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

Treat Your Finances Like the NFL Draft

Football stadium tunnel

It’s the middle of April, and the 2015 NFL draft is quickly approaching.

This means aspiring professional football players have made their way to the NFL scouting combine, where talent evaluators have scrutinized their speed, strength, and agility. General managers and coaches are looking at both their existing rosters and the young players hoping to fulfill a lifelong dream by being drafted into the NFL.

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How to Pay for College: Three Strategies

At this time of year, many families with college bound children are busy navigating the financial aid application process. A college education, long viewed as a pathway to the American Dream, remains a desirable goal for many, with some studies indicating as much as a 75% increase in earning power over the course of a career through the attainment of a degree. However, the soaring costs of higher education in recent decades have even middle-to-high income families wondering how best to fund this endeavor without jeopardizing their retirement or leaving their children saddled with huge debt. Finding the most efficient and beneficial path involves an understanding of both financial aid eligibility, as administered through the relevant government regulations and University policies, and the savings vehicles and strategies available to consumers.

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A Helpful Change to Maryland’s Estate Tax Law?

Governor Martin O’Malley recently signed a new law that will reduce the sting of estate taxes over the next several years for Maryland residents. So how does the Maryland tax compare with the federal version? As defined by the IRS, “The Estate Tax is a tax on your right to transfer property at your death.” The federal government imposes a tax on taxable estates in excess of $5.34 million (the individual federal exemption amount, which increases for inflation annually). Maryland currently imposes an estate tax on taxable estates in excess of $1 million (the state exemption amount).

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Five Affordable Retirement Locations for the Outdoor Lifestyle

If you’re a lover of the outdoors and thinking about where you want to live in your retirement, you probably already have some candidates. But have you considered the financial ramifications of living in those areas? While financial implications should not necessarily be your primary focus, you should consider such things as taxes and cost of living when making your decision.

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Secrets of a Successful Retirement Transition

For most Americans, retirement is one of life’s major turning points. We’re no longer required to take part in the work-a-day world, and can turn our attention and considerable experience to family, friends, service, and personal interests.

But it isn’t as easy as it sounds. Many people find retirement jarring, and have trouble adjusting to the new lifestyle. With that in mind, we’ve asked our retired clients for advice for those about to make the leap — what lessons they’ve learned, what they did well and what they wish they’d done differently. The responses are full of fantastic insights, important reminders, and creative ideas. Whether you’re facing retirement now or at some point in the future, you will find something of value here.

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