Inheritance: Challenges and Solutions

A number of Abacus clients come to us because they’ve inherited money and have a need for guidance and advice about how to manage it properly. Inheriting money sounds like a great problem to have but there are unique challenges that many people aren’t aware of and require careful attention.

A couple of years ago my father passed away and I had been named executor of his estate. My father’s estate was not that complicated in the grand scheme of life, but it still posed challenges for me. Even as a financial advisor I found there were technical matters beyond my areas of expertise so I hired a CPA in one state and an attorney in another one. On a personal level, I was conscious of the fact that while managing the sale and distribution of his estate, I am serving in a fiduciary role for his heirs and that felt like an added pressure. Here are some of the challenges I see our clients facing in this situation, along with possible solutions.

Challenge: You’re expected to make decisions around investing assets at the same time you are grieving and possibly handling someone else’s affairs.

Solution: Make an appointment for 60-90 days from now with a financial advisor. It is OK to take time to breathe before you decide what to do with the money you inherit, but there are certain deadlines you must meet, such as required minimum distributions you must take from an inherited IRA, or you could face a penalty. Putting a meeting on the calendar allows you time to grieve and also ensures you won’t avoid addressing it for too long. This is the #1 challenge we see as advisors – clients keep large sums of money in cash because they either don’t know what to do or can’t face dealing with it.

Challenge: You may feel like this is not your money. Some people feel they do not deserve to have the money because someone else worked hard to earn it.

Solution: After not touching her inherited funds for several years, one client finally worked through her feelings with a therapist. She had to get past the idea that she couldn’t spend what, to her, was her dad’s money. In the end, she hired an advisor, used some funds on a family trip to bring her father’s ashes to his favorite Colorado mountain spot, bought a safer family vehicle (something dad would have loved), and ear-marked the remainder for college and retirement funds. The fact is, it is your money now and someone intended for you to have it.

Challenge: Being afraid to take steps to change the investment selection the deceased had in place.

Solution: Consider that these assets are now meant to support your goals (not those of your 92-year-old grandmother). Invest in a way that matches your own goals, both short and long-term. Just because your grandfather bought stock in the company he worked for doesn’t mean it is the right investment to keep in your portfolio.

Challenge: Knowing who to use as an investment advisor if you do not already have someone you trust.

Solution: Some people use the same advisor with whom the deceased worked and some prefer to find someone new. Ideally you will work with the same financial advisor and planner for decades to come, so finding the right fit is important. Interview several advisors using a set of questions you ask each one. Choose the person who listens to you and takes steps to have your goals in mind.

Ultimately, we move forward after losing someone, but rarely in a linear fashion or one that makes sense to anyone but the person going through it. Surrounding yourself with friends, family, and professionals can help you through the process and ensure you make the right choices around this new money.


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