Wednesday, July 16, 2014
Sometimes heirs who are not money savvy can end up blowing it all on a more lavish lifestyle. In some cases, an unequal inheritance may create rifts between relatives or trigger guilt in someone who had not expected a large windfall. Below is a list of potential mistakes heirs make and how to avoid them:
- Careless Spending. Receiving large sums of money can lead to big purchases, “If a beneficiary hasn’t had access to money before, it’s that Sudden Money Syndrome . . . What may have taken mom an dad a lifetime to build can be quickly frittered away.” It may be helpful to consult a financial professional they trust before making large purchases with an inheritance.
- Letting In Jealous Tension. When survivors do not get the inheritance they expect, there can be resentment among family members. When dividing up an asset that may have more emotional than financial value, it may be best to do a bidding system where people place sealed bids and give up that portion of their financial inheritance to pay for the item in dispute.
- Not Getting An Expert’s Opinion. A professional may advise you to renounce part of the inheritance or help you consider other tax implications.
- Losing Other Income Sources. Receiving an inheritance may disqualify beneficiaries who receive income based or asset based government benefits.
- Giving All the Money to Others. Sharing is not a mistake. Giving away large sums of money out of guilt could lead to problems. This could jeopardize your financial security as a result.
See Susan Johnston, 5 Inheritance Mistakes for Heirs to Avoid, U.S. News, July 15, 2014.