Will Inheritance Be a Benefit or Burden?
One of the biggest conundrums of estate planning is considering how, or even if, you can give money or property to your heirs in a manner that will help them.
Research shows that getting a lot of money can have harmful consequences. According to MarketWatch, a study found that a third of people who received an inheritance had negative savings within two years.
Watertown Public Opinion’s recent article notes that on average, an inheritance is gone in about five years because of careless debts and bad investment behaviors.
However, a minority of heirs don’t mishandle their inheritances. Nonetheless, it’s good to explore exactly what you intend the gift to accomplish, prior to leaving money or property to someone. It’s also important to consider the possible negative consequences of a gift.
Consider the Practical Costs
Determine if the gift will actually cost the recipient time or money. As an example, leaving the family home, vacation property, land, or a ranch to someone can often cost them money they may not have in maintenance or taxes.
You should also consider if it results in causing difficult emotional issues between siblings, and whether it might encourage bad financial behavior. If a beneficiary hasn’t developed healthy financial behaviors, a significant inheritance might actually create new financial troubles instead of addressing existing ones.
Explore Your Intentions
A good way to make certain that your bequests are helpful is to explore your own intentions. Ask yourself:
- Do you want to leave enough money for the beneficiary to become financially independent?
- Would you like your bequest used in a specific way, like to pay off debt or fund education?
- Do you care how they spend the money?
Communicate with Your Heirs
Another way to provide for thoughtful, conscious inheritances is to speak with the intended recipients. Ask them directly whether someone would want a bequest, such as a valuable art or coin collection or perhaps an expensive vacation home. Discuss the options and possibilities and don’t simply take for granted what your heirs might want or what they might do with an inheritance.
Final Thoughts
Leaving a family member an inheritance can be helpful in some instances, but may be exceedingly destructive in others. No two situations are alike, and if you want to increase the chances that your bequests will be helpful, explore and improve your own relationship with money. Examining that relationship can help make sure that what you leave to heirs will be a benefit, not a burden.
Thoughtful consideration of the effects an inheritance on the beneficiaries is fundamental to quality estate planning. If you need help with your estate planning, contact our office today to schedule a consultation with attorney Trey Stegall.
