Many people who inherit wealth or small businesses are at significant risk for essentially squandering the wealth. An Ohio University study shows that an astonishing 33 percent1 of all beneficiaries lose their entire inheritance within two years of receiving it. The ways they manage to do so are as varied as the imagination, but in our experience we have seen a common thread: mismanagement.
There are a few key ways beneficiaries struggle to make the right financial decisions with their inheritances. For example, a beneficiary might not have been brought up with a strong education on the basics of money management. Or, even if the beneficiary knows what to do to properly manage their money, it can be challenging to manage an inheritance while dealing with the loss of a loved one.
A beneficiary may invest unwisely, resulting in significant losses, or spend their wealth on an unsustainable lifestyle, rapidly exhausting an inheritance. Worse still, some heirs develop a sense of entitlement that can lead to problems like the well-publicized “affluenza teen,” Ethan Couch.
No one wants these outcomes for their family.
While a live-in-the-moment attitude can serve young people as they gain life experience, it can be very dangerous when large sums of money are added to their lifestyle. Often, they do not have the same experience and hard-won wisdom as the generation that acquired or built the wealth.
One of the greatest gifts you can leave your children, grandchildren, and other beneficiaries is the gift of your wisdom. Sharing the stories, struggles, and journey of success that brought you to where you are, along with the money wisdom you’ve gained, is as important as leaving a financial legacy in your will or trust.
Money alone can become just as much a burden as it is a gift if it doesn’t go hand in hand with practical guidance. Let your beneficiaries know that they can help build a legacy of wealth that supports them throughout their lives and for generations to come.
Here are a few pointers for setting up your beneficiaries for success:
Feel free to contact us to ensure that your will or trust is completely up-to-date and that we’ve included strategies like lifetime discretionary trusts, incentive trusts, trust protectors, substance abuse protection language, and more, so that your family’s financial legacy is as safe as possible. We can even help you navigate discussions with your beneficiaries so you can rest assured that you’re doing what’s necessary to make your wealth last.
1 Ausick, Paul. “A Third of Americans Blow Through Their Inheritance.” 247wallst.Com, 8 Nov. 2015, 247wallst.com/investing/2015/11/08/a-third-of-americans-blow-through-their-inheritance/.