Sudden Money – Sudden Inheritance


Social, mental, and emotional thoughts get stirred up with unexpected passing of a parent. Add to that the sudden receipt of money and most people are feeling extremely uncomfortable.  Not only are you dealing with loss, you’ve suddenly got their home or maybe two homes. You have their personal property and all these different assets dropped in your lap.

Many are hard to understand. Perhaps Mom and Dad didn’t share much of this with you, which is not uncommon. There are siblings involved and your immediate family. It’s a major transition and it’s sudden. A lot of life-changing moments and decisions, with pitfalls and opportunities.

Here’s an example: About 15 years ago this gentleman was referred to us. He came in to discuss his recent inheritance of about $1.5 million. The first thing he said to us was “I’m taking half of this, $750,000, and I’m buying a bowling alley.”

“Well, okay. Tell us about that.”  He told us he’s a bowler. “I love bowling. I go with friends all the time and am in a league. I really understand bowlers and I want to do this bowling alley thing.”

Now, you might be asking yourself: does he know anything about business? No. Does he understand that bowling alleys primarily make their money from the liquor side of the business? It was pretty clear he didn’t understand that either. How could he really believe that, never having run a business, he would be able to run this bowling alley business?

What’s the point here? First, people in a sudden-money situation have lots of different reactions. In this case, it was fire – ready – aim. Just jump in without much thought. It’s not an isolated story. Plenty of people with sudden money will take it and spend it quickly without thinking it through.

Others will freeze – do absolutely nothing.  In fact, some will do nothing for years. We met a woman who didn’t sell her mother’s home for almost 10 years. She just wasn’t sure what to do. Seemed simple but she couldn’t do it. It could have been emotional; it could have been just over-thinking – and then taking no action. Or not wanting to say she just didn’t know how to get started.

So, where do you start with sudden money decision-making? We recommend always starting in the future. Look to tomorrow and work your way back to today. It’s actually a lot easier than the other way around.  Think to yourself: What does this look like two years from now? Integrating this money into our lives, what does that look like?

When you approach it this way, it becomes clearer and easier to start the discussion with your spouse and with your family. You start to find some hard and fast ideas. You can begin to ask the three key money questions:

  • What does my balance sheet look like?
  • What does my cash flow look like?  and
  • What will my taxes look like?

Sometimes this exercise is easy – you’re just doing the science. And there’s real value to that. You can disrupt the distractions and limit the kinds of questions you think you need to answer. It gets you into the pre-frontal cortex, the part of the brain where you’re making good logical decisions away from all the emotional angst that comes out of the death of a parent.

It makes you very intentional about where you’re going and what you’re doing. You can look more easily at this sudden money as a gift from your parents. It’s been handed to you and now, all of a sudden, new avenues open up. You can look at some of those things that matter to you but were out of reach. It’s time to take a fresh look.

We’ve watched a lot of folks go through these life events. It’s never easy but with some guidelines, you can weather the storm, gain greater clarity and separate from some of those emotional and other issues that people can have a tough time with.

Look into the future and think through those three key money questions. Be intentional and realistic. Run the numbers. You’ll feel in control and avoid buying that bowling alley.

If you find yourself in a transition like this, please give us a call at 800-480-7913. We’ve helped a lot of people work their way through the key money questions and put a framework in place. We’d love to do the same for you.

Enjoy!

Send me your response, query or comment to gklaben@coylefinancial.com.