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| Adrian Mastracci, president of KCM Wealth
Management, says "Park the inheritance for 30 to 90 days,
maybe longer, before making major decisions. Then figure out
what's important about the windfall." |
For Immediate Release
Vancouver, BC (July 8, 2002): Is everyone ready?
North American baby boomers are set to inherit an estimated $11
trillion over the next 10 to 20 years. Some of which has already
begun.
Adrian Mastracci, president & "fee-only"
investment counsel at Vancouver based KCM Wealth Management
comments, “Inheritances are made up mostly of their parents’
homes, summer cottages, rental properties, stocks, bonds, mutual
funds, business interests, cash and term deposits. In Canada, that
number is estimated at $1 trillion, a windfall that could prove
to be a welcome boost for aging boomers.”
“Receiving an inheritance is a little like winning the lottery,”
notes Mastracci, “We've all heard of someone who squandered
it. Therefore, we'll try diligently to avoid the many pitfalls of
dealing with an inheritance.”
“The key to receiving an inheritance is how those new assets
are allocated,” explains Mastracci, “Everyone will have
personal preferences. In addition, it's advisable to take into account
the specific wishes of the person who made the bequest.”
“Fortunately, most family members don't leave many directions
about how the inheritance should be allocated,” observes Mastracci,
“Instead, they simply want to benefit their family and make
life a little more enjoyable for their loved ones.”
"The answers to the puzzle are found by asking what is important
about one's situation,” remarks Mastracci, “A little
long-term thinking goes a long way. First the game plan, then the
actual allocations."
- Mastracci outlines the first steps in dealing with an inheritance
windfall:
- Above all, don't rush and don’t do anything.
- Park the inheritance for 30 to 90 days, maybe longer, before
making major decisions.
- Figure out what’s important about the inheritance windfall.
- Review one's own will and estate planning provisions.
- Seek some professional counsel in refreshing the investment
plan.
By now, one should be ready to make informed decisions. Mastracci
makes 10 suggestions:
- Treating oneself to something special, such as the dream vacation
that was on the back burner.
- Doing something special and unexpected for a family member
or friend who is less fortunate.
- Giving to a charitable cause.
- Stashing three to six months of ready cash into the rainy day
emergency fund, just in case something unexpected happens.
- Repaying the highest cost loans where the interest is not deductible,
such as the credit card and the mortgage.
- Redirecting those former payments on repaid loans to the investment
plan.
- Making the 2002 RRSP contributions, perhaps also catching up
on the unused RRSP room carried forward.
- Making a loan to spouse, at the prescribed rate, if the spouse
is in a lower tax bracket.
- Contributing to an RESP for children, or grandchildren, giving
them a head start on paying for their higher education.
- Allocating the rest of the inheritance to the investment plan
in search of financial security.
“More inheritances are wasted for lack of a little simple
planning, than any other reason,” explains Mastracci, “It
happens all too frequently.”
"The receipt of an inheritance is a terrific opportunity to
make inroads towards improving one's financial security,”
suggests Mastracci, “It can make a real financial difference
when handled properly."
“Therefore, stop for a moment,” concludes Mastracci,
“Take ample time to consider the personal circumstances. More
importantly, how one wishes to fare in the future. Too many have
made quick and perhaps inappropriate decisions about this new wealth,
only to regret it later.”
“Receiving an inheritance can be a tremendous boost to the
nest egg,” summarizes Mastracci, “A little thought to
allocating the windfall will assist in achieving those personal
goals.”
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