For those whose loved ones happened to be rich, death could be a harbinger of both good and bad news. It brings sadness on account of the loss of the loved one. Conversely, it heralds fortune.
But in the two cases, death comes with a burden, according to Brokamp.
The first question that stares a beneficiary (as the will may confer) in the face is: What do I do with the money in the meantime?
Anne’s story would illustrate how not to tackle this question in the line of a sudden inheritance without proper hints.
Anne Somebody (so to say) was still understandably in shock from her husband’s death. She had not yet packed away his things, removed his shoes from his side of the bed or taken off her wedding ring. And yet, this was the time she chose to jump into the real estate market with a friend. The friend had kept Anne company while she was mourning- something for which Anne was very grateful.
The friend and Anne agreed that she would put up the money for the down payments on two rental properties. She and her friend would split the monthly payments until the properties were rented, share in the upkeep, and then turn them over for a profit which her friend would share in equally. The friend, once her credit was up to snuff (and she had a windfall of money from previous sales), would contribute equally to future purchases. In the meantime, Anne would have “fun” getting involved in this new entrepreneurial venture.
It is important to note that in this venture, Anne’s friend put up no money and yet, would get half of the profit. What is more: the friend and her husband were promptly transferred out of the country after the deals were signed.
The implication was that the friend could not share in the upkeep of the property and Anne’s family. She could not also help show the properties to interested parties or do anything at all to help. So quickly, the “fun” Anne anticipated ended. What an imprudent way to fritter away fortunes!
Anne, a widow for just over a year, had inherited a large sum of money and squandered it.
She had become the sole surviving parent of three young children, who would need food, shelter, and all of the other things kids need for at least 14 more years. And that’s without factoring in any help they might need after their 18th birthdays.
You might scoff at this situation and think that you would never make such egregious errors in judgment. But Anne was quite intelligent a dedicated mother, who had been a successful career woman. She was also overwhelmed, vulnerable and grieving the loss of her life’s partner.
Brokamp, in her book, “Money, Relations And Fate,” says conventional wisdom dictates that you shouldn’t make any big, life-altering decisions within six to 12 months of a serious loss. However, that invites a host of questions: What about decisions I have to make quickly?’ How can I assure they’re sound?’ and; How do I know if I’m ready to tackle a big decision?’
In answering these questions, solutions are being provided on how to avoid the common pitfalls that have turned thousands of people paupers, despite the millions inherited at a time. To the questions, below are Brokamp’s solutions.
What can I do with the money in the meantime?
A high-yield savings account may be the best bet for you to put your money while you still weigh all of the options and factors involved in your inheritance.
This way, your money is stashed away somewhere safe, earning a little interest, and yet it is still easily accessible when and if it is needed. Various banks in the country have such accounts.
How can I make sure that decisions I have to make now (quickly) are sound?
There is no other good time to consider hiring experts to help you with your financial decision making than now. A financial planner can take a broad view of your financial picture and offer advice for how your inheritance may best be used to contribute to your overall financial health. For example, if you are carrying a lot of high-interest debt, your financial professional may suggest you pay that off immediately. Or if your retirement funds are sparse, he may suggest an aggressive plan to get you on track with savings for retirement.
How do I know if I’m ready to tackle a big decision?
It can be difficult (if not downright impossible) to make an objective determination of your own fitness to make decisions. Now is a good time to rely on trusted friends and family members to solicit advice and put some of your own safeguards in place before outlaying any major funds.
Brokamp gives the following tips on how not to fall victim of Anne’s experience.
Consult a financial expert. This is one of those times when going it on your own may not be in your best interest. Only planners can help you develop sound strategies for handling your new found assets, and you won’t have to worry about their commissions taking a bite out of your inheritance.
Be willing to accept help from trusted friends and family members,
For example, in the case of Anne, a deeper probe would reveal that she did not seek or get advice from close relatives before making the plunge.
Make rules about how long to consider a big decision before taking any action.
You might also want to put a cap on how much you can spend in the aftermath of a loss. Deciding on a new sports car may make you feel better for a little while, but it can get very expensive trying to outrun grief.
Avoid major moves for at least a year.
Sometimes in the immediate aftermath of a loss, folks think they simply can’t live with the constant reminders of their loved one and make hasty decisions to relocate.
The truth is, while the reminders are tough, grief will follow you wherever you go, even out of state and into a “new” life. Better to take some time to work through the intensity of the loss before making such a big lifestyle change.
Never mix business with friendship.
In the best of times, money issues can complicate or even ruin a perfectly good relationship. During and after a loss, money can make friendship much uglier.