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Tuesday, February 12, 2013

Suddenly you're rich - now what?

Though most of us will inherit only a modest amount of money, if any, there are certainly people out there who will inherit millions of dollars. I spend a good part of my day setting up estate plans for those who are going to leave that money behind for their children. But what about the children who inherit large estates? What is it like for them to suddenly have to deal with money they aren't used to having?

While we may smile and think it's a great problem to have, the fact remains that someone unprepared to receive a large amount of money may not deal with it wisely. They may blow the money, cause tax problems for themselves or even get swindled.  Click here to read an article from the Globe and Mail that gives some great tips and perspective on this topic. Note that this article is not just about those who inherit money, but encompasses those who sell businesses or win lotteries as well. However, I definitely see the need for this kind of advice for heirs who come into money.

2 comments:

  1. Finding the right financial adviser is probably the hardest part. When the guy at the bank sees the big balance, he suddenly becomes your best friend and wants to "help" you invest in various 3% MER mutual funds. Also, some people don't realise how little, say, $1 million is these days. I know a couple who sold their business, bought a big house, put the kids in private school and stopped working. Now, just a short few years later, they're downsizing and putting the kids into the public system.

    If you know your children will be inheriting a large amount of money, I think it's incumbent upon you to do your best to prepare them for it before you die. Money management skills should start from childhood, with the first allowance.

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    1. I agree that children should be taught about money early on, but unfortunately it doesn't seem to be a common practice. Mostly I see parents who know their kids are going to inherit money and want to use their wills to protect the children from themselves and from those who will prey on them.

      This is one of the reasons we at the bank "suddenly become your best friend" - because we have excellent financial advisors on board and would like to see the kids hire one of them rather than blow the inheritance in a few months. And of course more is available besides mutual funds.

      Anyone who thinks a $1 million is enough to change your whole lifestyle for a family with children in school is living in a dream world. Again, a good financial advisor can help people make the most of what they inherit.

      Lynne

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