Dealing with the loss of a loved one is difficult. For some, this loss happens while inheriting a significant amount of money or other assets.
Getting help to express your grief is essential, and so is being mindful of the next steps in managing your new money. If you are an executor for someone’s estate you will almost certainly need help to navigate that process, too.
Let’s explore some of the key questions and challenges that arise when people experience sudden inherited wealth.
Feeling Guilty About Inherited Wealth
“I didn’t earn this and I don’t feel like it’s my money to spend.”
This is a common sentiment when inheriting wealth, as inheritors often feel uncomfortable with money they didn’t make themselves. But most families want future generations to thrive and to have what they need to make a difference in the world.
Money can help fund education, buy a family home, and support enjoying time together. This might be just what your loved one wanted for you when they listed you as the beneficiary on their IRA.
Reconciling the Origins of Wealth
“My family made this money on oil and coal and other things that caused harm in the world. How do I reconcile what I have with where it came from?”
Sometimes family money can be viewed as having a dark past. One client told me he felt his inheritance had “bad juju” because it was earned from oil wells that devastated the land. Reconciliation eventually became possible once we transformed his inheritance from something that troubled him to something that aligned with his values.
First, we transitioned his inherited portfolio to one filled with companies that greatly reduced greenhouse gas emissions and helped build affordable housing units. We then calculated how much he could sustainably give to charities that maintained open space for public use and regenerated lands that had been harmed by energy extraction. Finally, gifting appreciated stocks to these charities helped save on taxes and started a necessary healing process for him to fix some of the wrongs he felt his wealth had perpetuated.
Aligning your inheritance with your values and donating to charities or organizations are just a few easy ways individuals can reconcile their inheritance with its origins. Opening a donor advised fund, being philanthropic, or providing reparations can also offer peace of mind to some.
It’s understandable to feel conflicted about the origins of your inheritance. Luckily, there are many ways to connect inheritors with resources and financial advisors who can provide guidance, including organizations like Resource Generation and Values Advisor.
Managing Inheritance Responsibly
“What if I invest it wrong and lose what I’ve been given? I don’t want to dishonor what was built before me. I’m afraid to make changes to the assets I inherited.”
Some people feel the Exxon stock they inherited from their grandmother is their connection to her and worry she’d be upset if they sold it. It can be difficult to part with shares of stock that are seen as one’s last remaining link to a loved one.
It’s important and an honor to consider the intentions of a loved one. So often, an inheritance is left behind to help an inheritor reach their dreams and goals; it’s entrusted with the hope that they will do what is right for them with the money.
And yet, being a good steward of the money might mean making significant changes to keep that inheritance safe. For example, having a portfolio of stocks that represents a comparatively small number of companies and sectors in the economy can threaten the viability of even a large portfolio.
Managing an inheritance responsibly can sometimes feel overwhelming. Inertia around money is understandable since investing can be intimidating or mysterious. Having a financial professional to help you navigate the next steps for your nest egg is perhaps the best step you can take.
When considering who to work with, it’s important that you hire someone who has your best interests in mind. Whether you’re a child, grandchild, loved one or widow, having a reliable financial partner is crucial when making financial decisions, especially during a difficult time. When searching for a trusted professional, consider hiring a CFP®, Fee-Only, Fiduciary Financial Advisor.
