How do keep your children and others from wasting an inheritance? How do you keep yourself from wasting an inheritance? Studies have shown that when people unexpectedly come into money, they’ll treat it differently than the money they’ve earned. No surprise in that really. An estate planning attorney can help prevent waste when it comes to the inheritance “cash dump.”
Forbes’ recent article entitled “5 Important Steps To Maximize An Inheritance” says that even the most financially astute consumers can get inundated with their newfound wealth. Wasting an inheritance also cause regret. People can feel pressure to use the cash to purchase new vehicles, bigger homes, or even take their families on dream vacations. Others may feel that they can safely quit their jobs and live the life of luxury. Would this be wasting your inheritance, maybe if not thought through carefully.
Many people regret jumping into major purchases after getting an inheritance and end up wasting their gift. Others will give away much of the money or even make bad investments that are completely wrong for their goals and financial needs. You never want waste. If you don’t get expert financial guidance to develop a plan for your inheritance, or take the time to do it yourself, you may find yourself worse off than you were before you became wealthier via an inheritance.
Here are some financial planning tips for anyone afraid of wasting an inheritance or another windfall.
Do Something Fun. Set aside an amount to splurge on something fun. Having fun is not really wasting your inheritance. However, figure out how much you want to spend and on what. Without that, you may find that one small splurge turns into many, and next thing, a big chunk of your inheritance could be spent.
Taxes on Your Inheritance. It’s uncommon for someone to get an inheritance big enough to trigger the federal estate tax. However, estate taxes will vary at the state level, so check with your estate planning attorney to make sure you haven’t wasted it all before Uncle Sam steps in. Depending on the type of assets you inherit and how they’re held, you may owe taxes on some of your newfound riches.
Quitting Your Job. This sounds tempting, but before you take this big step, make sure you’ve thought it through and that you have a plan to replace your income. Wasting what you’ve been giving will cause regret. It’s not hard to underestimate how much money you’ll actually need to provide a nice standard of living for the rest of your life.
Take Care of Yourself. When you come into money, you’ll hear from relatives you never knew you had. They’ll all be asking for money. Make sure your own finances are in order, before you commit to take care of others beyond your immediate family.
Consult Experts. An inheritance can be stressful and overwhelming especially if wasted, so talk to an experienced estate planning attorney. He can help with tax filing deadlines and provide strategies to protect that wealth.
Reference: Forbes (Feb. 26, 2020) “5 Important Steps To Maximize An Inheritance”
Suggested Key Terms: Estate Planning Lawyer, Inheritance, Asset Protection, Tax Planning, Financial Planning