Receiving an inheritance does not always represent the good fortune that it is. In many instances, the sheer enormity of coming into such wealth becomes overwhelming for many individuals. Usually, mismanagement of such a windfall leads many an heir to squander it. Of course, proper wealth management helps avoid many of the pitfalls associated with losing one’s inheritance quickly. Core Capital Partners is one institution that focuses on helping individuals keep and grow their inheritance by offering astute wealth management. For instance, they offer growth investment strategies that help build one’s portfolio.
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Why Do Inheritances Disappear?
Protecting your inheritance is about securing your future and that of your family. It has become all the more important in this day and age because of some disturbing statistics. For example, it is estimated that those who inherit money or other unearned gifts tend to lose about 70 percent of it over their lifetime. A further 90 percent of the remaining inheritance is lost by the subsequent generation.
Common reasons for this include:
i)Financial irresponsibility: An heir coming into a large inheritance often isn’t used to managing such wealth. As such, they may start to spend the money carelessly.
- ii) A lack of understanding of family legacy: Usually, generational wealth is passed down to children who may not share their parents’ vision of what family wealth should represent. This, coupled with financial mismanagement, is the perfect recipe for dwindling the inheritance quickly.
What Can You Do to Protect Your Inheritance?
It’s not all doom and gloom for those that come into an inheritance. With the right mindset and management, you can not only ensure that your inheritance lasts a long time but also grows.
Below are some proven ways to make that happen.
1)Pause and Reflect
It’s always advisable to take a step back and reflect on the whole situation whenever you come into an inheritance. Depending on the size of the inheritance and your experience with managing wealth, you may find yourself overwhelmed with the whole situation. This becomes more pronounced if you’re expected to carry the family legacy and run any endowment programs or any other such initiatives. Unless some pressing financial matters need to be handled immediately, don’t touch the inheritance just yet. Seek advice from the right professionals. This is especially true if you have no experience whatsoever with tax estate matters.
2) Surround Yourself With the Right People
Managing financial matters isn’t easy. The difficulty of this task increases when you come into a large sum of money quickly. There are several things to be mindful of. For instance, in most jurisdictions, you’ll have to pay an inheritance tax upfront before doing anything with your inheritance. Depending on other things like mortgages or liens on the estate, there could be other legal and financial considerations.
Having the right team around you makes navigating such complexities much easier. If you don’t have such people already, you should seek them out. These include estate attorneys, certified public accountants (CPAs), and financial advisors. The estate attorney and CPA should be able to handle most of the tax and legal issues involving the estate. The financial advisor assistants are there to give you direction regarding any investment choices you’d like to consider and how best to spend your inheritance.
3) Clarify Your Goals
One of the key elements of ensuring that your inheritance doesn’t disappear is to clearly define your life’s ambitions and general direction. Doing this helps you allocate your resources accordingly. For example, if your goal is to retire early, it’ll make more sense to make some smart investment choices that can secure your financial future as quickly as possible. If you have philanthropic ambitions, you may want to consult with your CPA and estate lawyer about how best to handle it and if it makes sense to give lump sums of money or use a trust to fund charitable works. As long as you’re clear about where your life is headed, the other financial decisions involving your inheritance should fall into place.
4) Address Immediate Priorities
Unless your inheritance is so large, you’ll have to think carefully about clearing some things on your to-do list. This includes things like high-interest debts and other financial obligations that need to be addressed immediately. For example, credit card debt is one thing you should tackle immediately since it’s a key contributor to your credit score. Things like student loans should also be paid off as soon as you can afford to. Addressing all such financial obligations ensures that you don’t incur high-interest rates on them.
Once you’re done with those, you can then fund other priorities. For instance, you can set up a college fund to finance your children’s education. Setting up a comfortable retirement fund and a bank account for emergencies also ensures that you always have an insurance policy if things go wrong.
Ultimately, having the right financial and legal advice will ensure the longevity of your inheritance.
