Sudden Wealth Inheritance – Guilty or Not Guilty?

By Laura Chiesman

There are events in life that have unexpected effects and a seemingly positive occurrence may cause stressful and even negative impacts.  Inheriting a large sum of money can be like that. It sounds like a good thing but often riddled with conflicting emotion and unexpected challenges.

Inherited wealth is increasingly at risk as it moves through the generations. Between 35% of inheritances are gone within 2 years, leaving the heirs back where they started or possibly even worse off.  Even more startling, 70% of wealthy families lose their wealth by the second generation, and 90% by the third, according to the Williams Group wealth consultancy2.  

While there are many compelling stories about inherited wealth quickly lost through over-the-top spending and gifting, vulnerability to fraud and bad business deals, I have also seen the opposite reaction. Some heirs are frozen into inaction by anxiety as they feel disconnected from, and reluctant to take control of, the assets left to them. There are feelings of uncertainty, fear and often guilt about this new wealth.  

In a previous blog, we explored how sudden wealth is often short-lived. An abrupt increase in wealth can come from a variety of sources – inheritance, divorce, death of a spouse resulting in life insurance and business liquidation proceeds, and of course the occasional much publicized lottery win.  Where ever a windfall comes from it’s estimated that up to 70% of all people who receive a windfall will lose that money within a few years.1  Revisit Sudden Wealth for ideas to avoid that fate.  

Some of the roadblocks I’ve seen to moving forward or loss of enjoyment and peace of mind regarding inherited assets are:

  • Feelings of loss and grief
  • Conflict with other heirs
  • Isolation due to inability or fear of sharing this development with others
  • Guilt over suddenly having unearned wealth
  • Imposter syndrome – “Who am I to have all this and what will I do with it?”
  • Sadness over the perception that those who left the wealth could have used these assets for a better quality of life
  • Attachment to long-held, undiversified portfolio holdings, sometimes treating individual stock positions like a photo album

Since the death of a loved one is often the source of inherited wealth, grief is often a major part of the process.  It seems that just as there are stages of grief, an inheritance brings its own “stages of inheritance”3to pass though as illustrated below and described by Ann Perry in her book “The Wise Inheritor.”

What’s the solution?  It’s always helpful to know what to expect and understanding that you may go through these emotional phases is a good start.  In your own time you can begin to consider how this new found wealth will fit into your life and how it can support your own goals and vision. These assets are now yours and can be a positive force for you and others.  Envisioning this new future and designing a coordinated plan around your goals will be time well spent.  Approach this journey with gratitude and excitement about new opportunities, allowing you to leave fear, guilt and the resulting inaction behind.

Estates commonly take months and sometimes years to settle, so you have time to pause, reflect and get good advice.  A great first step is to meet with a personal WealthCoach whose focus is to help you make smart decisions and create the future you dream of. Call our wealth services firm in Satellite Beach, FL – Melbourne/Brevard area at (321) 773-7773 to schedule your complimentary initial consultation.

National Endowment for Financial Education®

2Williams Group Consultancy study

3 Perry, Ann. 2003. The Wise Inheritor: A Guide to Managing, Investing, and Enjoying Your Inheritance. Random House, Inc. 

You should not assume that any discussion or information contained in this publication serves as the receipt of, or as a substitute for, personalized investment advice from FirstWave Financial. A copy of the FirstWave’s current written disclosure statement discussing our advisory services and fees is available upon request.