People in California may have heard news of late on an issue that will be affecting many Americans in the coming years, whether they know it know or not. According to a 2011 study, the baby boomer generation will likely inherit a grand total of almost $8.5 trillion from their parents and heirs. The median amount for most of these beneficiaries is somewhere in the area of $64,000, a significant amount for anyone planning for retirement, helping their kids through college, paying debt, or working on an estate plan of their own.
This massive shift in wealth could be a significant financial boon to baby boomers, but just how significant this inheritance will be will come down to each individual, and how well they prepare and manage the inheritance they receive.
In the article, the author suggests that people pick a strategy and stick to it as much as possible when it comes to managing an inheritance. This could include paying down debt, particular high-interest debt, and using the remaining money to invest in a long-term strategy that will provide stability. The one thing many people are guilty of when they inherit money is rushing out and making significant purchases that do not contribute to long-term financial health. While this is tempting for anyone who comes across "found" money, people who have the restraint and foresight to invest prudently will be better off for it in the short term, but especially in the long run. People who may have or plan to receive an inheritance should also consider their own estate planning needs, and thinking about ways their inheritance could also benefit future generations.
Parents and others who are considering leaving an inheritance should also discuss their options with an experienced estate planning attorney. Whether they have a substantial estate or just want to see their hard-earned assets treated with care and respect, there are financial tools and trusts that can offer asset protection and place limitations on its use.
Source: WMUR "Money Matters: How to manage an inheritance," Marc Hebert, May 29, 2014