Our Perspective

Grandfather, Family Inheritance, Now What?

by: Carl Santos-Ocampo
published on: 07/11/2016

It was four years ago in 2012 when I was playing professional golf around Asia. I finished up the final round of the golf tournament in Cambodia, checked the messages on my phone, and there was the news: my parents had messaged saying my grandfather on my mother’s side Renato Paras had passed away.

He was the first grandparent to pass away so as one of had never lost a loved one this close, the reality of the news hit hard. “Lolo”, as we called him in the Philippines, left behind his wife, 6 children, and 6 grandchildren. A true patriarch of the family, Lolo made it a point to value the importance of family. Saturday nights were family dinner nights. Yearly, he would organize a trip abroad on his treat further strengthening our family ties while sharing some of the best memories.

Through his strong religious faith, Lolo emphasized the importance of appreciating one’s blessings. Throughout his early life, it was a struggle to make ends meet. Losing his father at the age of 2 made it all that more difficult to support his mother and two other siblings yet with his hard work and determination, Lolo found a way to pull his family through, receive an education, top the CPA board exams for accountancy, work for Proctor & Gamble for the next 35+ years, get on the board of directors for multiple blue chip companies, and become a prominent figure in the Boy Scouts and Rotary Club of the Philippines.

While I can go on and on about how admirable my grandfather lived his life through all the challenges, I write this blog to share with you some of the dilemmas a family member may face upon the passing of a loved one. A few years prior to his passing, Lolo had given me a small corporate bond. At the time, I was simply thankful that I could pay off some of my cell phone bills with the coupon payments. Last month, I received an e-mail indicating that a bond had been called early at par and that the entire amount had been transferred to my checking account at the bank. I mean, we’re not talking big amounts here, but it was certainly enough to get me thinking about spending the money on some wish list items and trips or to do something else. Instead, I decided to put the money back into work by reinvesting the funds in a balanced allocation of fixed income and some select stocks. Had I not been in the finance industry and understood the time value of money, I may have easily been tempted to spend it all.

To help those who may have come across a transfer of wealth or are expecting one in the future, I have listed down a couple things to consider before thinking about that Ferrari or that around the world cruise:

Pay Your Debt:
It’s a burden to owe money. Get that monkey off your back and pay down the debt - especially those that charge you high interest rates.

Create an Emergency Account:
Put enough cash aside to live comfortably for 4 to 6 months. Having liquid cash reserves to prepare for the unknown will go a long way towards eliminating the possibility of future debt burdens.

Assess Your Cash Flow:
Take this opportunity to analyze how much you spend versus how much you are earning. If you are in the red, find if there are ways to cut down on unnecessary spending. If you are in the green, it is time to determine how much to put aside for times you may go in the red.

Take advantage of your financial success by maximizing the allowable contributions in your retirement savings accounts. If you still have excess funds, invest them in taxable accounts with the idea of not withdrawing for a long time. Remember, the time value of money is powerful. Investing now will give you the best chance to eventually see that figure grow years down the road.

Enjoy and Appreciate:
Your loved one who passed you the wealth did not intend for you to change your lifestyle, but I’m sure enjoying it over a nice dinner or weekend getaway would not hurt. Appreciate what they left behind but be responsible.

While the outlines above can help serve as a guide, transfers of wealth can more oftentimes become complex. It’s not always as simple as grandpa’s corporate bond being called leading to a small windfall. Working with an advisor can help you lay the foundations through this process. At the High Net Worth Advisory Group of Raymond James, we are equipped to handle these issues and help you deploy your inheritance wisely towards securing your financial freedom.

Finally, in memory of my grandfather Renato Paras and to all those who have lost loved ones along the way, make sure to honor them with a disciplined approach to their funds and most importantly upholding the strong values and priceless memories they left behind.

“You have to learn the rules of the game. And then you have to play better than anyone else.”- Albert Einstein

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