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Experts to heirs: Stop, breathe, think before making big plans

For many people who lose a parent, there are a variety of emotional issues to deal with in the aftermath. Perhaps the most common is a surge of grief or sadness and related feelings. For some, there are also unexpected, conflicting emotions after the will is read and they know they are to receive an inheritance.

Experts say that a sudden infusion of wealth can, in some cases, cause people to make rash, grand plans about quitting their Fullerton jobs, buying lavish treats for themselves or others, donating large amounts to charities, and so on. 

Those same experts say it's wise for people who receive inheritances to take a deep breath and put off big decisions on what to do with the wealth until they have taken time to think over options and consult with financial planners and the parent's estate planning attorney.

While those ideas about what to do are percolating, there are some steps to take to protect the assets, however.

Kiplinger's suggests putting cash into federal insurance-protected money market accounts. If the cash exceeds $250,000 (the maximum covered by the Federal Deposit Insurance Corp.), split the money among banks.

Some people might do well to put the new wealth into a CD (certificate of deposit) for three or six months. Because there are penalties for early withdrawal, the CD holders essentially force themselves to take investment/spending plans slowly.

Kiplinger's also encourages heirs who get their money from life insurance policies to turn down insurance company offers of new policies, annuities and the insurer's own money market funds.

Another step to take: discuss with an attorney ways to protect your inheritance in case of divorce.

Discuss, too, with a tax expert the ways to handle inheritance from an IRA or Roth IRA account. These accounts are governed by complex rules that must be adhered to or risk losing tax benefits.

Source: Kiplinger, "Heirs Should Treat Windfall With Special Care," Susan B. Garland, Feb. 2014

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