It’s your inheritance

Recent studies have found that more than two-thirds of the baby boomer generation will receive inheritances from parents and/or other family members. While many of these inheritance gifts will be small, almost 54 percent will likely receive gifts of $100,000 or more.

Often, the beneficiary has a difficult time treating their inheritance as their own. As a financial adviser, one of my primary responsibilities is helping clients to appreciate that an inheritance belongs to them and should be treated as well as, if not better than, any other financial assets that they possess.

Below are some common reasons why beneficiaries, often times, do not provide the appropriate care and attention to their inherited resources:

1. Guilt – Beneficiaries often feel guilty about their inheritance, sometimes believing that they are not worthy of the inheritance or feeling guilty that the grantor had not spent more of the funds on him/herself. It is important for beneficiaries to realize and accept that they would not have received these gifts had the deceased not wished them to have them. Many parents of baby boomers held the belief that it was their responsibility to leave an inheritance for their children. As the beneficiary, it is your responsibility to gratefully accept this generous gift and to use the inherited funds to make your life more financially abundant.

2. “I did not earn it” – Where a person may take full responsibility for the financial resources that they have earned, the fact that an inheritance is “unearned income” often accompanies a reluctance to treat these resources as carefully as earned income. The ramifications of this perspective will often take one of these directions for the beneficiary. Some people will endeavor to spend this “unearned” inheritance as quickly as possible. This often leads to extravagant purchases that are later regretted. The other common direction is to effectively ignore the inherited funds, without ever incorporating them into personal financial resources.

3. “Dad/Mom would not want me to change their investments” – In this scenario, the beneficiary will likely keep their inherited funds invested exactly as they were when inherited. The beneficiary often believes that the deceased would want the funds left in the same investments that they inherited. Even if the deceased was still an active and capable investor up until their death, the most appropriate way to honor their capable investment management would be to continue to have these funds actively managed in a style that meets your goals and objectives.

If you have inherited funds or expect to inherit funds in the future, it is important to honor this inheritance by treating the inherited funds as your savings. Unless the deceased’s will contains specific instructions to the contrary, they would want you to treat these funds as respectfully as possible in enhancing your own financial abundance.

As the beneficiary, you and only you are responsible for inherited funds. You may be tempted to leave the inherited funds with the current brokerage firm that a parent or other relative may have used out of respect. Unless you know that you can trust and have a personal relationship with the deceased’s broker, who can provide you with the full financial planning support that you require, it will be in your best interest to interview other financial professionals and find the person who is best suited to help you meet your family’s financial goals.

If you have a financial plan, have your advisor incorporate the inheritance into the plan. This will likely allow you to expand your goals and objectives. If you do not already have a trusted financial advisor, consider getting a comprehensive financial plan, provided by a fee only Certified Financial Planner (CFP®). A comprehensive financial plan will include your life’s goals and objectives and help you determine how your current savings, plus the inherited funds, can help you meet all of your financial goals.

If you are one of the fortunate baby boomers who either has or will receive a significant inheritance, use this wonderful gift as a tool to help you obtain the financial abundance that you desire and the deceased would have wanted for you.

Categories: Finance