One of the best ways to avoid sibling riffs over inheritance is for the descendant to have an estate plan in place, while they are still living. Sadly, this pre-planning doesn’t always happen. Below, we have out lined some common mistakes that heirs can face and practical tips, to avoid inheritance problems.
- Excess spending. It is so easy for heirs to spend this newfound cash on lavish purchases, such as a sports car or a boat. The problem occurs, when an heir of modest financial means may suffer with “sudden money syndrome”, and their inheritance will be done in a blink of an eye. Seeking the advice of a professional financial planner will help you save and invest properly, so you are ensured a secure financial future.
- Jealousy. It is important to remember that an inheritance is a gift, and the decedent can choose to distribute their estate, however they choose. This is one important reason that Wills and other estate planning should be updated (especially, when family dynamics change – such as a divorce, birth, or death of a previously named heir). For instance, when it comes to splitting up non-cash items, such as mom’s wedding ring or the good china, experts suggest a bidding system, where an heir will offer up a portion of their cash inheritance in exchange for the tangible heirloom item that is in dispute.
- Not seeking professional financial counseling. If you are not planning to make lavish purchases, you can still benefit from expert advice, regarding your inheritance. A large inheritance can make you a perfect target for con-artists and other types of financial scams. A professional financial advisor will guide you in the right direction, to make the most of your inheritance, gain the most interest, and take advantage of tax benefits.
- Giving all the inheritance away would be just as much of a mistake, as spending it all on one shopping spree. Donating to a charity, that your late relative was particularly fond of, is a great way to keep the memory of your loved one alive. But giving away all your inheritance to family members and friends, at the risk of your own financial security, is also a common error for heirs. Before giving away any portion of your inheritance, take time, and allow the reality of your newfound wealth set in. If everyone you know (and some that you don’t know) may be pressuring you to share your wealth with them, an easy response would be to say, “The money is in trust account for the moment” or simply say “I’ll get back to you, I’ll have to discuss it with my accountant”.