Managing your inheritance : getting it, keeping it, growing it-making the most of any size inheritance by Card Emily;Miller Adam (Adam L.) & Miller Adam (Adam L.)

Author:Card, Emily;Miller, Adam (Adam L.) & Miller, Adam (Adam L.)
Language: eng
Format: epub
Tags: Finance, Personal, Inheritance and succession, Wealth
Publisher: New York : Times Business
Published: 1996-01-05T16:00:00+00:00

CASE STUDIES IN ASSET ALLOCATION I73

James remembers thinking that the inheritance could not have arrived at a better time. His accounts were running on empty. Large credit card bills haunted him, but using plastic to pay plastic had become a habit. With his frantic efforts to make ends meet, James needed a break.

James's first thought when the letter came was 'Vacation!'' Upon return from their two-week Caribbean cruise, Kim convinced him that they should redecorate the kitchen and living room. The couple then upgraded the furniture to match the upgraded lifestyle they planned with the new inheritance.

For three months James and Kim hit the best restaurants, went on weekend getaways, bought new clothes for everyone, and purchased a high-end home entertainment system. They had paid the outstanding balances on all their debts, including Kim's Honda Civic and their many credit cards. James arrived at our office with only $35,000 left in his savings account.

Although he had paid off his debt, it was too late for us to help James save the majority of his inheritance. Now the challenge would be to conserve what remained and to help him budget to avoid overextending himself again. One key problem: The habit of overextending credit cards is hard to break. For this reason, rushing out to pay all bills never makes sense. First, a new plan and new habits must be set in place.

At our suggestion, James agreed to use a portion of the remaining balance to set up an educational trust for Randy and Ash-ton. We advised him to leave $5,000 in liquid savings and money-market accounts to meet any emergency cash requirements. The remaining $15,000 was spread among a mutual fund, municipal bonds, and Treasury notes to position James for the growth of the remaining asset base.

We also worked through a budget with James to ensure that Kim and James would stick to a spending plan that fit their resources. The couple agreed to limit future travel to local road trips

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