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Midlife Money Reflections

Financially Unprepared – the unintended burden of inheritance

by Stephanie Ferreira, Financial Planning Specialist at Chartered Wealth Solutions


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Kim Potgieter

Kim Potgieter

April 24, 2024
When helping our clients build their estate plans or those who have inherited, I have noticed a crucial factor that is seldom considered – the responsibility they place on their loved ones to manage their legacy and money going forward, especially when the beneficiary has no context as to what the money was intended for. As humans, most of us already have complex relationships with money, and when it comes to inheritance, those complications tend to run deeper.

I have found that one of the main contributors to these complexities is what I’ve termed financial maturity. When I speak about financial maturity in this context, I am talking about the beneficiary’s understanding of the value of money, how far it can or can’t go, their real-life experience with money, and whether they are capable of making informed decisions while considering the long-term implications of those choices. It also means feeling comfortable and content.

The Emotional Complexities of Inheritance

I have helped clients who received money from relatives with whom they had strained relationships – making it difficult for them to see the inherited funds as a positive in their lives. Instead, money becomes entwined with their negative feelings toward that person. Similarly, clients often feel guilty spending an inheritance, especially if they’ve outlived their loved one. The reverse is not uncommon, where people tend to recklessly blow through the money because of the emotions they have around it. In the case of younger adult children, I have also witnessed them feel completely disconnected from the money, as if it is not truly theirs.

The Importance of Financial Maturity

The most unintended burden I have seen when it comes to inheriting is related to financial maturity. When losing a partner or spouse, the question is whether the remaining partner knows and understands the financial plan and the real purpose of the money. If the person inheriting has the know-how or, at the very least, is equipped to handle the responsibility of the funds, this is financial maturity.

Unfortunately, we see it all too often where one spouse has been completely uninvolved in the family’s finances. Losing the spouse who has always ‘controlled’ the money leaves them feeling overwhelmed because they are unequipped, unprepared, and inexperienced. The remaining spouse becomes fearful and anxious about money at a difficult time, simply because they were never involved in the financial planning process to begin with.

I have even met people with substantial inheritance funds living in scarcity and constant fear of spending because they’re worried the money will run out, or don’t perceive it as their money to spend.

When it comes to children, many parents believe children in their mid-twenties can manage their inheritance. However, while these children may be completely responsible and ‘have their heads screwed on,’ if these young adults have not been involved with money management or lack financial experience, the responsibility can become a burden. The result is often squandered funds or increased stress caused by the inheritance.

So, how do you leave your legacy without complications?

Communication can go a long way! No matter how uncomfortable it is to talk about money or how vulnerable the topic of a loved one dying may be, you need to discuss money openly and honestly.

When it comes to a spouse, involving them in your financial planning and decision-making ensures that both parties take responsibility for looking after the money. This approach will build understanding and experience, leaving both parties at least somewhat equipped should one spouse pass away.

Nothing stops you from letting your beneficiaries know what they will inherit, why you leave them something, and what you intend with it. This is not to say put it in your will and rule from the grave. But keeping your loved ones involved in your thinking so they know what you would have wanted for them, is leaving a true legacy. For children, you can consider sharing a copy of your will and estate plan with them, enabling them to ask questions they don’t understand. In this way, you are educating them while also sharing your intentions.

Inheriting from someone you love should not feel like a burden. It should be seen as a gift and a legacy to be honoured. Ultimately, the best way to honour the legacy of a loved one is by being prepared and empowered to manage the inheritance with confidence, turning potential burdens into lasting legacies.

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