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By: Michael Kane
Smart Money
Vancouver Sun, January 02, 2001
North American baby boomers are set to inherit
an estimated $11 trillion over the next 10-15
years, made up mostly of their parents' homes,
summer cabins, rental properties, stocks, bonds,
mutual funds and small businesses.
In Canada, that number has been put at $1 trillion,
a windfall that could prove to be a boon or bust
to aging boomers.
"Receiving an inheritance is a little like winning
the lottery, and we've all heard the horror stories
of someone who squanders it all in a year or two,"
says financial adviser Adrian
Mastracci of Vancouver's KCM
Wealth Management.
"The key to any inheritance is how you allocate
these new assets. Everyone will have their own
personal preferences, and you always have to make
sure you have taken into account the wishes of
the person who made the bequest."
Mastracci's suggestions on dealing with an inheritance:
- Treat yourself to something special. Most
family members don't specify how the money should
be spent. They simply want the funds to benefit
their family, or make life more enjoyable for
their children. Splurging on a dream vacation
is not out of the question.
- Share some of the wealth. Do something special
for a family member or friend who is less fortunate.
Consider a charitable donation.
- Don't rush. Park the remaining inheritance
for at least 45-90 days before you make any
investment or business allocations. Give yourself
time to explore alternatives and options.
- Get professional help. Design your long-term
game plan. It's a little like building a house.
First you need to create the financial blueprint,
and then you can carry on with confidence.
- Review your own will. Bear in mind the wishes
you've made about your own estate.
- Put a little something away for an emergency.
This may include four to six months of ready
cash, just in case you lose your job.
- Pay the bills. Pay the highest cost loan,
mortgage and line of credit where the interest
is not tax deductible. Then redirect those payments
to your long-term investment plan.
- Don't forget the future. Make your RRSP contributions,
perhaps taking care of any unused RRSP capacity
that has been carried forward.
- Keep the kids in school. Start or continue
a registered education savings plan, giving
your children a head start on paying for a higher
education.
"In a nutshell, take the time that's needed
to consider your current circumstances, and how
you want to fare in the future," Mastracci says.
"Too often people make quick and perhaps disastrous
decisions about this new-found wealth, only to
regret it later. The results can be tragic as
one generation's entire life's work is squandered
by the next generation, sometimes in just a few
months."
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