04 May What to do with inherited stocks
Photo: darnok/morguefile.comQ. I inherited a portfolio of $50,000 in stocks that was like play money for my dad. I’m saving regularly for retirement and I have an emergency fund so this money doesn’t really have a goal. Should I keep his stock picks or sell it all?
— Unsure
A. We’re sorry about the loss of your dad.
Inherited funds often need to be reinvested to suit the needs of the beneficiary — in this case, you.
And while it’s not uncommon for beneficiaries to hold onto inherited investments because they often represent an emotional link with the deceased person, that’s not the smartest financial move for most investors.
You need to look at your financial situation, said Bill Connington of Connington Wealth Management in Paramus.
He said even if you’re investing for retirement and have an adequate emergency fund, you can look at what other assets and goals you have for the future.
“It would seem to me that this inheritance would be a way to build wealth outside of your retirement and emergency fund,” he said.
He said you should evaluate the investments in the inherited portfolio, and consider having a financial professional help. Together, you can decide which ones you would like to hold on to and which ones you can sell.
“Since stock was inherited, your cost basis on these securities will be based on the date of death,” he said. “So although taxes should be taken into consideration, they should not keep you from making decisions on which investments to sell.”
You should look to reallocate the portfolio based on your risk and return goals.
“You may not have a goal for this inheritance right now, but by using it to accumulate wealth may help you to at some time in the future purchase a home, provide for education or buy a new car,” Connington said. “But most of all, it is a benefit that will allow you to build your portfolio to achieve financial independence, which is the point that you can feel secure in achieving your goals.”
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This post was first published in May 2016.
NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.