The biggest mistake people make when they inherit a chunk of money is not thinking it through, said Meg Green, a certified financial planner and CEO of Meg Green and Associates in Miami. “People who don’t have means often squander the money on things they have been dying to have all these years, and then it’s gone.”
You just received a large inheritance from a family member and you have no clue what to do with it. Spend it? Invest it? Decisions, decisions. It’s sort of like winning the lottery, yet you know how those stories have turned out in the past. You don’t want to be a “when wealth goes bad” statistic.
There is a well known phenomenon concerning lottery winners. A few years after they win the big jackpot, they have usually spent all their winnings and are no better off financially than they were before they won. This is because people who have never had a lot of money do not have the experience or knowledge about how to handle it when they receive a lot of it at once. People who inherit a lot of wealth often go through the same process.
The Miami Herald recently published some advice about what to do with an inheritance in an article titled “Inherit? Invest.” The article presents a long list of advice about what to do with a sudden inheritance. However, the advice can be boiled down to essentially this: do not spend all the money right away, seek good advice and invest the money wisely. Of course the problem for many people is they do not know where to go for good financial advice. People who are not used to dealing with financial advisors do not necessarily have the experience to tell the good advisors from the bad.
If you have inherited a lot of money, then the good news is that you are most likely already in contact with someone who can assist you and give you some advice about how to preserve your inheritance. That someone is your estate planning attorney. Ask your attorney to recommend advisors and about setting up legal entities to protect your new assets.