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Client Profile

Clay just received a seven-figure inheritance from his late aunt’s estate. The inheritance is the largest sum of money he has ever handled, and he wants to make sure he has a plan.

Clay is wise to be cautious. He doesn’t want to give in to the urge to spend and shrink his inheritance down to nothing. A little planning will go a long way toward helping him make the most of his money.

In many cases, receiving a large sum of money carries a “price tag” in terms of taxes. Although income taxes generally aren’t due on inheritances, there are exceptions (e.g., for withdrawals from an inherited individual retirement account). So the first thing Clay should do is find out what his tax consequences might be. His next priority should be putting together a sound, long-term strategy for investing and spending.

Temporarily, Clay may want to put the money in short-term investments, such as certificates of deposit or a money market fund. He will then have time to evaluate his goals and set priorities without having to worry about the investment markets.

Since his personal wealth has increased substantially, Clay will also want to review his estate plan. He may have opportunities for controlling estate taxes, and he’ll want to make appropriate provisions for his family.

Receiving a large sum of money can be thrilling — and overwhelming. Having a plan for handling the money can help ensure that wise financial decisions are made.

Client Profile is based on a hypothetical situation. The solutions we discuss may or may not be appropriate for you.

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