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By: Adrian Mastracci
North Shore News
Business Section, “Loose Change”
Sunday, July 14, 2002
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.
Inheritances are made up mostly of their parents’ homes,
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.
We've all heard of someone who squandered it.
The key to an inheritance is how those new assets are allocated.
Everyone will have personal preferences. In addition, it's advisable
to take into account the wishes of the person who made the bequest.
The answers to the puzzle are found by asking what is important
about one's situation. A little long-term thinking goes a long way.
- First the game plan, then the actual allocations:
- Above all, don't rush and don't do anything.
- Park the inheritance for 30 to 90 days before making 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.
Now consider these 10 suggestions for the allocations:
- Treating oneself to something special, such as the dream vacation.
- Doing something special and unexpected for a less fortunate
family member or friend.
- Giving to a charitable cause.
- Stashing three to six months of ready cash in the emergency
fund.
- Repaying non-deductible loans, such as the credit card and
mortgage.
- Redirecting those former payments on repaid loans to the investment
plan.
- Making the 2002 RRSP contribution, and catching up on the unused
RRSP room.
- Making a loan to a spouse, at the prescribed rate, if the spouse
is in a lower tax bracket.
- Contributing to an RESP for children, or grandchildren, to
assist their higher education.
- Allocating the remainder of the inheritance to the investment
plan.
The receipt of an inheritance is a terrific opportunity to improve
one's financial security. It can make a real difference when handled
properly.
Therefore, someone with an inheritance ought to stop for a moment
to consider 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.
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