The theme this week on the Retirement Quick Tips Podcast is: What to do with a $300,000 inheritance

Today, I’m talking about taking advantage of step ups to re-align the portfolio for your needs.

The estate tax situation is very favorable in our current time. Under current tax law, assets like IRAs and Roth IRAs are passed along tax free - at least at first - until you have to start taking mandatory distributions from non-Roth accounts, which very often occurs in the first year.

There are high exclusion amounts on estate values, meaning that in most states, estate taxes won’t even be an issue until the estate value exceeds several million dollars. 

Most taxable investment accounts enjoy step ups in cost basis, meaning that on a long held profitable investment, all the capital gains get wiped out as of the date of death, making it easy and free of major tax consequences to sell inherited assets. 

Which brings me to the point of today’s episode: It’s vital that you re-position inherited assets to suit you and your needs and your stage of life. 

Too many people don’t re-allocate assets appropriately. They hold on to houses they shouldn’t, stocks they shouldn’t, a CD or bond portfolio designed for someone in their 80s, not someone in their 50s or 60s. 

There’s a lot of reasons for this. Guilt I think is one. Being overwhelmed and not really knowing what to do is another common reason. Receiving an inheritance is an important time to bring a financial advisor into the picture to help you make sound decisions, rather than ones based on emotions. He or she can help you move forward and re-align inherited assets to fit you and your needs. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.  

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance