The Downside of a Large Inheritance

Many people dream of receiving a sudden financial windfall. Wouldn’t it be great to win the lottery or get an unexpected inheritance? But when someone you love dies and leaves you with a large amount of money, the experience is usually much different than expected—especially if the loved one is your spouse.

Emotions

A lottery winner’s emotions are mainly positive. However, a person who receives a large inheritance experiences an intense, bittersweet gamut of emotions: grief, sadness, exhaustion, fear, guilt, denial, anger, loneliness, confusion. Often people feel guilty for benefiting from the death of their loved one. Selling inherited investments can feel like a betrayal, even when those investments made sense for your loved one but do not make sense for your situation. All these emotions are perfectly normal.

Pressures

When you receive a large inheritance, you will often feel pressure to make significant long-term decisions at exactly the time you are least emotionally ready to make them: in the depths of a painful grieving process. But everything does not need to be done at once; only a few things need immediate attention. Most decisions can and should wait until your emotions have stabilized and you can think more clearly, especially significant decisions. It might take a few months or even more than a year. Until that point, do not make impulsive decisions or allow anyone to pressure you into making decisions.

Most importantly, do not make any gifts to family members, friends, or charities until you meet with your Wealth Manager, update your financial plan, and verify that those gifts will not damage your long-term financial security.

Decisions

People leave money because they want to improve the lives of their loved ones. This presents the inheritor with a unique opportunity to create a new life, develop new goals, visualize a new future, and plan for a new ‘normal.’ But unique opportunities can also be scary. People are often afraid of making decisions for fear of making bad ones, so they procrastinate. They can feel paralyzed from trying to figure out what the person who gave them the money might have wanted them to do with it. They may also be afraid of offending other people, so they do what other people want… and hurt themselves in the process.

Good financial planning is important when receiving a large amount of money, and wealth due to an inheritance presents unique challenges that require specialized help. For example, there are special tax rules that apply to inherited assets, and failing to understand those rules could lead to an unexpected tax bill. The Wealth Managers at Pinnacle Advisory Group have years of experience in helping our clients through difficult situations like this. Should you have any questions, or know of someone who might benefit from Pinnacle Advisory Group’s expertise in this area, please let your Wealth Manager know.

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Stephen Wright
About Stephen Wright
Stephen joined Pinnacle Advisory Group (formerly The Enrichment Group) in March 2012. He has over 10 years of experience in finance and became a Certified Financial Planner (CFP®) in 2013. Stephen has a Master’s Degree in Business from the University of West Florida and an Executive CFP® Certificate from the University of Miami. He is an active member of the Financial Planning Association of Miami and the Estate Planning Council of Greater Miami. Stephen enjoys working with his clients and helping them achieve their financial goals.