Every parent has a legacy for their children. The legacy can be a strong family value system and financial security that they leave behind. On the other end of the spectrum, the legacy can be a long history of family dysfunction and poor money management skills. For some, the legacy is something more tangible, as in cash, stocks or property. Since this is a financial page, we’re going to talk about that one. There are certain responsibilities that come with this legacy, and we as parents don’t always take the time to articulate our unspoken expectations. I can’t speak for them all, but I believe that I speak for many.
Please do not blow through your inheritance like an impulsive lottery winner.
Your inheritance may be the size of a lucky scratch off lotto ticket or it could be like winning the Mega Millions, but I’m guessing it will be somewhere in between. If it’s on the lower end, please, make sure your needs are met, do something nice for yourself, pay off debt and use it as a springboard to start building a legacy of your own. If you get something larger, like larger than you have ever imagined having before, this is for you. Remember that this gift can be the seed you plant to create generational wealth. Or you can take it all and buy a big, expensive vehicle. If you decide to spend it all on a larger new home, will you be able to afford the taxes and increased maintenance? Will you be able to sustain yourself in retirement? Or will you find yourself in more financial stress than ever? If you can project forward and imagine the older and presumably more “mature” version of you, which one of these choices do you think would provide greater peace of mind?
Don’t spend in a short time what took me a lifetime to create.
Please be responsible. It is not a windfall. It is the result of years of hard work, patience, forward thinking and good decisions. Keep that in mind as you decide what you will do with it. The greater the gift, the greater the responsibility. Receiving a large financial legacy is an opportunity to get your money to work for you. If you can amass a respectable sized nest egg, you can feather your retirement nest with the dividends created by the nest egg. Even after you’ve used some of the principal for your own enjoyment, you will still have some to leave to the next generation.
Always Have a Plan B
You might be expecting an inheritance when your parents are gone, but have they set up a legal plan to transfer their assets according to their wishes? Or are they living an inflated lifestyle which leads you to believe they have greater wealth than they actually do? If that is the case, any equity they have may be used to pay off debt and not transferred to heirs. Of course, even the most financially prudent parents could see their wealth eroded due to catastrophic illness.
I wish for you to have the warmth of a loving parent for as long as possible. Take this opportunity to gently ask them some questions about this topic while you are able to do so. Find out if there are any unspoken expectations that come with your legacy. Learn to look at life through a long-term lens, which will usually lead to better choices.