Just because someone else owned them, it doesn’t mean they’re good investments.
What did you do when you received a purple vase decorated with green stripes and gold roses as an inheritance from your late Aunt Minnie? Did you give it a place of honor in your breakfront, hide it away in the attic, or did you follow your spouse’s instructions and “sell that hideous thing because at least you might get some money for it”? Chances are that you wouldn’t dare sell the vase, simply because of its sentimental value.
When it comes to a financial inheritance, such as stocks or bonds, you would be surprised how many people keep holding onto these positions for sentimental reasons.
If you do inherit some money in the form of stocks or bonds, you have two possible options:
1. You could sell the positions and start from scratch.
2. You could keep them and try to maintain the portfolio.
Under the right conditions, either decision could work for you.
For example, if the original owner didn’t have a solid reason for holding them, but did so anyway because at the end of his life he really wasn’t thinking so clearly about money anymore, why do you need to keep them? If these investments aren’t doing so well, do you really need them? Even if these investments were suitable and worked well for the person who left them to you, consider if they are appropriate for you and fit in with your overall financial plan. You may well be better off selling them and investing the money into something else that would be a lot more suitable for your personal situation and aspirations. And last, but by no means least, an investment is not an old vase. Whereas the worst thing that could happen to you by holding onto Aunt Minnie’s vase is that you have another dust collector in your living room, holding onto an investment for sentimental reasons can have a negative impact on your portfolio.
On the other hand, this doesn’t mean that you should automatically sell the investment just because you have inherited it. Take a look at it (preferably with the help of your financial adviser) and ask yourself whether you would have invested in this particular position if you didn’t inherit it. If the answer is positive, then keep it.
Sometimes, a person receives an inheritance and doesn’t know what to do, simply because they have never invested before. The world of stocks, bonds, and mutual funds may not be familiar territory for everyone. If this is the case for you, consider taking the free course on “3 Tips to Dealing with Inheritances.” If you anticipate receiving, or giving, an inheritance one day, this is knowledge you must have.
About the Author: Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd, a financial planning and investment services firm located in Jerusalem. He specializes in working with clients who live outside of the United States and want to maintain a U.S. brokerage account. Doug’s newest book, co-authored with Susan Polgar, about how using chess strategies to improve your finances, Rich As A King can be purchased at www.richasaking.com. He is a licensed financial professional both in the U.S. and Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, FSI. Accounts held at Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation. Neither Profile nor PRG gives tax or legal advice. Before immigrating to Israel, it is advisable to consult with a tax attorney who is knowledgeable about Israeli law. Contact at firstname.lastname@example.org
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