How Quickly Should You Invest The Money You Inherit?
By Douglas Goldstein, CFP®
Though I often advise people to wait before investing an inheritance, sometimes you must take quick action.
When do you need to act quickly?
If you inherited a risky position, you should consider liquidating it. For example, the grandfather who always managed the stock portfolio passes away, leaving large amounts of money invested in a few individual stocks. Unable to live on her own, the grandmother who now owns the stock portfolio needs to move to a nursing facility. What would happen if she waited 12 - 18 months to deal with the account and then, just before she sold in order to pay her bills, the stock market crashed?
How much money do you need now?
If you inherit a portfolio of stocks, ask yourself if you are in a position to wait (possibly for years) to use the money. A fancy car or a luxurious vacation is not an emergency expense. On the other hand, paying for home health care or other medical procedures may very well be a question of life and death and cannot be delayed. Any money needed for the near future, regardless of the type of investment it was in when you inherited it, should be converted to liquid assets like short-term bank deposits, money market funds, and savings accounts. If that means selling Grandpa’s stocks, it’s the right choice. After all, wealth should first and foremost be used for your family’s health and well-being.
How to get the money quickly
Depending on the account’s structure, you may or may not have easy access to the funds. Even if an account is titled “joint account” or “transfer on death,” there may be a drawn out procedure to follow before the money is fully available. Your investment advisor should be able to walk you through the process. Nonetheless, make sure money is available to each spouse separately so that the survivor does not face undue financial pressure caused by bad planning.
Not sure how to structure your accounts?
If you have assets, especially money in different countries, contact a cross-border investment advisor who can help you determine the best way to structure your portfolio. Learn more at www.Profile-Financial.com.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. He is a licensed financial professional both in the U.S. and Israel. His best-selling book, Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing, is available at online, at bookstores, and at www.RichAsAKing.com. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, FSI. Accounts carried by Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.