Millennials and Generation Xers will face major decisions in the coming decade on how to handle any inheritance from parents, grandparents and other relatives. An estimated $30 trillion in assets is expected to pass from baby Boomers in North America to their heirs over the next 30-40 years, according to a 2015 study by Accenture. At the peak, between 2031 and 2045, 10 percent of total wealth in the United States will be changing hands every five years.
I’ve worked with a number of people who have received an inheritance. Developing a strategy for this often unexpected sum, or for any windfall, can be life-changing. With prudent planning, a sudden influx of wealth can be an opportunity to achieve financial stability, pay off debts, educate your children and also leave you with a little left over to have some fun.
It can be difficult to make important decisions when you've received money, especially from a loved one who has passed away. Some people feel paralyzed by loss, which can be compounded by a sense of guilt. Others can get overexcited. It's easy to be taken in by a friend or acquaintance looking for $50,000 to fund a start-up or by the temptation to buy an expensive home or vacation. But if the start-up goes belly up or the splurges pile up, the funds that once seemed so large can disappear — fast.
After benefiting from an inheritance or a windfall, it’s important to delay any major decisions and develop a long-term game plan first. After spending a little on yourself, here are six recommendations for how to optimize your new wealth.