My father recently passed away Feb 15th 2007.I am slated to inherit $400,000 worth of Abbott Labs stock?

Question

I am currently 40 years old.I work as a Registered Nurse in Columbus Ohio USA.I earn roughly $60,000/year.I rent currently and pay $675/month for rent.I would like to sell off so many shares pay off roughly $35,000.00 worth of nursing student loans and sell off enough to put a 20% down payment on a $300,000 condo/house...(avoid PMI insurance) then finance the rest of the mortgage @ 6.0% 30 year loan.Then reinvest some of the stock in T Rowe price international aka Latin America...European invest ments and keep some invested in my fathers choice Abbott Labs...ANY Advice?????..Am i spending too much on a condo in Columbus Ohio USA..i mean there is a push to revitalize Downtown area in Columbus...I don't want to move way out in the Suburbs of Columbus..It seems the closer you are to Downtown city center you pay more and get less space>

Answer 1

One responder suggested paying attention to the tax consequences of selling the shares. Your cost is the cost on the day you inherited the shares. Use that. To make your decission. Abbot is an excellent company. No doubt about it.
Actually from you plan, you should be answering these questions instead of asking. Well thought out.

I do however have some suggestions. Think carefully about the risk of investing in especially developing countries. It would be a pitty to take a big hit on your investments. Most advisors would recommend no more that about 10% of your investments in developing areas. They are very volitile. Chinese stocks lost 10% last week.

Heck, I do not know beans about property values in Columbus. But with $300,000 you could buy 1/2 the town of Muncie. Or a large estate 20 minutes from Ball Hospital. Why don't you move here?

Answer 2

First off, alleviating debt is always a good thing but...
I own a tremendous amount of ABT and it is a very good stock. It increases it's dividend annually, usually about 8-10%. It has recently made some good business aquisitions and sales of units that will make this a very good investment over the next ten years.

Selling off your stock will not only pay down your debt but you will also have to pay the 20% capital gains tax to the feds (Whatever the cost value of the stock is to you on the day you inherit it.) Also, it will also be taxed as income.

Maybe sell enough to make a down payment on a condo but that would be all I would do. You are in a very good, dividend paying stock that is sound. Don't waste your time, in my opinion, with mutual funds or oversees investments. Stick with the big name stocks you know and get away from these money manager/Mutual fund companies and all their screwy little charges and fees. If anything, try diversifying the ABT into some other strong stocks such as, BAC, PG, UNP, XOM, JPM. I would cconsider opening a brokerage account with say Huntington or KeyBank. I have one at Huntington and they are wonderful to deal with, always have good advise, and they do not charge you for having an account there.

Some advice: make sure you are in these things for the long term when you are buying. If I looked at my stocks every day, week, minute, I would go nuts and think constantly about selling. Stay with the Warren Buffet way of investing. Buy a strong company and sit on it. I do, and I outperform the market and many of these money managers. I do not own mutual funds, my wife does and they are so-so.

As for real estate, it's okay but at the end of the day all the cost you will constantly put into it does not outway the benefits and paybacks that a stock like ABT offers. Plus, keeping a dividend paying stock like this will be a nice added source to your income for the future and will continue to grow each year (through Dividend, stock splits,etc) You've also got a nice jump on your retirement in something that is fairly low risk. Condo's right now and historically have not been the big returns in real estate.
I hope this helps. And yes, I think you are spending a bit much on a condo. I would get a financial planner to help advise you on what you should and can afford while planning for the future.

