Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Inheritance question
Old 06-13-2015, 10:03 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Apr 2015
Posts: 5,803
Inheritance question

Last parent recently passed after long illness, leaving heavy stock portfolio, dividend paying. Firecalc has us good to go on our own funds. Would it be advisable to leave this as is and let it ride?
What do I do with the dividends?
Kind of feel lost, this parent was my go to person for financial advice and the reason we have what we have.


Sent from my iPhone using Early Retirement Forum
__________________
Give a Man a fish, he will eat for a day.
Teach a Man to fish, he will eat for a lifetime.
pacergal is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 06-13-2015, 10:17 AM   #2
Thinks s/he gets paid by the post
 
Join Date: Nov 2011
Posts: 3,877
Sorry for your loss. Sounds like it's time for you to study more about investing, and that you've found a good place to learn here. You could do worse than dividend stocks. If your inherited portfolio has performed OK during the past few years, I'd say don't make changes until you have a good reason to do so. That portfolio was likely arranged to support a retiree, which you may soon be yourself, thus it could well be a fit for you too. Study how the inherited portfolio's stock/bond/cash allocation meshes with your own. If it makes you too stock (or bond or cash) heavy those could be areas to reduce via rebalancing.
GrayHare is online now   Reply With Quote
Old 06-13-2015, 10:21 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 26,821
Sorry for your loss.

Financially, the stocks would have been stepped up in basis to their date of death, so there should be little/no cap gains issues in selling them.

From there, I can see no reason to not treat them as part of your overall Asset Allocation. If this puts you over-weight in stocks, move some to fixed income and vice-versa. I prefer an ETF/index mutual fund to avoid specific stock/bond risk, it's just a basic diversification guideline.

What do I do with the dividends?

Ummm, spend them? Give them to me? Give them to a deserving charity? Re-invest them so your heirs or designated charities may have more at your ultimate demise?

-ERD50
ERD50 is online now   Reply With Quote
Old 06-13-2015, 10:29 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Sarah in SC's Avatar
 
Join Date: Sep 2005
Location: Charleston, SC
Posts: 13,566
I am so sorry for your loss.
It sounds as though your parent had made some good choices in the portfolio, and there is nothing at all wrong with just leaving it as is for now, until you feel ready to incorporate it into your own long term plans.
As for dividends, you can change it to have them reinvested if you don't have any pressing cash needs, or just allow them to be swept into a money market if you do need some of the income.
Again, just giving it 6 months or a year before you make changes, may give you some piece of mind while you process the emotions.
__________________
“One day your life will flash before your eyes. Make sure it's worth watching.”
Gerard Arthur Way

Sarah in SC is offline   Reply With Quote
Old 06-13-2015, 10:41 AM   #5
Full time employment: Posting here.
hesperus's Avatar
 
Join Date: Aug 2013
Location: https://www.google.com
Posts: 750
Send a message via ICQ to hesperus Send a message via AIM to hesperus Send a message via Yahoo to hesperus
Quote:
Originally Posted by pacergal View Post
Last parent recently passed after long illness, leaving heavy stock portfolio, dividend paying. Firecalc has us good to go on our own funds. Would it be advisable to leave this as is and let it ride?
What do I do with the dividends?
Kind of feel lost, this parent was my go to person for financial advice and the reason we have what we have.


Sent from my iPhone using Early Retirement Forum

Very sorry for your loss... I went through a similar situation a few years ago when DF passed and left a significant portfolio. The one thing I learned is to take a deep breath and do nothing immediately. Take stock of what you have, and look at your overall allocation with the new additions. Then you will have a better idea of how it fits into your financial goals. On one hand, it is a very good time to rebalance because of the stepped up basis, on the other hand you need take a good look at how it fits currently into your plan before doing anything. You may or may not need to tweak it much. I was fortunate enough to have inherited a pretty well diversified portfolio, although advisors where the account was held (Wells Fargo) had me start selling a lot of positions which, in hindsight, really did not need to be sold - can you say commissions? You have to be careful because many brokerage advisors will see gold when you tell them your story. Trust your own research and learn what you can. I eventually moved everything out of Wells Fargo and into Fidelity where I have many tools to analyze & manage the portfolio, along with a private client advisor that isn't pushy and doesn't rely on trade commissions.

