As the next generation, you might be starting to think about your future and what it might hold. One thing that may be on your mind is the possibility of receiving an inheritance from your parents or other loved ones. After all, what’s not to love about getting a little extra cash to help you achieve your dreams? But receiving an inheritance can also bring up a range of emotions and questions. In Let’s Talk Inheritance Part 1 and Part 2, we explored how parents can prepare their children for receiving an inheritance. In the final piece in this series, we’ll explore how you might feel about receiving an inheritance, some ways you can prepare yourself for those feelings and financial changes, and the role of the right advisory team can play.
Exploring the Feeling of Inheritance
First, let’s talk about how you might feel about receiving an inheritance. For some of us, the thought of receiving an inheritance might bring feelings of excitement and gratitude. You might see it as a way to achieve financial security or fulfill your dreams, whether that means buying a home, starting a business, or traveling the world. For others, however, the thought of receiving an inheritance might bring up feelings of guilt, obligation, or even pressure. You might worry about living up to expectations or feel overwhelmed by the responsibility of managing a large sum of money. Even more common, it’s all of the above. These competing emotions can often color the lens of good decision-making during this time. That’s why it’s so important to be prepared and have conversations before inheritance triggers so that you are making solid decisions with the money that was entrusted to you.
Preparing Yourself for Wealth Transfer
So, how can you prepare yourself to make the most of this opportunity? One way is by educating yourself about financial planning and management. Receiving an inheritance can be a great opportunity to learn about financial planning and management. You can seek out resources like books, online courses, or financial advisors to help you understand how to make smart decisions with your money.
Another way is by developing a plan for how to use the inheritance. It can be helpful to take some time to think about your long-term goals and how you might use the inheritance to help you achieve them. This might involve setting financial goals, creating a budget, or identifying specific investments or opportunities you want to pursue. And don’t forget about estate planning. If you know that you will be receiving an inheritance, it can be helpful to have open and honest conversations with your loved ones about their wishes for the inheritance. This can help you understand their expectations and ensure that you are honoring their wishes as you make decisions about how to use the inheritance. Estate planning can also help your loved ones ensure that their assets are distributed according to their wishes, rather than being subject to the probate process.
It’s also important to understand the role of gift and estate taxes in the process of receiving an inheritance. Gift taxes apply to the transfer of money or property from one person to another while the donor is still alive. On the other hand, estate taxes apply to the transfer of assets after a person’s death. In the United States, the federal government imposes both gift and estate taxes, but the amount of the tax and the thresholds at which it applies vary. It’s important to be aware of these taxes and seek guidance from a financial professional or attorney if necessary to ensure that you comply with the relevant laws and minimize any tax liabilities.
Receiving an inheritance can be a complex and emotional experience for the next generation. While it can bring feelings of excitement and gratitude, it can also bring up feelings of guilt, obligation, or pressure. At Treehouse, we help by educating our clients about financial planning and investment management, while developing a plan for how to use their inheritance, communicating with our loved ones about their wishes, and seeking out the right team and guidance. This helps better prepare our clients to make the most of this opportunity and create a bright and secure future.
Garrison Point Advisors, LLC doing business as “Treehouse Wealth Advisors” (“TWA”) is an investment advisor in Walnut Creek, CA registered with the Securities and Exchange Commission (“SEC”). Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. TWA only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of TWA’s current written disclosure brochures, Form ADV Part 1 and Part 2A, filed with the SEC which discusses among other things, TWA’s business practices, services, and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov.
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