Answer 3

Sorry for your loss. Re: the inherited stock: you're doing the right thing by diversifying your holdings. The cost basis will be the value of the stock on Feb 15th 2007 (not the value when your father originally purchased the stock) and if there is a gain, regardless of the time between the date of death and when you sell in order to diversify, the gains will be treated as long term capital gains even if it's sold prior to Feb 15th 2008 (consult with a tax advisor to varify) As far as what you are planning on doing with the funds I think your investment strategy is very sound and continuing to hold Abbott Labs is a great way to recognize your father but be careful not to keep too much invested in one stock (I would suggest no more than 5% of your entire investable assets)...also, while it seems remote based on the funds you're looking at investing in, double check to make sure the funds themselves aren't holding Abbott Labs stock or if they are you may want to lower the amount of individual stock you maintain. Regarding the condo purchase I like that you are focusing on the quality of life issue primarily and the investment attributes of the property only secondarily. I too live in the city and have found my life to be much more enjoyable having a short commute and being so close to the things I like to do. At 6%, 30 year fixed, it makes sense to put the minimum down you are comfortable with based on the monthly payment. There are only a couple of other things I would suggest: 1. You are fortunate enough to be able to keep a sizeable emergency fund so make sure you set enough aside in a CD or money market accoutn sufficient to cover at least 6-12 months of living expenses. 2. Put some of the money you're investing into mutual funds into a domestic fund 3. Because the domestic and international markets are so volatile right now I think it would make sense to liquidate the portion of Abbott Labs stock you are planning on and then keep the distributions in cash (money market funds) and stage your contributions into the funds on a monthly or quartely basis over the next year or two rather than all at once....this will protect your overall portfolio from some downside risk if the world markets continue their current downward trend.

Answer 4

Just general comments...yes, pay off the student loan. And finding yourself a home is a great idea.. and the mortgage is right, too. ( home loan interest is one of the few " breaks" a little guy gets at tax time...plus the bundle that you DON'T put on the house should make more than 6% in investments)
As far as investing...only about 20-25% of your funds should be as " venturesome" as Lat Am,Emerging Mkts, etc..
Whatever investment co.( Fidelity, T.Rowe, Vanguard, etc) that you go with will have some nice " balanced " funds for a stable 8.9, or 11% return. That's your " core", your "nest egg"....leave it alone and it will be good to you!
As far as Abbott, you don't owe them anything..take the money and walk...if you really " have" to just look into a " pharmeceutical" fund ...under " holdings" find one with a lot of Abbott and let that fund be some of your 20/25% venturesome investing.
Your Dad took good care of your future, don't create a lot of worries for yourself by getting too " creative"....I'm sure he wanted you to enjoy a little, not anguish over a lot of details.

Answer 5

Personally, I'd just pay cash for the house.

If you take out a 30 year fixed mortgage, by the time you've finished making all the payments, you'll have paid about $900,000 for that condo. Whats worse, most of the interest is in the first years of the mortgage. You don't even get to the point where it's half paid off until about the 23rd year.

Pay cash for the house and take what you would have paid in mortgage payments every month and invest it. Just taking your current rent payment and investing it would give you well over $200,000 in 25 years if your investments earned zero capital gains.

Answer 6

Without commenting on your choice of future investments:
1) sorry for your loss.
2) be sure you understand all the tax implications of selling the shares.
3) best thing you can do both fiscally and emotionally is eliminate all your debt. There is nothing like the feeling of having that burden off your back.
4) dont dump all the leftover $ into the same mutual fund or sector (like all into latin america)
5) you cant always look at real estate as strictly as an investment, afterall you need a place to live.

good luck, friend

Answer 7

Sorry to hear about your father...

Your plan sounds fairly reasonable. You have assets sufficient to pay for the condo and a good income, so you should be able to get a decent interest rate on a mortgage. In general you'll pay more for downtime real estate in relation to what you're getting, just because it is downtown. For the record I lived in Grove City for a couple of months last year working on a political campaign and I generally found that traffic into town from the south wasn't bad.

Answer 8

well naturally you will have a huge tax issue with this next year and 300k for a condo is too much. You also have to factor in taxes (especially property) it IS cheaper to live in the burbs look around talk to legit home sales people in your area you can get a very nice home for well under 300k. As for mortgage you have the right idea but still never pay more on a home than what you can afford.

Answer 9

My simpathies on your loss.. My wife died 18months ago.. she was 36yrs. I am 42yrs..we had a large life insurance policy.. I also have a large sum just like that.. Here is what I did.. GET RID OF ALL DEBT! Credit cards,mortagage, ALL OF IT... then take the rest of money and diversify the rest.. THEN.. cut back in your cost of living.. IN DOING THAT...The money you now save each month is a new paycheck for you... SAVE IT!! Dont buy the big nice house, car and vacations.. What a waste..
This windfall of money ... make it last, and make it grow.. do that, and you could retire by 52!! I am on pace to do that!! I wish you the best!

Answer 10

The sooner that you pay off a house the sooner banks will be scrambling to your door with truck loads of cash to lend to you at much better terms. Why bog yourself down with a 30 yr mortgage. Own your own house and then build your wealth from there