As the so-called "baby boom" generation continues to age, it is becoming increasingly likely that many individuals will receive an inheritance within the next few decades. A Boston College study has found that it is possible that, over the next 40 years, various beneficiaries will receive as much as $59 trillion through inheritance. Unfortunately, according to a 2012 Ohio State University study, it is a distinct possibility that those heirs will spend, lose or donate about half of their inheritances. With HSBC, a banking company, indicating that the average American inheritance will be about $177,000, there will be a great deal of wealth squandered, both here in Florida and around the country.
One of the factors that may be involved in this potential loss of inheritance is making large financial decisions while an individual is under the influence of strong emotions. Grief can take many forms, but it often goes hand-in-hand with strong feelings like anger, depression and guilt. These emotions can sometimes make us less likely to make decisions that are in our best long-term interests.
While there are some steps that beneficiaries can take to make it less likely that they will squander their windfalls, there is also something that can be done before the problem of emotional spending rears its head. The use of a trust as part of a comprehensive estate plan can go a long way toward ensuring that one's heirs cannot make these types of mistakes. When certain types of trusts are set up, assets are placed within the trust's structure and beneficiaries are named, as well as a trustee. The trustee's job is to manage the assets of the trust in accordance with the instructions contained in the trust instrument. The person setting up the trust can thus restrict the use of the funds or other assets in the trust in order to prevent the wealth from being squandered during a set period of time.
Trusts are but one way to attempt to make certain that one's wishes are carried out after death. Anyone with questions about this sometimes complex process may want to consult a Florida estate planning professional.
Source: Florida Weekly, "Expecting a windfall? ," Dec. 18, 2014