Whoever said that you should never count your chickens before they are hatched probably blew an inheritance.
If we are to believe depictions in popular culture, receiving an inheritance might be the best thing that can ever happen to you. Getting a call or a letter saying that you have inherited money might be the financial windfall that you are looking for to solve your problems.
The American population collectively inherited over $427 billion in 2016 alone.
And the average inheritance value ranged anywhere between $70,000 to $707,000.
However, getting an inheritance can bring you more troubles than solutions to your financial problems.
Here is what to look out for if you learn you have an inheritance coming.
Don’t Announce It
If you learn that you have an inheritance coming, you should keep it to yourself until you receive it.
Announcing and publicly bragging that you are receiving an inheritance could stir up jealously amongst relatives and familial turmoil.
And announcing that you have an inheritance coming could inspire your relatives and friends to start legal challenges.
You could end up using your own money or wasting the inheritance paying lawyers to fend off legal claims from others.
Keep quiet about your inheritance until it is in your hands. And after receiving it, think twice before unnecessarily bragging about it.
Estate Taxes
The taxman always gets his due, even if you are bequeathed an inheritance.
Depending on the state you live in, you will have to pay anywhere between 7% to 40% in estate taxes if someone gifts you property as an inheritance.
But the average estate tax is 17%.
17 states and the District of Columbia tax anyone who directly inherits wealth of any kind.
Distracting from Personal Finance Problems
People who gain inheritances usually go on spending sprees and spend their financial windfall like water.
If you gain an inheritance, you should reevaluate your personal finances, budgets, taxes, and especially debt.
If you ignore your debts to celebrate your inheritance, then your debts will only increase.
It Could Take Years to Receive Your Inheritance
Just because you receive an alert that you have been named in an inheritance does not mean that you will receive it imminently.
The person who names you in their inheritance may be doing so for legal or tax reasons. Until they pass away, you will receive nothing. And the person who names you in an inheritance might live another few decades.
Even if you are set to receive an inheritance imminently, legal challenges may draw out your acceptance for years or decades.
What You Should do After Receiving an Inheritance
Make plans for inheritance acceptance with a financial advisor or a lawyer. Don’t assume that the inheritance will be in your hands imminently.
And don’t start spending money you don’t have until the inheritance is in your hands. The inheritance is not viable until you claim it.
One out of every three Americans will squander an inheritance within two years of getting it.
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Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.
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