The Inheritance Boom.

• Author: KRONEMYER, BOB

The nation's baby boomers are expecting a wealth transfer of more than $12 trillion.

As if most baby boomers in America aren't already enjoying the good life, here comes the mother of all materialism.

In a study by the Boston College Social Welfare Research Institute (supported by the Lilly Endowment) the most conservative estimate over a 20-year period shows $12 trillion changing hands through wealth transfers in final estates. So we asked a number of Hoosier investment experts how this already blessed segment of society should manage its newly found riches.

"People who inherit money usually do one of two things: they either invest too conservative or they invest too aggressive," says Jim Kocon, a principal at Peerson and Co. in Whiting. A passbook-savings account at 2 percent annual rate of return or an individual believing that within a few years he can turn $100,000 into $1 million through some risky stock investment represent such extremes.

According to Kocon, investment strategies involve an individual's emotional situation, psychological background and previous financial experience. For someone under 35 years old who inherits $100,000, Kocon recommends investing in stock mutual funds. "This will provide diversification and professional money management, especially for someone who has had no prior experience in the stock market." He suggests that half the money be put into growth-stock mutual funds and the remainder in value-stock mutual funds. "Over a five- to 10-year period, these blended funds should perform extremely well, with a historical annual return of about 15 percent over the last 50 years," he conveys. "The point is not to become emotional and try to quintuple your money in a short period of time."

The roller-coaster ups and downs of the stock market over the past year underscore the fact "that it can be a very dangerous market if you don't know what you are doing," Kocon cautions.

Danger may also lurk in the form of tax implications in estate planning. "An inheritance will increase one's own assets that become part of their taxable estate upon death," says Shannon Frank, a partner at Lavallo & Frank, a law firm in Evansville. "Each person has the ability, either during life or at death, to pass an amount of money free of federal inheritance taxes." For the year 2000, that amount is $675,000.

When people inherit money, they have certain expectations of what that money can do for them. "Do you want it to grow, do you want...