It was a tough time, with the loss of a parent combined with the responsibility of taking something on that was so important to them. I still find myself now, years later, wishing I could ask my DF investment advice.
hesperus is offline   Reply With Quote
Old 06-13-2015, 10:50 AM   #6
Recycles dryer sheets
robertf57's Avatar
 
Join Date: Jun 2014
Posts: 337
I am sorry for your loss.

Given the stepped up basis, you certainly want to record what your cost basis is , so there are no questions down the road when you do sell. Definitely take the time to educate yourself before you do much of anything. One of things I would not wait to do o is assess any fees that are being paid through the accounts/funds and move everything if there are significant costs with the current custodian.
robertf57 is offline   Reply With Quote
Inheritance question
Old 06-13-2015, 12:06 PM   #7
Thinks s/he gets paid by the post
 
Join Date: May 2014
Posts: 1,867
Inheritance question

Mine are all gone too Sorry for your loss...

Investing newbie may I suggest you read this:
http://www.transparentinvesting.com/...wholestory.pdf

I've used the low cost diversified mutual funds suggested and dividend stocks to great effect. One other thing stay away from financial advisors study after study says they do more harm then good...



Sent from my iPad using Early Retirement Forum
rayinpenn is offline   Reply With Quote
Old 06-13-2015, 12:37 PM   #8
Thinks s/he gets paid by the post
SumDay's Avatar
 
Join Date: Aug 2012
Posts: 1,862
Quote:
Kind of feel lost, this parent was my go to person for financial advice and the reason we have what we have.
I remember that feeling. Even though I was in my 50's, it really hit me hard when I realized I was an orphan. You have a "new normal" to adjust to, and you will.

As others have said, don't do anything for a while. I have also been lucky enough to receive an inheritance. I found this board, and learned a lot. But I still wasn't confident in my decisions. Someone here at ER suggested finding a fee only financial planner, which I did. While many on this board would never utilize one, I needed this help and reassurance, so to me, it was worth it. No active participation in our finances, just recommendations for which funds in our 401(k)s, Asset allocation, and lots of Vanguard love from her. Of course, YMMV.

Here are a few links that may help:

Fee-Only Financial Planner: What's the Difference? - Forbes (skip the ad)

https://www.napfa.org/

Good luck to you. Took me a while to get used to spending "their" money.
SumDay is offline   Reply With Quote
Old 06-13-2015, 12:44 PM   #9
Recycles dryer sheets
 
Join Date: Jan 2010
Posts: 183
Sorry about your loss.
As someone else pointed out, since you get step-up in cost basis, it is a time to evaluate it as your own. Think of it as cash, and what you would do with that cash - would you buy the same dividend paying stocks , or would you buy index funds, which vendor would you keep them with?
Also consider - What is your marginal tax rate? What impact would the dividends have on your taxes?
If you are quite new to investing, a decent option is some low cost index funds at Vanguard or Fidelity. Search for bogleheads wiki and educate yourself a bit. Feel free to post specifics of your current (and inherited) portfolio here or at Bogleheads forum and forum members will give you more specific advice.
pixelville is offline   Reply With Quote
Old 06-13-2015, 02:12 PM   #10
gone traveling
 
