The reluctant inheritor

Someone you know has received a windfall of money, maybe $50,000, $350,000, or $5 million. It’s exciting! What a wonderful life-changing experience. Lucky dog, wish it was me!

This is the emotion and experience of a windfall, yes? Well, not quite, or at least, not fully.

The reality, from my personal experience and in my work with clients, is that these windfalls are usually tied to sad or traumatic events: the death of a loved one, a severe accident, or the upheaval of a new and unfamiliar life after divorce. This leads to a common situation that I short-hand as “the reluctant inheritor” (since the most common large windfalls occur after the death of a parent or grandparent).

The reality of this experience is that it comes with complicated emotions – like guilt, responsibility, and overwhelm – that are tough to talk about in our society.

We may feel guilty for being the one left behind after a death, or the money may be the last symbol of our complicated relationship with a family member. These muddied emotions can lead to actions that are less than ideal responses. Some actions are actually fearful inaction and paralysis, like keeping a large amount of cash in a bank account so as to not ‘make a mistake’ with it. The actions may also take the form of impulsive spending, lifestyle changes, and gifting.

All of these feelings and behaviors are common when one receives a windfall of money – called “sudden money” by author and financial planner Susan Bradley in her book Sudden Money: Managing a Financial Windfall. This complex experience may be difficult to work through, especially when there is no one in your current circle of friends and support who understands that the change is not all positive. What others see as a wonderful blessing, an exciting opportunity, you are experiencing as much more complex. This makes it challenging to find the joy, the gratitude, and the energy of creativity to use this windfall as a way to create a life that you envision for yourself both now and in the future.

As I’ve experienced these challenges myself, after an auto accident insurance payout when I was a young adult, and after the deaths of close loved ones including my in-laws and grandparents. As I’ve helped friends, family, and clients navigate the details and decisions of their new money lives, I’ve found a few things that have been very helpful in moving through the burdens and complexities of this unfamiliar emotional terrain:

Acknowledge: If it’s been a year or less since the loss of a loved one or a divorce, recognize that even if you don’t fully register it, you are in a cloud of emotion to some degree.   You are going through grief, healing, and an important time of emotional processing. Susan Bradley recommends in her book Sudden Money that this time should be a “decision free zone.” While it feels like there are many decisions you need to make, only make those you must during this time.

Explore: This is a tender time, yet you likely feel like you need to be taking action. Focus your energy on finding the resources that can help you once you have gotten through these first phases of grief and processing. Start doing some reading and learning; Susan’s book is one I like, though there are several others on this topic of navigating financial windfalls. Find others to talk to, whether it’s a trusted friend or family member, or a therapist (there are financial therapists who might be especially helpful). Share these complex feelings you are experiencing. Be sure it’s someone you feel safe with, not judged by. The reality is even your loving family members may not feel very empathetic about your situation when they’ve got their own money or emotional troubles weighing on them. It’s important you find some support to be able to share what you are going through, process it, and not carry the burden in isolation. On the practical side, if you hadn’t previously had the need for financial advice, now is the time to begin meeting and interviewing financial professionals to bring on your team. I’d suggest beginning with an accountant and a fee-only financial planner.   You may need to be clear with them at this stage that you’re still exploring your options; don’t let their expert stance push you into taking action before you’re ready to and before you’re sure they’re the right ones for you to work with.

Get clear on the details: In the fog of emotions, there is one key thing you need to establish the foundation for clarity after inheriting assets from a loved one. Talk directly with the executor of the estate—and don’t be shy about following up with them as much as you need to as you get up to speed. This is a really important one. It doesn’t need to happen immediately after the death, but you will want to establish a comfortable dialogue with the executor within the first month, and you definitely need to be fully informed before the estate is closed and the assets are yours. Initially, the estate will be doing its own tax filing, but eventually you—and your accountant—will be responsible. Get a clear list of the accounts are you inheriting and what kinds of accounts are they (trusts, brokerage accounts, bank accounts, etc.), and be sure your accountant is versed in the tax requirements for the types of assets you’re now dealing with. By the time the estate is closed (several months or more after the death), you’ll want to have a solid understanding of your new “big picture.” I have helped clients who inherited accounts years ago but didn’t realize the accounts were out there somewhere, leading to entirely preventable issues with the IRS. Remember, you don’t have to make your new investment plan (or life path choices) right away; the time will come for that. But don’t let the financial details be handed off to others without your involvement, and be sure you have that complete list of your new assets in hand.

It is possible to get support so that you are able to navigate through the experience of sudden money in a way that you can look back on and feel at peace with.   Following the three recommendations are the first steps on this path.

This article first appeared in the Spring 2016 edition of the Natural Investment News

Tags: , ,

Carrie Van Winkle

Welcome to my archive of newsletter articles and blog posts. For more information on my service offerings, please go to my advisor webpage.