How to Manage Your Inheritance
In an article published over the weekend, Alison Griffith of the Toronto Star writes that over 21 per cent of Canadian households had received an inheritance averaging $91,000. This amount is likely to jump as our society continues to age. As estate lawyers we are often so focused on the importance of advising clients of having an estate plan that we rarely consider the other side: after you have received your inheritance, how do you manage the new found wealth?
Ms. Griffith states: "unexpected money – and sometimes expected money – creates both financial and emotional challenges."Many of us who receive these windfalls often stress over the idea of what to do with the money and how will it be managed.
In her article, Ms. Griffith recommends that anyone who has received a windfall should follow the following four steps, which will likely assist them in making more informed decisions:
- Take a deep breath and acknowledge the reality of the situation. If you received an inheritance the chances are there is a death of someone important in your life.
- Don’t rush. Ms. Griffith tells a story of an old friend who inherited over $200,000, following the death of her mother. She advised that she intended on "playing around" in the stock market. Six month later – she didn’t want to talk about how "play time" ended. Ms. Griffith states: "As the calendar advances you almost certainly will change your mind about what you want to do with your windfall. Meanwhile, park it in short-term GICs or high interest savings account."
- Seek advice. "Contact a fee-only or fee-for-service financial planner who doesn’t sell anything other than their services."
- Reduce your expectations. "Don’t expect your windfall magically to turn you into a blissful resident of Shangri-La."
Receiving an inheritance can cause the beneficiary to experience mixed emotions. It is important to consider the above steps to avoid making an impulsive decision, which is likely to lead only to regret.
Rick Bickhram – Click here for more information on Rick Bickhram.