Sudden Wealth Inheritance – Guilty or Not Guilty?

Sudden Wealth Inheritance – Guilty or Not Guilty? – Some events in life have unexpected effects, and a seemingly positive occurrence may cause stressful and even negative impacts. Inheriting a large sum of money can be like that. It sounds good, but it is often riddled with conflicting emotions and unexpected challenges.

Inherited wealth is increasingly at risk as it moves through the generations. Approximately 35% of inheritances are gone within two years, leaving the heirs back where they started or possibly even worse off. Even more startling, 70% of wealthy families lose their wealth by the second generation and 90% by the third, according to the Williams Group wealth consultancy.

While there are many compelling stories about inherited wealth quickly lost through over-the-top spending and gifting, vulnerability to fraud, and bad business deals, the opposite can also happen. Some heirs are frozen into inaction by anxiety as they feel disconnected from and reluctant to take control of the assets left to them. They feel uncertainty, fear, and often guilt about this new wealth.

Sudden wealth is often short-lived. An abrupt increase in wealth can come from various sources: inheritance, divorce, death of a spouse resulting in life insurance and business liquidation proceeds, and, of course, the occasional much-publicized lottery win.

Some of the roadblocks to moving forward and having peace of mind regarding inherited assets are:

• Feelings of loss and grief.
• Conflict with other heirs.
• Isolation due to inability or fear of sharing this development with others.
• Guilt over suddenly having unearned wealth.
• Imposter syndrome – “Who am I to have all this, and what will I do with it?”
• Sadness over the perception that those who left the wealth could have used these assets for a better quality of life.
• Attachment to long-held, undiversified portfolio holdings, sometimes treating individual stock positions like a photo album.

Since the death of a loved one is often the source of inherited wealth, grief is often a significant part of the process. Just as there are stages of grief, an inheritance can bring its own “stages of inheritance” to pass, as illustrated below and described by Ann Perry in her book, The Wise Inheritor.

What’s the solution?

Knowing what to expect and understanding that you may go through these emotional phases is a good start. In your own time, you can consider how this newfound wealth will impact your life and how it can support your goals and vision. These assets are now yours and can positively impact you and others. Envisioning this new future and designing a coordinated plan around your goals will be time well spent. Approach this journey with gratitude and excitement about new opportunities, allowing you to leave fear, guilt, and the resulting inaction behind.

Estates commonly take months and sometimes years to settle, so you have time to pause, reflect, and get good advice. A first step is consider meeting with a Savant financial advisor whose goal is to help you make smart decisions to pursue your ideal future. Schedule your complimentary initial consultation today.

Laura K. Chiesman Financial Advisor / Managing Director CFP®, CDFA®

Laura has over 30 years of experience in wealth management and financial planning. She is a member of the Financial Planning Association, the Women Presidents’ Organization, Orlando Chapter, an advisory board member of Enterprising Women, and a member of the League of Extraordinary Investors.