People in California who are thinking about retirement and beyond, as well as people who expect a sizeable inheritance, should see a recent article in Forbes, which talks about the issues that can unfold when a person receives a life-changing amount of money as inheritance from a loved one. The psychological 'shock' of receiving a large amount of money can be a serious problem for some people, who may have trouble wrapping their heads around life with more money than they had envisioned.
With more money comes more responsibility, which can be one of a myriad of issues that might lead to a feeling of being overwhelmed by newfound wealth. "We call it 'money shock,'" said one financial expert. "Post-traumatic stress is another good name for it." Whatever you call it, it's the overwhelming feeling that the inheritance is about to change your life in ways you can't even anticipate-and not always in a positive way.
People in the process of estate planning should involve their heirs from the start, as explanation can go a long way in mitigating the harm of 'money shock'. Having a conversation, with the help of legal counsel, with loved ones can get everyone on the same page regarding future financial expectations.
Once people overcome their initial fear, they may understand a clearer path to continued financial security. Instead of being overwhelmed, people fortunate enough to receive an inheritance should face the challenge with the help of an experienced estates and trusts attorney. It's never too early for people with a substantial estate to start developing a comprehensive financial plan, including ways to avoid unnecessary taxation and providing protection for heirs.
Source: Forbes "Overcoming 'Money Shock' From An Inheritance Windfall," Judy Martel, Oct. 22, 2013