How to Invest Settlement from Wrongful Death Suit

Dear Dr. Don,

I am receiving a large settlement from a mesothelioma wrongful death suit that my father filed before his death. I'd like to make sure that I invest this money effectively. Where do I begin?

Thank you,

- Rhonda Recompense

Dear Rhonda,

I'm sorry that you lost your father to this disease.

A good first step is to work with an accounting professional to determine the potential tax implications arising from the settlement. Some forms of compensation in a mesothelioma settlement may be taxable income, while other compensation can be tax-free. Let's hope it is more of the latter.

Your next step is to ask yourself what you want to accomplish with the money. It's common to use the money first to pay down debt. You might want to pay off your mortgage, your credit cards and your car loans.

Whether you decide to reduce or eliminate your debt, you'll also need to invest the settlement. How you invest depends on your attitude toward financial markets versus attempting to protect the principal by putting the money in savings. Annuities offered by insurance companies are another option.

What you really need is more financial advice than I can provide you here.

Interview a few fee-based financial planners: The first meeting should be free. The goal is to find a trusted adviser to help you make investment choices. The CFP Board of Standards and the National Association of Personal Financial Advisors both offer publications to help you during the interview process. NAPFA's is called "Pursuit of a Financial Advisor Field Guide" and is available online. The CFP Board guide is "The Consumer Guide to Financial Planning" and can be requested online. It will then be mailed to you.

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

Ask the Adviser

To ask a question of Dr. Don, go to the "Ask the Experts" page and select one of these topics: "Financing a home," "Saving and Investing" or "Money." Read more Dr. Don columns for additional personal finance advice.

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

Copyright 2014, Bankrate Inc.