Join Date: Apr 2011
Posts: 3,375
Since you have no cap gains now on those stocks right now, now is the perfect time to rebalance your assets to what you want with next to no tax consequences. Of course you have to know what you want.
gerntz is offline   Reply With Quote
Old 06-13-2015, 06:13 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Apr 2015
Posts: 5,803
Thank you so much for the support and encouragement. I have some reading and more research to do! The estate is not settled yet. I want to give myself time to make good decisions. Several of you mentioned the capitol gains. Question: do I have this entire tax year to make any changes or do I have to do it right away when it changes to my name?
pacergal is offline   Reply With Quote
Old 06-13-2015, 06:33 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 26,821
Quote:
Originally Posted by pacergal View Post
Thank you so much for the support and encouragement. I have some reading and more research to do! The estate is not settled yet. I want to give myself time to make good decisions. Several of you mentioned the capitol gains. Question: do I have this entire tax year to make any changes or do I have to do it right away when it changes to my name?
If you are talking about adjusting the 'cost basis' (the record of what is used for its 'purchase' price'), then you really do not need to do anything until/if/when you sell it.

However, I would do it as soon as it is convenient, so that you don't forget, and/or the job doesn't end up falling on someone else, who might not be as aware of the full history.

I handled this for my FIL's estate, and updated the cost basis at the brokerage that I consolidated their holdings at (Fidelity in this case). It could all be done on-line, though there was one glitch where they got some record of cost basis from the transfer agent, and I can't change that on-line. But they said they would do it with a letter signed from my MIL (the trustee). The difference was small enough, and only affected a few shares (probably a dividend reinvestment?), I probably won't bother.

Of course, I'm just a random person on the internet, you should verify that on your own. But it should get you pointed in the right direction.

-ERD50
ERD50 is online now   Reply With Quote
Old 06-13-2015, 07:05 PM   #13
Full time employment: Posting here.
 
Join Date: Jul 2014
Posts: 930
First, sorry for your loss. As others have said, if you're feeling overwhelmed and confused or still emotional from your loss, now is not the time to make any big decisions. Your stepped up basis will apply whenever you sell, so you don't need to do anything now, just keep records of the value from the time of the death.

Once you're ready to address this situation, consider the inherited portfolio in the aggregate with your current portfolio. Is the overall asset allocation what you would want if you were starting from scratch? Are there excessive fees involved?

And try not to be emotionally attached to these particular investments if they're not right for you. Your parents wouldn't want you to keep things if they're not right for you. If you have some emotional attachment, you can always keep a few token shares, but try to take the emotion out of the investment question.

If you have particular questions, feel free to post questions here or at another forum like Bogleheads.
Katiek is offline   Reply With Quote
Old 06-13-2015, 08:01 PM   #14
Thinks s/he gets paid by the post
 
Join Date: Nov 2011
Posts: 3,877
Quote:
Originally Posted by pacergal View Post
Thank you so much for the support and encouragement. I have some reading and more research to do! The estate is not settled yet. I want to give myself time to make good decisions. Several of you mentioned the capitol gains. Question: do I have this entire tax year to make any changes or do I have to do it right away when it changes to my name?
The new cost basis has already been set (it's not under your control). It's the average of the high and low share price on the date of death. If the stock market was closed on that day, the new cost basis calculation is a bit more complicated.

If the shares are at a brokerage, the brokerage can reset their record of the cost basis for you. Typically that involves you sending them a request form plus a death certificate.

If the shares are not at a brokerage, you need to do the calculation youself. You'll want to search online for historical stock prices. Don't put it off and forget because subsequent splits, buyouts, etc. can make calculating an old cost basis tediously difficult.
GrayHare is online now   Reply With Quote
Old 06-13-2015, 09:07 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 17,203
Like others, sorry for your loss....

Also like others, take your time on any decisions... do not feel like you NEED to do anything right away...

A question that has not been asked... what kind of percentage is this portfolio compared to your own IOW, if it is small compared to what you have you might not have to do much of anything... but if it is 10X your portfolio... then you have to make some decisions on AA etc...


