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Too much money at once

One terrible decision is giving the inheritance to the children in such a way that they receive an infusion of money they’re just not prepared for. What many clients don’t realize is that once the client passes away, the child will often get more cash, more money, than the parents themselves had. How is that possible?

Frequently, any real estate that’s owned is sold. So now it goes from real estate to cash. Investments are often liquidated. A life insurance death benefit may flow in. So there’s a lot of cash and decisions are made in many estate plans in such a way that the child just doesn’t have the financial understanding of how to deal with this infusion or windfall of money.

The lottery winner syndrome

We call it the lottery winner syndrome. We call it that because many lottery winners that get a significant amount of winnings through the lottery are not prepared to deal with that kind of infusion of money. And a few years later, they’re declaring bankruptcy. They didn’t know how to handle it.

The same can happen with the child that’s not prepared from a financial perspective on how to deal with that infusion of an inheritance. So that’s one terrible decision we see frequently.

Lost in a divorce

Another one is leaving the inheritance in such a way that it, or at least 50% of it, could be lost if that child is married and subsequently gets divorced. We see that frequently. It’s very easy in a divorce situation to lose 50% of the inheritance.

Lost government benefits

And the third terrible decision we see is leaving an inheritance in such a way that if a child were on certain government benefits because of disabilities, that they lose the benefits they’re receiving from the government because of the inheritance. That’s a horrible mistake, a horrible decision, that didn’t have to be made that way.

I hope you found this information helpful. Perhaps you may have made any of these types of mistakes. Or you may have questions or are just not sure what to do. If so, feel free to reach out.

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