A lot of people think that receiving their inheritance will solve all of their problems.

The fact of the matter is, your inheritance could end up hurting you.

One of my dear friends, and clients, inherited a large sum of money before he was ready to manage it. He chose to ignore my advice and ended up wasting it all on expensive, big ticket items like cars, a boat, and an RV.

Statistics show that 1 in 3 heirs will spend their entire inheritance within the first 24 months.

These heirs often walk away with more debt, a bigger house than they need or can afford, and multiple large purchases they can’t maintain.

If you are expecting an inheritance or already received one, here are 3 things you need to do:

1. First, be honest about what you want this inheritance to do for you and your family.
2. Secondly, talk to your family. Share your vision with them and hear what your loved ones have to say. What are their hopes for your future?
3. Lastly, talk to professionals. A fiduciary financial advisor can help you design a plan, grow your money, and make it work for you.

The money your parents or even grandparents pass on to you can be a tremendous blessing. But, if you’re not careful, you could end up more miserable in the long run.

Don’t let this happen to you.

Let’s schedule a quick phone call.

The post Unpopular Opinion: Your Inheritance Is Not Your Friend appeared first on AWM.

“Sudden wealth” (inheritance) is when a person receives a large sum of money quickly.  Examples of “sudden wealth” include:

• Being named a beneficiary in a trust
• Winning money from litigation (such as a class action lawsuit)
• Insurance payoff (such as life insurance upon the death of a spouse)
• Hitting it big with a winning lottery ticket

You might think “sudden wealth” should make your heirs’ life easy.  It actually might introduce a new world of complexity.

An article in Business Insider relates 20 tragic tales of peoples’ lives being ruined – just because they won the lottery.[1] The US Bureau of Labor Statistics estimates that one out of three heirs will have blown their money within two years![2]

The chances of financial damage rise if the heirs have problems related to bad credit, gambling, or substance addiction.

The good news for you is that possible solutions exist to raising the odds that your inheritance can truly help your heirs.  Trusts feature several potential options that might empower you to bless your heirs:

1. Consider opening a trust. A trust involves conveying your property to an heir but with control over how much, when, and for what purposes the property will benefit the heir.  Finding a trustworthy person, whether a relative or a third party, to administer the trust is a key consideration.
2. Define the conditions of the trust. Did you know that you can define as narrowly or broadly as you want how you want the beneficiary to use your inheritance?  You can also reward the heirs for good behavior.  For instance, if you want the heirs to finish a college education, you could specify a certain payout only after they show proof of graduating college.
3. Bypass the heir and pay for their service providers instead. For example, you might consider including monthly rent payment directly to the landlord or mortgage company of the heirs (instead of paying money to the heirs – and hope they use it responsibly).

Naturally, your situation has its own complexities.  It’s likely you would need professional advice to explore and perhaps create a robust trust.

We have worked with many clients considering wise ways to pass on their legacy to the next generation.

Let us help you to explore the best potential options for your needs.

Schedule appointment

[1] Mandi Woodruff and Michael B. Kelley, “20 Lottery Winners Who Blew It All”, Business Insider, December 14, 2013, on http://www.businessinsider.com/lottery-winners-who-lost-everything-2013-12  accessed on June 13, 2018.

[2] Cited in Juliette Fairley, “The Downside of Sudden Wealth”, Private Wealth, June 16, 2016, on https://www.fa-mag.com/news/the-down-side-of-sudden-wealth-27518.html  accessed on June 13, 2018.

The post 3 Ways You Can Protect Your Heirs and Yourself appeared first on AWM.