inherit stocks, most capital gains can be
lessened by re-valuing the stock to the date of the grantor’s death.
For example, if your grandmother purchased stock for a $10 base and the stock is worth $150 today, the
capital gain would be assessed on the difference of $140 if the stock were sold. But if she passed away
and left the stock to you, the base value of the stock is $150, adjusted to the day of her death. This
decreases capital-gains liability by the time you receive the stock.
If you inherit real property, its value as an asset or liability is largely determined by whether you plan to
live in, rent or sell it. To understand the cost factors involved, review the property and tax laws pertaining
to the asset, along with any maintenance fees or out-of-state property management costs. Then, balance
that against any rental income, if applicable. If you want to sell the property, consider the capital-gains
implications and the time and cost of waiting to liquidate it at the best price.
Jewelry and Collectibles
I have noticed that most people inheriting jewelry or collectibles value them as family heirlooms, not as
assets. These items usually hold great sentimental value. They are not liquid assets that you want to sell
quickly, if at all. Keep in mind that these valuables need to be protected. While an estate planning
attorney can determine a valuation for each item, for insurance purposes you should consider getting a
neutral, certified evaluation. You may also need to obtain a separate insurance rider against loss. Jewelry
and collectibles appreciate, so be sure to update your insurance every three to five years. Working with
your advisory team and using strategic planning can help you preserve and enhance your inheritance.
If you expect that some assets may eventually be passed on to you, you may want to speak with the
grantor to determine the optimal way to receive the gift or bequest to increase its value to your estate and
to decrease tax liability. Please reach out to me if you would like more information or have concerns
about the current plan you have in place for your inheritance.
*The content of this material was provided to you by Lincoln Financial Advisors for its representatives
and their clients. This article may be picked up by other publications under planner’s bylines.