Age With Confidence And Grace

How can you help your heirs navigate the pitfalls of inheritance?

On Behalf of | Nov 24, 2023 | Estate Planning

It’s a wonderful thing to be able to leave an inheritance to your children (and, maybe, their children), especially if the amount is substantial.

However, inheriting a large amount of money can actually be a double-edged sword. On one hand, it opens up opportunities for financial security and growth. On the other hand, a sudden influx of wealth can be a bit overwhelming to a lot of people – and they can easily mishandle the situation.

What are the most common financial mistakes?

When people inherit a lot of money and they aren’t adequate prepared to handle it, they tend to make some similar mistakes:

  • Impulsive spending: Extravagant purchases can easily get out of hand, especially if someone has lived a fairly frugal or modest existence before out of necessity. The wealth may end up funding a temporary lifestyle that isn’t sustainable.
  • Excessive generosity: Most people dream about having enough money to give their loved ones a boost when they need it – but that idealism can quickly lead to an empty wallet. Sometimes, people who inherit a lot of money can even be easily guilted into giving their friends and family large sums of cash simply because they feel like they haven’t really “earned” all that wealth.
  • Poor financial planning: Money grows only when it is tied to clear goals, so people with wealth know that they need good financial guidance, including an understanding of any tax considerations. When people don’t seek out the experts they need to help them make decisions, that can lead to bad investments, unexpected tax liabilities and financial disaster.

What can you do to help your beneficiaries and heirs avoid these kinds of problems? Start by letting them know what sort of inheritance they can expect and discuss your concerns. You may want to introduce them to your own financial planner and consider fail-safes, like establishing a trust to maintain some control over the money even after you’re gone. Seeking experienced legal guidance can help you address these kinds of problems in advance.