For many Texans, inheriting money from a family member’s estate may contain some unexpected consequences. Your elderly rich aunt may have left you a portion of her assets, but be prepared to deal with envious family members who may descend upon her belongings like vultures on a carcass.
Designated beneficiaries can react like children in a candy store. They might overspend on luxury items and have regrets later, inciting even more family hostility.
Experts agree the best way to handle division of assets is to plan ahead. A benefactor can do a lot of good by anticipating inheritance issues before they can begin to cause problems. It is a good idea to set up trusts instead of specifying large amounts of money to be distributed. An astute benefactor will also consider leaving behind clear instructions for beneficiaries. An estate plan should be updated regularly, especially after a birth, marriage, divorce or death.
One way to avoid potential problems later is to educate the beneficiary on the value of the money left behind. It is not always a good idea to get that dream car or boat. People may not think of how much it will cost to maintain such a costly item. Beneficiaries need to understand their purchases may be squandering the hard-earned life savings of a family member. Relatives may become territorial when items of sentimental value come into question.
Research indicates some people who suddenly find themselves with extra money can end up frittering it away in Las Vegas. Vast quantities of money can disappear quickly in gambling spots, making it is advisable to express prudent judgment when awarded an inheritance.
Blended families can also intensify the risks. As family disputes develop over who gets what, animosity brews that can sever family ties.
It’s better to be practical and seek the assistance of a professional who can help guide you in managing your finances. You can learn to be prudent with your new money, as well as benefit from good advice and suggestions on ways to make your good fortunate work with you and not against you.
Source: U.S. News & World Report, “5 Inheritance Mistakes for Heirs to Avoid” Susan Johnston, Jul. 15, 2014