Emotionally Charged Money: Inheritance

You may be one of the many Baby Boomers or  Gen-Xers who have received an inheritance or will in the not too distant future. It has been documented that the wealth transfer from the “Greatest Generation” to their heirs  will total $14 trillion. If you’ll be receiving an inheritance, it pays to prepare yourself, as no money is more emotionally charged than inherited money.

How Do You Feel About Your Inheritance?

Maybe the money is emotionally charged because you know how hard your parents worked for it. You watched your dad go to work everyday and your mom cook, clean and play the dutiful wife and mother. You may recall that they denied themselves many pleasures because they were worried about not having enough, or worried that they would be “a burden” to you in their old age. You may feel you aren’t deserving of their largess.

Or, maybe it’s because when you look at your bank account you are shocked and dismayed at how much of your inheritance has been spent already. It seemed like so much money when you first got it, but now you realize that it will take discipline to hang on to it. It felt good to be generous to family and friends and to treat yourself to a few nice things but now it seems imprudent. You just want to turn back the clock and start all over again.

Depending on the amount you inherit, the windfall may create rifts between you and your friends or family who haven’t been so fortunate. You may feel like you can’t talk about it and have to hide the fact that things have become so much easier financially.

My clients who have received inheritances express emotions all over the spectrum when they talk about their inheritance. They feel gratitude, relief and happiness but also shame, anxiety and guilt.

The windfall may create rifts between you and your friends or family who haven’t been so fortunate.

Tips for Managing an Inheritance

If you know an inheritance is coming, take a moment to absorb some of these ideas to prepare yourself and handle this potentially life changing and probably life-enhancing event:

It’s so easy to convince yourself that it’s OK to spend large sums when you receive money you haven’t earned. Many beneficiaries buy new cars, or take expensive vacations or start remodeling projects soon after they receive the cash. There is nothing wrong with these expenditures, but to protect yourself from future regret, try to wait several months before you make any major purchasing decisions. Let the money marinate in your bank account for a while.

  • Be prudent about the way you invest the funds. Due to its emotional component, this may not be money you want to take big risks with. Invest it in a balanced, diversified way that is consistent with your risk tolerance.
  • Think carefully about giving or lending money to friends and family or even to charitable causes. Consider whether you would have found this to be a wise course for you financially before you received the funds and act accordingly.
  • This is a good time to do some financial planning. Many baby boomers haven’t saved enough for retirement. Our values around saving and spending have not matched our parent’s frugality. This windfall may be just what you needed to fund your retirement. If so, invest it and throw away the key—you will be happy you did so when you stop working.

Lastly, take care not to be too conservative when investing your inheritance. You don’t want your fear of losing the money to outweigh investing the money prudently for a reasonable return.

About the author

Cathy Curtis, CFP®

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