Why Inheriting Money May Not Solve Your Problems
Without a financial plan in place, even millions of dollars can be wasted. Here are some ways to make certain that doesn’t happen.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Delivered daily
Kiplinger Today
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. Smart money moves start here.
Sent five days a week
Kiplinger A Step Ahead
Get practical help to make better financial decisions in your everyday life, from spending to savings on top deals.
Delivered daily
Kiplinger Closing Bell
Get today's biggest financial and investing headlines delivered to your inbox every day the U.S. stock market is open.
Sent twice a week
Kiplinger Adviser Intel
Financial pros across the country share best practices and fresh tactics to preserve and grow your wealth.
Delivered weekly
Kiplinger Tax Tips
Trim your federal and state tax bills with practical tax-planning and tax-cutting strategies.
Sent twice a week
Kiplinger Retirement Tips
Your twice-a-week guide to planning and enjoying a financially secure and richly rewarding retirement
Sent bimonthly.
Kiplinger Adviser Angle
Insights for advisers, wealth managers and other financial professionals.
Sent twice a week
Kiplinger Investing Weekly
Your twice-a-week roundup of promising stocks, funds, companies and industries you should consider, ones you should avoid, and why.
Sent weekly for six weeks
Kiplinger Invest for Retirement
Your step-by-step six-part series on how to invest for retirement, from devising a successful strategy to exactly which investments to choose.
It would be nice to believe that a financial windfall, such as winning the lottery or receiving an inheritance, is a silver bullet to solving all financial problems. However, history is filled with stories that prove this often is not the case.
One of the most high-profile examples is the sad story of Maureen O’Connor, a former California politician who inherited more than $40 million from her late husband, Robert O. Peterson, the founder of the Jack in the Box restaurant chain. She gambled it all away at casinos and was left destitute. O'Connor liquidated her savings, sold numerous real estate holdings and auctioned valuable personal items. To top it off, she misappropriated millions of dollars from her deceased husband's charitable foundation.
Other heirs have lost their fortunes to extravagant lifestyles, lavish gifts, multiple costly divorces and illicit habits.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
If you believe you will receive an inheritance one day, it is important to know that a lump sum will present opportunities – but also some challenges. Here are some of the ways people mishandle a windfall and recommendations on how to best prepare yourself for an inheritance.
It’s Not Your Debt, It’s Your Spending
People often think an inheritance will solve their debt problems. Under a mountain of debt with steep interest rates and a barely manageable minimum payment, it seems reasonable to assume that a large lump sum would save the day.
However, debt is often a symptom of an underlying problem. Most consumer debt is incurred when spending exceeds income. Spending more than you make is not simply solved by making more money. We have seen people of all levels of financial means outspend their earnings. Unfortunately, this problem only gets more complex when the numbers are larger.
Years ago, one of our clients passed away, leaving each of her three children with millions of dollars. The two children who already had a healthy relationship with money, strong savings and reasonable spending habits invested their inheritances and continued to live life largely the same as before. However, the sibling with money problems eagerly paid off six figures of debt, immediately upgraded his lifestyle, and within 36 months found that his multimillion-dollar inheritance was almost gone already.
People who spend too much usually know it. If you do, begin working on your relationship with money now instead of waiting for an inheritance to save the day. Your attitude and decisions regarding money will impact you more than the numbers in your bank account.
You May Have to Wait Years to See a Dime
People are living longer these days, so you may have to wait a long time to inherit assets – into your 50s, 60s or even 70s. By that point, it may be too late. And a longer life means an aging parent will need more money for long-term care and other needs – so any inheritance may be less money than expected.
We have seen this happen firsthand. One of our clients thought they would inherit a large sum of money from their mother. But Mom ended up living past age 100 and needed around-the-clock care for the last 10 years of her life. By the time the funds were inherited, there wasn’t a whole lot left.
Fortunately, through careful planning and disciplined savings, this person got on track to be financially independent apart from the inheritance, which was key to their success. Relying on an inheritance to make a plan work is problematic since you never know what can happen.
What You Should Do If an Inheritance Is Imminently Coming?
If you know an inheritance is coming soon, start making a thoughtful plan. You may want to pay off your mortgage or other debts or use this newfound money to give more to charitable organizations and have an impact in your community. Having a plan, even just to save those funds, can prevent impulsive decisions that you later regret.
A financial adviser can help you navigate how to manage this windfall. With a sound plan, a person could retire earlier than expected. There may also be some tax-planning techniques or your own estate tax considerations to consider. You may also benefit by a plan to protect your assets, such as determining the correct amount needed for an umbrella insurance policy to protect against excess liability or putting a trust in place.
A Final Word of Caution – Don’t Do These Two Things
No. 1: Don’t advertise that you have this windfall coming. You probably do not want extended family or “friends” coming out of nowhere trying to make claims on your inheritance or trying to guilt you into giving them money.
No. 2: Don’t spend the money before you get it. It’s great to have goals for those funds, but make sure nothing has been implemented before the funds are received. Wait until funds are in your possession before putting your plan in motion.
Our experience has taught us that an inheritance is best thought of as the cherry on top rather than a lifeline to save the day.
-
Dow Leads in Mixed Session on Amgen Earnings: Stock Market TodayThe rest of Wall Street struggled as Advanced Micro Devices earnings caused a chip-stock sell-off.
-
How to Watch the 2026 Winter Olympics Without OverpayingHere’s how to stream the 2026 Winter Olympics live, including low-cost viewing options, Peacock access and ways to catch your favorite athletes and events from anywhere.
-
Here’s How to Stream the Super Bowl for LessWe'll show you the least expensive ways to stream football's biggest event.
-
How to Add a Pet Trust to Your Estate Plan: Don't Leave Your Best Friend to ChanceAdding a pet trust to your estate plan can ensure your pets are properly looked after when you're no longer able to care for them. This is how to go about it.
-
Want to Avoid Leaving Chaos in Your Wake? Don't Leave Behind an Outdated Estate PlanAn outdated or incomplete estate plan could cause confusion for those handling your affairs at a difficult time. This guide highlights what to update and when.
-
I'm a Financial Adviser: This Is Why I Became an Advocate for Fee-Only Financial AdviceCan financial advisers who earn commissions on product sales give clients the best advice? For one professional, changing track was the clear choice.
-
I Met With 100-Plus Advisers to Develop This Road Map for Adopting AIFor financial advisers eager to embrace AI but unsure where to start, this road map will help you integrate the right tools and safeguards into your work.
-
The Referral Revolution: How to Grow Your Business With TrustYou can attract ideal clients by focusing on value and leveraging your current relationships to create a referral-based practice.
-
This Is How You Can Land a Job You'll Love"Work How You Are Wired" leads job seekers on a journey of self-discovery that could help them snag the job of their dreams.
-
65 or Older? Cut Your Tax Bill Before the Clock Runs OutThanks to the OBBBA, you may be able to trim your tax bill by as much as $14,000. But you'll need to act soon, as not all of the provisions are permanent.
-
The Key to a Successful Transition When Selling Your Business: Start the Process Sooner Than You Think You Need ToWay before selling your business, you can align tax strategy, estate planning, family priorities and investment decisions to create flexibility.
