Be Cautious If You Receive an Inheritance

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My favorite aunt passed away last year, and I inherited $2,500,000 after her probate. The check came last week. It has been a nightmare! I am a pharmacist and know a lot about medicines but very little about managing money.

The arrival of an enormous sum can be overwhelming to those who are not accustomed to handing money, even though it sounds like a problem we’d all love to have. The truth is, as discussed in “Take your time, plan wisely when you inherit” from Edmonds Beacon, when something like this happens it can be unnerving, like winning a huge lottery jackpot.

Because the will in this situation went through probate, the heir and the amount of money is public knowledge. The tension begins when people you don’t know—and some that you do—start calling with propositions. Sales calls come from shady operators, unknown and known financial advisors and long-lost cousins. The first thing you need is the financial and legal equivalent of a 10-foot-tall fence, complete with sentries.

Most big lottery winners are flat broke, several years after their big wins. Without the right help, it’s easy to go through this kind of money. Don’t rush and don’t be rushed into anything.

If you have children or grandchildren, they could benefit from this inheritance. Start by meeting with an experienced estate planning attorney. Your attorney will talk with you about the many tools, including trusts, that can be used to safeguard the inheritance for coming generations. You’ll also want to make sure your estate plan is up to date and that it includes having powers of attorney for financial and health matters.

You’ll also need a professional tax advisor, which is likely to be a CPA, and a financial advisor. Take your time in researching and checking references for these individuals and their firms. They should be working with your estate planning attorney as part of an integrated team. Having three advisors sounds like a lot. However, it actually works well: all three have knowledge in their fields and can serve as checks and balances on your behalf.

Draw up a roadmap for your life and action plan. Now that you don’t have to work for a living, do you want to continue working for other reasons, like satisfaction or service? Have you always dreamed of traveling? Is there a cause that matters to you?

And, don’t forget to deal with the tax side of this situation. Will there be earnings from the investments you make with the inheritance, and what will your tax liability be now? Should you pay off your existing mortgage or buy a new home? 

A sizable inheritance can be a blessing or a curse. Protect yourself and your inheritance by proceeding slowly, being skeptical of all the new well-wishers in your life and by making smart decisions.

Reference: Edmond’s Beacon (Oct. 10, 2018) “Take your time, plan wisely when you inherit”

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