Hey, 30-somethings, here’s another reason to be annoyed by your elders. Baby Boomers, a.k.a. The Luckiest Generation, will inherit some $8.4 trillion dollars in the coming years. Nearly one in five boomers – those born from 1946 to 1965 -- will share in that pot. Thirty percent of “pre-boomers” (1930-1945) expect to receive an inheritance. Fifteen percent of those folks predict to collect more than $100,000 after the funeral.
Inheritances are by their nature bittersweet. They come at the terrible cost of losing a loved one. A significant inheritance – like a lottery jackpot – is also a double- edged sword. Properly managed, it can change lives; poorly managed, it can slip through your hands and lead to terrible heartbreak.
Here are some tips for insuring that any bequest you receive is a lasting blessing and not a short-lived curse.
Be Patient. Remember that there is no deadline or pressure to figure out what to do with the money. People often feel like they need to do something as quickly as possible, whether it be investing it, getting a new car, paying off debt, etcetera. While those may be solid ideas, they can all wait for three, six, or even 12 months while you develop an overall game plan to maximize the benefit to you and your family.
Make a plan. Inheritances should be invested and not spent. Live your daily life as though you didn’t get a dime. Elimination of debt is a great use for inheritance money -- provided it’s not setting the stage for you to rack up more debt. Putting the money in a retirement or college fund is another sound use.
Protect the kids. Make children wait for their portion of the inheritance. Many adults can’t be trusted to do the smart thing with a pot of money; just image a teen running loose with a wallet full of cash. It will be empty faster than a can of Pringles at a high school lunch table. (Make a note: when it comes time to write your will, specify that any money left to minors be used only for education expenses until the recipients reach a certain age.)