Many of us want the best for our loved ones, including that they have enough money to live comfortably. The money we carefully earn and invest for them and the items of value we cherish so that they can enjoy them after we’re gone are intended to bring them joy. We long for them to make the most of the material possessions we leave; we imagine the familial bliss they’ll experience (while still retaining a small amount of sadness in on our passing) and we hope that our legacy will be remembered.
While an inheritance may seem like an exciting thing, if your family’s not prepared for it then it may end up being the catalyst for a relationship meltdown. Or it could spell trouble for them if there are taxes you’ve not understood properly. Or they may not be able to cope with the new wealth they are given and squander it away.
Family Angst Over Money Can Happen Quickly
There’s a story in an old book about a son who gets his inheritance early. His dad seems happy enough giving it to him and off he goes – to spend it very quickly on not very much at all. In the story he ends up so badly off that he eats food from a pigpen because he has no money, nowhere to live and nothing else to eat. It’s probably not what the father intended for his son. It has a happy ending, though. The son goes home and the father, instead of being really angry with him, looks after him very well! Not many of us will get to see how the inheritance we leave our children is used, but our hope is that they don’t end up eating from a pigpen or that the money does not cause them trouble.
We often imagine that it’s large amounts of money that may be fought over if family are not in agreement over how it should be spent. Not so in a recent case where a man named William Pomeray shot his girlfriend over a US$3,500 inheritance. During an interrogation by police, Pomeroy said that he and Koegel got into a fight on the back porch. Pomeroy had recently inherited the money and wanted to spend it on cocaine, according to Detective Tyson Carroll. During the fight, Koegel pulled a revolver on Pomeroy, but he took it from her and then shot her.
One accountant, Brendan Murray from Bentleys Chartered Accountants, has had experience in dealing with people who have either come into money unexpectedly or knew that they were receiving a significant inheritance. His advice for them is to go slowly and make decisions without any hurry. He says being charged with a significant sum can be stressful and disconcerting, particularly for average earners with no experience of managing an investment portfolio. He has helped a handful of lottery winners and inheritors chart their course over the past decade and says a slow and steady approach using trusted professionals – accountant, solicitor, financial adviser – can alleviate angst. Murray says. “Obviously pay off your mortgage, do all the sensible things, but when sitting down and working out ‘what are we going to do with this money?’ it really is a matter of just calmly, calmly going through the process of setting it up properly.”
Creating a monthly budget based on your new found wealth, including holidays, luxury items and assistance for family members, and arranging to draw down that sum each month can preserve the capital – and provide peace of mind. “If you spend all of that money every month it’s not a problem because we’ve budgeted for you to be able to do that and the nest egg is untouched,” Murray says.
There are three core pieces of advice to give your loved ones on how to handle well their inheritance:
No impulsive and sudden moves – take your time in writing a wish-list and budget while the money is sitting safely in the bank untouched. Life can go on normally.
Get professional advice – if you’re not savvy with how to invest money well, then get the help of those who do. Get a recommendation from someone that you trust for someone you can trust with your money.
Keep a lid on it – it’s not always wise to tell the whole world of your recent life-change. This is not just to keep away any money trolls, but also to give you opportunity to mantain your current good family and friendship ties that can change with your changed financial position. Let those you trust know slowly and gently.
You other option is to go the way of Russian oligarch Mikhail Fridman who will not be leaving his children anything. The man, worth $13 billion, will be leaving behind quite a bit of money – just not to his family. He said he wanted his children to forge their owns paths, like he did. The wealthy father also said he was afraid that giving his children large quantities of money could put them at risk. Instead, he will give the money to charity. While his method is different to many others who do leave money behind, his intentions are the same – he wants his children to be okay. Whether his children will decide to challenge the oligarch’s will is another story, but it’s not an uncommon desire of the very wealthy.
Whatever you decide, good communication with your family about your estate planning before you die, will go a long way in helping them to be prepared for an inheritance. Having conversations with them about your intentions will also help to reduce any family conflict when your estate is divided up according to your plan. A lawyer who is experienced in estate planning can help you to draw up the relevant documents so that your wishes are fulfilled without any complications. Please contact us today for a free, 10-minute phone consultation with one of our estate planning specialists.
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