Take Steps to Protect Your Inheritance

At some point in your life, you may inherit a sizable sum of money ­­ and what you do with it could have a major impact on your financial future.

How should you handle your inheritance? To begin with, don't make any quick decisions, especially if the money is coming from a parent or a particularly close relative. Even as an adult, you need time to recover from a major loss. So, rather than making any emotional choices, you may just want to ``park'' the inheritance funds in a money market account for a while.

Eventually, though, you will need to decide how to put this money to its best use. Here's one suggestion: If you are carrying a large balance on a high-rate credit card, you may want to pay it off now, while you have the money. Many cards have interest rates of 16 percent or more; since you would have a hard time finding an investment that paid that kind of return, your decision to get rid of the debt is smart use of your money.

Once you've paid off that credit card debt ­­ or if you never had it in the first place ­­ you'll want to look at other ways you can maximize your inheritance. Some people make the mistake of assuming that, since they didn't have the money before, they are now free to invest it aggressively. And yet, if their investment goes sour, they end up regretting it just as much as if they'd invested money they had earned. Don't make hasty decisions without considering potential risk, as well as your comfort level with that risk.

If you're a moderate or conservative investor, and you wouldn't feel comfortable investing aggressively under normal circumstances, then there's no way you're going to feel good about putting your inheritance in high-growth, high-risk vehicles.

So, before you invest a dime of your new money, ask yourself: ``What sort of investor am I?'' If you've been investing for a while, it won't take long to come up with the answer. Then, ask yourself some more questions:

``What are my long-term investment goals?''

``When will I need this money?''

``Is my portfolio properly diversified?''

The answers to these questions will help you determine how to invest the money from your inheritance. A qualified financial professional can help you assess your situation and make recommendations appropriate for your individual situation.

Thus far, we've just talked about what you might do with your money if there were no strings attached. If your inheritance is large enough, you may well face some estate taxes. If that's the case, then you'll need to deal with your tax situation before you start investing. Your tax adviser can help you make proper choices.

You'll want to treat your inheritance with the respect it deserves. So, take the time you need to make the right moves.

- 30 -