22nd Apr 2014
It is easy to be careless with funds that one receives from an inheritance. Sometimes this money isn’t even known until the reading of the will. As a living trust attorney in Orange County, I help people decide the best way to spend their inheritance so that it will benefit them in the long run. Do you invest it? Put it in an account to grow interest? What should you do with it? These are all common questions that I have the answers for. There are multiple ways to beneficially use the money. Statistics show that each year there are over 20,000 estates inherited that are worth over $20 million. Sudden wealth is great but can be very strenuous on relationships and add stress to one’s everyday life. Here are some tips for properly taking care of your inheritance:
Understanding that money inherited can mean different things to different people. This is generally because the type of relationship with the deceased person varies. The relationship might have been good or estranged. If someone inherits money from an estranged relationship, they usually have a different approach to spending the money. I have seen cases where the beneficiary spends their inheritance form an estranged relationship on things not needed or they refuse to take the money in the first place. Don’t let bad feelings jeopardize your future. You were given the money for a reason.
Never spend the money before you even have it in your hand. It is ok to pick one or two things that you would like to use the money for, but it is better to save it for the future. You lived without the money up until the point of inheriting it, so you will do just fine if you save it. This is different if you are looking into things, such as a car, that are necessary for everyday living. This does not include buying a luxury home in St. Thomas for vacation. As a living trust professional I will help you to choose between a necessity and a want. Another problem is the length of time it can take for an estate to settle. Many settle within a year but in some cases in can continue to drag on over several years before settlement. This happens often when there is a problem with the estate or someone is refusing to take his or her share.
It is always a good idea to purchase extra insurance. You need to get in touch with your insurance broker. Make sure that there is full coverage for all of your assets including home and car insurance. You want to purchase an umbrella liability policy; a type of policy that is used for personal liability. You want to purchase insurance that is consistent to whatever your worth is.
It is important to determine the amount you should spend on luxurious things and activities. Your inheritance will do you no good if it is spent frivolously. A good way to make sure you are not spending too much money is to remove a percentage such as 10% or 20% of the inheritance. Put it into your personal bank account to for things that you have been dying to purchase or do. The other part of the inheritance should be put into a savings account. Doing this leaves a total of 80 to 90 percent of your inheritance that is saved for the future and allows you to spend the rest on vacations and luxury items like clothes, shoes, cars, etc.
Another tip I have is to constantly review the amount spent from your personal bank account. Be careful and look at the full cost of a purchase. For example, you may want to buy a new car with your inheritance. First review your options, determine if you want a luxurious car like a BMW or a practical car like a Toyota. You should not only compare the overall price of each car, but take a look at the cost overtime as well. A Toyota runs on regular gas whereas a BMW usually requires premium, which is more costly. The insurance premium is another factor that may change your decision, so make sure to look into that. Also, you should think about maintenance costs. Parts and repairs on a luxurious car may be more expensive than a practical car.
There are many people who unfortunately spend money from an inheritance frivolously. The excitement of receiving a large sum of money can be exhilarating but be careful. If you decide to squander it, you will be left in the same situation that you were in prior to the. As an estate planning attorney, I know that thinking things through will determine how long your money really lasts. Take a step back to plan out your future with the use of your inheritance. Yes lavish things are nice to enjoy but don’t overdo it. Be responsible when spending an inheritance and it will go a lot further.