Jones Wealth Management Group
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INVESTING AN INHERITANCE OR
LAWSUIT SETTLEMENT OR COURT AWARD
INVESTING AN INHERITANCE
If you are fortunate enough to be the recipient or beneficiary of an inheritance, it comes with an emotional connection that's not generally associated with other potential windfalls. Your benefactor (the person(s) that named you as a beneficiary) took the necessary steps to leave his/her/their legacy, so it should be an important consideration of yours to honor their legacy by being a responsible steward of the proceeds. It has been noted that a significant percentage of people who receive an inheritance spend most or all of it in two (2) years or less.
Receiving an inheritance does provide an opportunity to reduce or eliminate debt, but before you rush to pay off creditors, ask yourself whether you and your family should be the greater beneficiary(ies) of your loved one's legacy or your creditors? An ultimate honor or tribute to your loved one should be building upon the tradition they have started (or continued) by taking similiar measures as it relates to your loved ones.
At the time you receive an inheritance would be an appropriate time to have a will drafted, if you do not have one, or review your current will. A review of your current beneficiary designations on life insurance policies and/or retirement accounts is also strongly encouraged.
It is strongly recommended to enlist the services of an financial advisor when it come to investing an inheritance. All inheritances are not treated the same, so an experienced financial advisor can provide you advice and services to better help you manage an inheritance. Rules associated with receiving an inheritance are different for spouses than they are for a non-spouse such as a daugher or son, grandchildren, siblings, aunts and/or uncles, nieces and/or nephews, etc.
It makes a difference if you are receiving an inheritance where the proceeds are coming from tax-deferred accounts, including, but not not limited to, traditional IRAs, 401(k) plans, pensions, annuities and/or profit sharing plans. Similarly, there are considerations if you are looking to invest an inheritance where the proceeds come from investments such as stocks, bonds, or mutual funds. An experienced financial advisor helps your understand these rules.
Your benefactor may have owned a life insurance policy and an annuity. Although both are issued by an insurance company, the rules are vastly different for each. An experienced financial advisor can help you understand the differences before you invest an inheritance where the proceeds come from a life insurance policy and/or an annuity.
After some of the issues mentioned above are addressed, you should then communicate your financial priorities to your financial advisor so that (s)he can help you develop a plan for investing an inheritance. This plan will include recommendations for dealing with any outstanding debt, planning for college, or addressing retirement planning needs.
The low interest rates offered on many fixed-income investments such as CDs and bonds prevent someone from depositing money received from an inheritance and "living off of the interest", but an experienced financial advisor can help develop a plan that meets current and future financial needs and continuing to honor the legacy provided by their benefactor.
Allow Jones Wealth Management Group to evaluate your situation. Call today to schedule a no-cost phone or in-person consultation.
Jones Wealth Management Group does not give legal or tax advice. Individuals should seek advice based on their particular circumstances from an independent tax advisor.
INVESTING A LAWSUIT OR COURT AWARD
Lawsuit settlements and court or jury awards can be the result of personal injury, including but not limited to, car, truck, or motorcycle accidents, worker's compensation, medical malpractice, wrongful death, class action, employment disputes and other means.
Depending upon the amount of the settlement, your settlement could be offered to you in the form of a lump sum, one-time payment(s) over a short period of time (1-2 years) or in the form of a structured settlement where periodic payments are made over a longer period of time, such as 20 years or longer. A combination the two, part lump sum and part structured settlement, could also be an option.
A structured settlement is a financial arrangement that arises from a lawsuit settlement or court/jury award where payments are made over a long period of time and usually involve an insurance company arrangement (annuity) that provides the periodic payments.
Before making the decision on your own to receive a lump sum payment or a structured settlement, know your options and seek a better understanding of the benefits of each by seeking the advice of an experienced financial advisor.
Contact Jones Wealth Management Group today for a no-cost consultation to help you determine the best option for your situation of investing a lawsuit settlement.
The National Endowment for Financial Education cites research estimating that 70 percent of people who suddenly receive a large sum of money will lose it within a few years*. Although not specifically addressed, that 70 percent figure could include persons who received their lawsuit settlement as a lump sum AND those who received their lawsuit settlement as part of a structured settlement.
One could conclude that lack of proper planning and guidance has created the industry where companies exchange a one-time payment in order to receive the monthly or yearly payments of a structured settlement for persons who own a structured settlement, lottery winnings, or other periodic payments. The one-time payment provided by these companies is only a fraction of what the total of the periodic payment would be.
Consulting, and following the advice of, an experienced financial advisor when it comes to investing a lawsuit settlement can be beneficial to your on a short-term and long-term basis.
Allow Jones Wealth Management Group to evaluate your situation. Call today to schedule a no-cost phone or in-person consultation.