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Jordan Goodman is the author of Everyone's Money Book, available at 888-201-6300. This is the third edition of the book. You can also visit his Web site at www.moneyanswers.com. He talks with us on Thursday mornings.
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June 19, 2003
"Inheriting Money Wisely"
Inheriting a huge amount of money sounds like one of the easiest and most
pleasurable events you ever hope to experience in your financial life -- but
in fact, it is not at all as easy to do as you might think, according to Ann
Perry, the author of the just-released "The Wise Inheritor: A Guide to
Managing, Investing and Enjoying your Inheritance."
First a few facts about inheritances these days:
- A Boston College study projects that between 1998 and 2055, at least $41
trillion, and possibly as much as $136 trillion, will be inherited by the baby
boomers, and transferred from the 'boomers to their kids.
- One-third of all inheritances are received by the ultra-rich: the top 1% of
all families. The second third goes to the top 10% of Americans, and the
remaining third goes to the remaining 90% of Americans. The average bequest
is about $90,000.
- The arrival of hundreds of thousands of inheritances will create a new
class of what Perry calls "the McMillionaires," to the tune of about 20 million by the year
2010.
What do most people do with their inheritances?
- 31% spend it on a home or home remodeling
- 30% spend it on education
- 10% use it on a vacation
- 9% buy a new car
- 3% help children or family members
- 2% pay off debt
- 1% invest it
Here are some steps that Perry recommends for you if you either have
received or are about to receive an inheritance:
- Talk to your parents about it in advance so you understand any wishes they
may have for the money after you’ve inherited it. Particularly, talk about
difficult situations, like passing on a family business that you don’t want
to run.
- Talk to your brothers and sisters about the inheritance before your
parents die so there is no squabbling when the will is read.
- Talk not only about assets, like stocks and houses, but also valuable
objects and personal possessions so a fight does not break out over the
grandfather clock or Ming vase.
Be prepared for the emotional consequences of inheriting money, which can be
quite complex. These are some of the emotions you may go through: disbelief,
anger, euphoria, guilt, paralysis and, finally, being "heir-worthy."
In many cases, it is a good idea to get professional help in sorting out
all of these issues. In addition to a trusts and estate lawyer, that may
mean a financial planner, appraiser, accounts and even a psychologist.
You may think inheriting money is easy, but it’s a lot harder than most
imagine.
For More Financial Tips From Jordan Goodman
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