Inheritance Planning: How an Advisor Can Help You Manage Your Inheritance

by | Oct 26, 2022 | Blog

I know that inheritance planning might be the last thing on your mind right now.

I’m sorry for your loss…

And I know that reading, “I’m sorry for your loss”, just doesn’t quite fill the void.

Grieving the loss of a loved one is the most painful experience that many of us will ever experience. And if you were fortunate enough to have received an inheritance, you can be filled with gratitude and pain. You may even feel like the funds don’t even belong to you.

When you look at your bank balance, you might even feel guilty about having so much in the bank. And it can be a constant reminder that you don’t have them anymore.

Consider the story of a young man named Dean, his dad died in 2017 and one of the first people to reach out to him was his dad’s company. Between his dad’s last paycheck, bonuses, stocks, and his dad’s life insurance policy he received about $400,000. Years later, he reportedly still feels ‘dirty’ when looking at his bank account. It is a constant reminder that he doesn’t have his dad anymore. And he doesn’t know what to do with it.

It is important to remember that it is, in fact, your money. But also consider what your loved one would want you to do with this inheritance. Through a free counseling session, a registered investment advisor can help you prevent major mistakes with the burden and gift of inheritance planning in several ways.

Prevent Self Sabotage Through Proper Inheritance Planning

Inheritance Planning Self Sabotage

One reason you should seek a financial advisor when planning your inheritance is to prevent self-destructive behaviors. If you are like that young man Dean, this may be the first time you have had a large amount of money to handle. If so, it can become overwhelming and may seem like an insurmountable sum. You may not have the skills necessary to properly manage these assets. And this mismanagement tends to fall into two categories.

Don’t hoard cash

I am not telling you to not have an emergency fund of three to six months of expenses. I am telling you that you should. At this time, you may need to take time away from gainful employment to grieve. This is normal and healthy, don’t feel guilty. What I am saying is that it is not in your best interest to leave funds that you don’t need immediately invested in extremely low interest cash accounts. This is especially true today in a period of high inflation. By leaving the money entrusted to you invested in cash, the real value of this inheritance may very well be eroded by inflation and at a rapid pace.

Consider Dean for a moment. The $400,000 he received in 2017 without proper inheritance planning would be worth $327,440 in 2022. Even though the market has fallen this year, that same money invested in the S&P 500 in 2017 could have grown to over $736,000 for a real spending power of over $600,000. I am not telling you that the next five years will be as great as the past five because it is next to impossible to predict the future. However, by hoarding cash, you have very little chance to outpace inflation.

Don’t sit on cash!

Don’t take too much risk

There is an even more insidious activity that plagues the beneficiary’s assets. Oftentimes, without proper inheritance planning, recipients take too much risk. This may be due to an unhealthy relationship with money from the start, or out of guilt. You will likely be inundated with all types of investment ideas from friends and family. And without a trusted advisor to rely on, you could have a very difficult time with two very important letters, “N” and “O”. You may even feel obliged to offer help, especially before you realize that it is your money. But it was entrusted to you for a reason.

With a trusted financial advisor, you can at least have a chance to pause and say that you need to check with your money manager first and get a second unbiased opinion.

We can say no for you.

Wait a Year Before Making Any Major Decisions

wait for the grief to subside

It is important to seek out a financial advisor quickly for inheritance planning. You need a trusted partner to help you manage your assets and get a plan in place as soon as possible. Other than investing wisely, it is also important to delay most other major decisions.

This is an emotional time, and many times beneficiaries want to do ‘something big’ with the money. Family and friends have needs, and you may want to help.

This bears repeating… we can say no for you!

But I have personally seen widows make large purchases for their grandchildren like a house or pay for their college education very quickly after receiving an inheritance. On the surface, it may even feel right to do this. But again, this is your money. Even though the amount you receive may feel so large that you couldn’t possibly spend it, I have seen the money disappear time and time again.

It is hard not to help, and I get it.

But don’t let your emotions cripple your ability to live and give later in life.Please seek consultation before you make any big decisions this first year.

Selling Off Unaffordable Assets is Proper Inheritance Planning

unaffordable assets inheritance planning

Another costly mistake I have seen beneficiaries make is keeping a large physical asset that they cannot afford. Oftentimes, an inheritance will take the shape of a house or a boat. If this has happened to you, you may want to keep it. This is a reminder of them and the times you have shared together. I understand the desire to keep the house, and there may be others that might apply emotional pressure to hang on to it. They may even say they will help.

But a financial advisor can help you paint a realistic picture of your overall financial health. It may very likely be the case that you can afford it with proper inheritance planning. It might be that by investing in revenue-generating investments you can generate enough cash flow to maintain them. However, it might be possible that you need to liquidate the asset and convert it to long-term value-oriented investments.

You won’t know if you don’t ask

Dupree Financial Group, LLC Can Help

We can help you create a comprehensive financial plan and help with your inheritance planning. At Dupree Financial Group, LLC, we have been helping hundreds of clients like you manage their investable assets for over 40 years. And we can do it for you too. It is imperative that you delay making any large decisions other than making wise investments with this inheritance. Get a hassle-free second set of eyes on your financial plan and rid yourself of the burden of making these decisions all on your own.

Contact us today.

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