The one thing that I would want to know is where is the assets held... people are assuming things I would not... he might have it all in some high cost brokerage or investment company that would love to have you buy and sell stuff to make money off you.... so I would make a decision on the firm first before I made a decision on where to invest the money....
Texas Proud is offline   Reply With Quote
Old 06-13-2015, 10:44 PM   #16
Full time employment: Posting here.
 
Join Date: Dec 2006
Posts: 880
OP: Lots of good advice given. Given the fact you are asking the question,

start reading and learning. This site is pretty good.

Also, be very, very, very, careful of "financial advisors" and others trying to sell you products you do not need.

Very easy, to prey on the uninformed.
wolf is offline   Reply With Quote
Inheritance question
Old 06-14-2015, 05:13 AM   #17
Thinks s/he gets paid by the post
 
Join Date: May 2014
Posts: 1,867
Inheritance question

Like the book the millionaire next door suggest a common trait of those who achieve financial independence is how you handle windfalls. We've been beneficiaries twice now I feel one way we show respect for the lost relative is too be judicious with the money. In our case we invested it in mutual funds and let it grow. Eventually the funds earnings will help fund retirement and hopefully will be legacy for our children.

A farewell gift to be enjoyed and respected...


Sent from my iPad using Early Retirement Forum.
rayinpenn is offline   Reply With Quote
Old 06-14-2015, 08:07 AM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2011
Posts: 8,362
Quote:
Originally Posted by pacergal View Post
Firecalc has us good to go on our own funds. Would it be advisable to leave this as is and let it ride?
Quote:
Originally Posted by ERD50 View Post
From there, I can see no reason to not treat them as part of your overall Asset Allocation.
I think there's a tendency to keep the deceased alive in a way by keeping and viewing such funds separate as "Dad's/Mom's money". I've done the same thing out of some weird respect/rememberance.

It's ok to do this for a while, but as noted, it eventually needs to be absorbed into your overall portfolio and allocated appropriately.
__________________
Living well is the best revenge!
Retired @ 52 in 2005
marko is offline   Reply With Quote
Old 06-14-2015, 02:45 PM   #19
Thinks s/he gets paid by the post
mpeirce's Avatar
 
Join Date: Feb 2012
Location: Northern Ohio
Posts: 3,182
Quote:
Originally Posted by marko View Post
I think there's a tendency to keep the deceased alive in a way by keeping and viewing such funds separate as "Dad's/Mom's money". I've done the same thing out of some weird respect/rememberance.

It's ok to do this for a while, but as noted, it eventually needs to be absorbed into your overall portfolio and allocated appropriately.
My DM has done this as well. She has a few ATT shares that she inherited from her DM and when I suggest she sell them, she doesn't want to. I don't push it, but it's fairly irrational (OK, maybe sentimental)
mpeirce is offline   Reply With Quote
Old 06-14-2015, 04:01 PM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2006
Posts: 11,401
Quote:
Originally Posted by mpeirce View Post
My DM has done this as well. She has a few ATT shares that she inherited from her DM and when I suggest she sell them, she doesn't want to. I don't push it, but it's fairly irrational (OK, maybe sentimental)
This is where it helps to be an INTJ like me. When I inherited a trust, a house and a portfolio, I had no hesitation in selling them and realigning the proceeds with my desired asset allocation. I don't need to own the house to keep happy memories, and I have no emotional attachment to funds selected by my mother's financial institutions many years ago.
Meadbh is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
TRAD IRA inheritance Question 5oneanddone FIRE and Money 17 11-27-2013 02:52 PM
Inheritance and Tax question - form K-1? BOBOT FIRE and Money 14 02-06-2011 06:20 PM
New Member - Inheritance Question packraider Hi, I am... 10 07-28-2005 09:19 PM
Honey,  I shrunk the kids (inheritance) John Galt FIRE and Money 24 02-23-2005 10:15 AM
My parents and their inheritance Jane Other topics 42 08-15-2004 09:23 AM

» Quick Links

 
All times are GMT -6. The time now is 11:38 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.