It shouldn’t be! Just a few tips on what I wish you would do to be more prepared for an inheritance.
First of all, Don’t Expect Anything! Live your life as if you were inheriting nothing. That adage that “money suddenly gained often drains away” seems to be pretty accurate. You are better served to keep working, save like you will inherit nothing and if you happen to be a recipient of a gift, just be thankful.
Okay, so you have prepared yourself by not expecting anything. But then you receive a gift. What next? Do nothing? Let it sink in? No, you have to do something even if the final decision is to take no action. What I mean is this, say you inherited stock of XYZ Company, the employer of your donor. Many people elect to hold on to an inherited stock, but just because that investment worked out in the past, doesn’t mean it is appropriate for you. Know your options and try to avoid feeling obligated to hold on just because someone else did. Keep in mind; they may have held the stock just to avoid paying capital gains tax. As the new owner, their issues of their past may not be your issues of your future. Your investments should reflect your goals and needs, whether inherited or saved.
So now you know what you will keep and what you should sell. It is time for a spending spree? That is what typically happens next. The shopping spree breakdown is typically home, education, vacation, car, help the children or family members, pay off debt and then last but not least, invest whatever is left over. The problem with a new home and even a new car is the potential cost to maintain. If you spend your inheritance on a new “something”, and a few months later, you are back to living on the income you earned before the inheritance; your cost to maintain whatever you bought can become an anvil. Imagine for a moment that you spend your inherited money on a purchase, but because you can’t maintain it, you then sell it to get out from under the obligations you now have. Your probably selling under duress, so you take whatever you can get, which is probably less than you paid. You end up giving a complete stranger part of your inheritance. Try to avoid this mistake; it is really tough to watch.
Education, paying off debt, and investing will likely yield the best long term results.
Keep your kids informed. Until they become rational adults, a stack of $100 dollar bills is awesome. Remember when you were 20 and you thought, “man, if I just had ______, I’d have it made”. Whatever filled that “blank” is probably not as perfect as we anticipated. A little money can seem like a lot when you have never had it.
Remember, an inheritance was triggered by a loss. You probably spent much of your life protecting your family from the things you knew could hurt them, an inheritance is no different. It can have a great influence or cause great harm. If you get one, enjoy it, but make it work, that can bring the greatest honor to the one who left it for you and to you.