INHERITED MONEY…
How would you feel about a sudden windfall?
Most people think that they would be delighted to inherit a pile of money…wouldn’t you? An unexpected increase in your assets could go a long way toward paying off debts, taking a vacation, and generally raising your standard of living.
When you process it a little deeper, there are many feelings to deal with and an increased level of responsibility that goes along with inherited money. Both can place a heavy burden on the recipient. As a Daily Money Manager, I have seen clients dealing with both sides of the inheritance coin.
FEELINGS
An inheritance can come with a feeling of survivor’s guilt. Particularly if the deceased was a big part of your life and died at a youngish age, your feelings of guilt can be quite strong. This can lead to the money not being used effectively for your benefit, and can also lead to over-spending because you do not want to feel ‘connected’ to the money, do not feel you deserved it, and would rather have the person back in your life.
Loss of identity is another issue that inheritors can face. Maybe you had a great job or purpose in life and receiving money demotivated you. Because you no longer need the money, you no longer go to the job or perform the work that brought you a feeling of satisfaction or purpose. Money can make life feel empty. It is important to find a positive passion that will motivate you even on your darkest days.
You will undoubtedly feel pressure to ‘loan’ money to friends and family, once word gets out about your wealth status. Money can be very divisive. It is bound to affect some of your relationships if you flaunt it, and even when you don’t. Be sure to set boundaries and have a ready reason as to why you can’t make that loan because most of them are never repaid. Generosity is great, but too much of it means you will not be generous forever. You can’t buy love with money.
Money has been called the great magnifier. The positive and negative in your life is intensified. If you have a substance problem, it will get worse. If you are a woman who loves cats, you could become the next cat lady! Coupled with a lack of financial skills or certain personality traits, the result is often over-spending to the point of loss. Happiness is more than just wealth. You will need to establish financial boundaries to keep the balance in your life.
RESPONSIBILITIES
Usually, those with significant assets have planned their estates through wills and trusts, and have an appointed executor. There are some famous examples of those who did not, but that is a topic for another article!
Often the Executor(s) and the inheritor(s) are one and the same. At a time when you are grieving, you somehow must pull together all the information needed by the estate attorney to open probate and go through the process of settling the estate. This can be a daunting task if significant assets are involved, unless you get some help.
Investing. Families are not always open about their holdings. A period of forensic work might be necessary to find out what is there if assets are not well-documented. Then there is the concern of what to do with all of this new-found wealth. It is imperative to have a trusted advisor to guide and inform you, so you can make good decisions. Research how to interview a financial advisor before you make impulsive moves that could hurt you later.
Cash management skills. Those who inherit money do not always have the skills needed to manage it. Those who have money would do well to educate their heirs but ‘family university’ is not as common as it should be. Interestingly, 80% of parents think their children learn about money in school and 90% of children say they learned financial skills from their parents! Hmmm. It’s no wonder that 70% of wealth transfers fail1.
Philanthropy can become a way of life for those blessed with abundance. This too is no walk in the park. You may feel a responsibility to support a variety of causes, but there are ways to give effectively (tax advantaged) and giving should always be planned and not done impulsively. This allows for sustained giving and wealth conservation. There are also tax limits to personal gifting that you will need to understand.
For those struggling with the feelings and responsibilities of an inheritance, sometimes the best thing to do is get some help to get you over the hump. We help our clients manage the everyday details with patience and confidentiality. We connect you with other trusted advisors as needed, with the goal being for you to enjoy and preserve your wealth. Inheritance is truly a mixed blessing and you need to approach it with eyes wide open.