The Downside of a Large Inheritance

Many people dream of receiving a sudden financial windfall. Wouldn’t it be great to win the lottery or get an unexpected inheritance? But when someone you love dies and leaves you with a large amount of money, the experience is usually much different than expected—especially if the loved one is your spouse.

Emotions

A lottery winner’s emotions are mainly positive. However, a person who receives a large inheritance experiences an intense, bittersweet gamut of emotions: grief, sadness, exhaustion, fear, guilt, denial, anger, loneliness, confusion. Often people feel guilty for benefiting from the death of their loved one. Selling inherited investments can feel like a betrayal, even when those investments made sense for your loved one but do not make sense for your situation. All these emotions are perfectly normal.

Pressures

When you receive a large inheritance, you will often feel pressure to make significant long-term decisions at exactly the time you are least emotionally ready to make them: in the depths of a painful grieving process. But everything does not need to be done at once; only a few things need immediate attention. Most decisions can and should wait until your emotions have stabilized and you can think more clearly, especially significant decisions. It might take a few months or even more than a year. Until that point, do not make impulsive decisions or allow anyone to pressure you into making decisions.

Most importantly, do not make any gifts to family members, friends, or charities until you meet with your Wealth Manager, update your financial plan, and verify that those gifts will not damage your long-term financial security.

Decisions

People leave money because they want to improve the lives of their loved ones. This presents the inheritor with a unique opportunity to create a new life, develop new goals, visualize a new future, and plan for a new ‘normal.’ But unique opportunities can also be scary. People are often afraid of making decisions for fear of making bad ones, so they procrastinate. They can feel paralyzed from trying to figure out what the person who gave them the money might have wanted them to do with it. They may also be afraid of offending other people, so they do what other people want… and hurt themselves in the process.

Good financial planning is important when receiving a large amount of money, and wealth due to an inheritance presents unique challenges that require specialized help. For example, there are special tax rules that apply to inherited assets, and failing to understand those rules could lead to an unexpected tax bill. The Wealth Managers at Pinnacle Advisory Group have years of experience in helping our clients through difficult situations like this. Should you have any questions, or know of someone who might benefit from Pinnacle Advisory Group’s expertise in this area, please let your Wealth Manager know.

Copyright: yar000 / 123RF Stock Photo

Navigating Healthcare When You Retire

Securing a Health Care Plan in retirement can be a challenge if you retire before age 65 and are Medicare eligible. If you are under 65, there are typically two options available. First, you can continue on your employer’s health insurance (assuming you had an employer who offered health care) for up to 18 months. This is called COBRA. With COBRA, you will pay 102% of the premium—the full cost of the insurance plus a 2% administrative fee. Second, you can obtain your own coverage through the marketplace paying the going rate and keeping that coverage until you are Medicare eligible at age 65. Note that with the first option, the 18 month COBRA period may not take you to age 65 so you might still need to obtain your own policy for some period of time.

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Hangovers & Roadmaps

2016 began with a thud and ended with a bang. After one of the worst-ever starts to a year, U.S. stocks managed to rebound and ultimately finish the year with solid gains. Much of the rise came in the final few weeks of the year, following the surprising results of the U.S. presidential election. Indeed, there has been an abrupt change in market sentiment, and asset prices have largely taken their cues from a recalibration of economic expectations in the wake of the surprising Trump victory and Republican sweep of Congress.

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Does Active Portfolio Management Still Make Sense?

Does Active Management Work?

Do the terms “upward sloping equity glide paths” and “bond tents” seem unfamiliar to you? They are terms that financial planning researchers are using to describe investment strategies designed to mitigate “sequence risk,” the risk that your portfolio returns will occur in the wrong order, thereby negatively impacting the amount of income your retirement account will generate.  Pinnacle’s Director of Wealth Management, Michael Kitces, writes an interesting article on the subject in this month’s OnWallStreet, titled, “Avoid the Retirement Danger Zone.” (You can read the article by clicking here.) Since most Pinnacle clients fall in the age range of 50 to 70, where pre-retirement and early post-retirement risk is the highest, and since the recent election has clients questioning recent portfolio volatility (in this case, to the upside), it seems a good time to revisit the question of whether active portfolio management still makes sense.

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Pinnacle’s Deb Kriebel Named A “Woman To Watch”

Deb Kriebel honored by Investment News

Investment News has just named Pinnacle Wealth Manager and Partner Deb Kriebel to its 2016 Women to Watch list. The list is comprised of…

…female financial advisers and industry executives who are distinguished leaders at their firms. These women have advanced the business of providing advice through their leadership, passion, creativity and willingness to help other women along the way.

We’re very proud of Deb and pleased that others recognize her hard work on behalf of her clients and for women throughout the financial industry.

You can read more about the recognition here.

The Financial Pros and Cons of Renouncing Your Citizenship

The main reason people renounce their U.S. citizenship is to take advantage of lower tax burdens abroad, but the growing unease with U.S. politics might also be contributing to a record number of Americans who are renouncing their citizenship and surrendering their passports. While we don’t recommend this to our clients, we have received questions about the financial pros and cons of leaving behind one’s U.S. citizenship. In the interest of keeping you fully informed, we sat down with Raoul Rodriguez, a Pinnacle Wealth Manager and resident expert on expatriate issues, to discuss the question.

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