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Dealing with sudden windfalls

Coming into a lot of money through a windfall is a problem many people in Michigan think they might like to have. Yet some financial advisers have noted that this type of "money shock" is something that can actually ruin the lives of people left large inheritances as a result of a will or other estate planning instrument of a wealthy family member. Many heirs of large family fortunes worry that their inheritances may distance them from other people because of wealth that may have been created decades ago.

Advisers observe that this type of windfall often is not the solution to all the recipient's problems, with some comparing it to post-traumatic stress in that it is an overwhelming feeling that one's life is about to be changed in ways that cannot be anticipated, and not necessarily in a positive way. Many such recipients feel such guilt that they are led to donate the inheritance, while others may feel overwhelmed by the perceived responsibility of putting it to good use.

Another potential problem with getting a big windfall is that emotions can sometimes take over and make the person lose everything. People are advised to develop a plan that will hopefully address both the emotional fears and responses as well as the suggested financial aspects of future money management. People who know that they will be receiving an inheritance would benefit by having such a plan in place before the event actually takes place.

People who may be affected by a large inheritance may benefit by speaking with an attorney who has experience in estate planning matters. The attorney may be able to counsel potential beneficiaries as to how to properly plan for such amounts, and may be able to advise prospective donors as to how to best structure the testamentary gift.

Source: Forbes, "Overcoming 'money shock' from an inheritance windfall", Judy Martel, October 22, 2013

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