Inheritance could free reader from debt
Dear Bruce: I recently inherited a small amount of money invested by my departed relative in a major software company. The amount of money is almost enough to pay off all of my credit card bills. I was thinking, though: Would it be better to hold on to the stock and wait for it to rise? My credit cards helped me pay child support and alimony, but now I can settle the debt. Should I pay or keep the stock?
-- Reader, e-mail Dear Reader: The company that you mentioned is doing very well, and I think it will continue to do well. However, that is just an uninformed opinion. Only you can make the decision whether you would be better advised to pay off the credit card bills and avoid the high interest, or whether this stock will outperform those high bills. On balance, there is a lot to recommend paying off the credit cards. In your position, I probably would go that route.
However, no one can say whether this is the time to sell a specific security. That stock might go through the roof, and you will be sorry you sold it. That's what investing is all about.
Dear Bruce: I sold a small parcel of property and plan to put the money into CDs. If I divide it equally and put my name and one of my children's names on it, will my kids receive the money upon my death? Or will it have to go through probate?
-- Reader in Iowa Dear Reader: If the CD is titled in your name and your child's name with the right of survivorship, the money would pass directly to them. In all likelihood, your Social Security number would be on the instrument. Many older people have put funds in their children's names so that they would have access to the money in case they were not able to handle their own affairs. Unless the amounts are extraordinarily large, this will be an easy process.
Dear Bruce: I will soon be receiving a settlement from a malpractice lawsuit settled out of court. My 13-year-old son was included in the suit, and I plan to give him $30,000. I want to invest this money in an annuity, with checks paid to him starting at age 25, but I am at a loss as to how to go about doing this. I have no idea which company would be the best for this investment. Can you offer any advice on this matter?
- I.O., e-mail Dear I.O.: First of all, I'm at a loss as to how you arrived at the $30,000 number. You said you plan to give your son the money and that he was included in the lawsuit. It seems as if this would be some kind of stipulation by the court. That said, I'm not at all certain that you have the authority to keep the money from him. If your son was included in the suit, the money might have to be invested under the stewardship of the court and paid out to him at age 18. It would be quite different if you were the beneficiary and could use the proceeds any way you wanted. But before you go out and buy any annuities -- which can be a difficult path -- consult an attorney.
I would be careful with regard to annuities. While they can be valuable in certain circumstances, more often than not, the salesperson gets the best deal of all with a substantial commission; there are better ways to invest.
Send your questions to: Smart Money, P.O. Box 2095, Elfers, Fla., 34680, or e-mail to:bruce@ brucewilliams.com. Smart Money