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The No. 1 Reason People Who Inherit Money End Up Broke

Liz Smith | APR 29, 2018

Between $1 trillion and $3 trillion will be transferred to heirs every year through 2050, according to a recent Accenture study. 

Unfortunately, inheritances tend to get squandered quickly. In fact, experts estimate that 33% of benefactors have negative savings within two years of inheriting wealth. 

The Single Reason Inheritance Recipients End Up Broke 

Even if you are generally smart with your money, you may not be prepared for a sudden increase in wealth.

Not seeking unbiased, professional advice from a financial advisor is one of the biggest mistakes people make after receiving a financial windfall. 

financial advisor can help you navigate inheritance taxes and asset sales, as well as define fiscal goals and develop a plan that ensures you reach them.

5 Benefits of Hiring a Financial Advisor After Inheriting Wealth

Benefit 1: Tax Assistance

Inheritances are subject to state taxes. Depending on the size of your inheritance, it may also be subject to the federal estate tax (which can claim up to 40% of your windfall!). A financial advisor will help you develop a tax strategy that ensures you get the most money you’re entitled to without breaking any rules. 

Benefit 2: Clever Debt Repayment

Financial advisors can help you determine which debts to pay off first, and what loans it makes the most sense to get ahead on. They’ll also calculate the emergency account amount you need to avoid ever going into debt again. 

Benefit 3: Higher Investment Returns

Investing your inheritance gives it the opportunity to grow. While the value of working with a financial advisor will vary by person and advisors are legally prohibited from promising returns, research suggests that average additional investment returns can range from 1.5% to 4% each year.  

Benefit 4: Retirement Confidence

Making good decisions with your inheritance today can add thousands to your retirement accounts. Voya Financial found that 79% of people who use a financial advisor said they “know how to pursue achieving their retirement goals.” 

Benefit 5: Unbiased Advice

You’ll receive plenty of unsolicited advice after receiving an inheritance. Unlike your friends and family members, fiduciary financial advisors are legally required to provide unbiased advice. In addition to making smart plans for the future, they can help you splurge thoughtfully.

The Best Way to Find the Right Financial Advisor for You

Finding the right financial advisor is key. Family referrals may be convenient, but they don’t always work out.

This new tool matches you with up to three local fiduciary investment advisors that have passed a rigorous screening process so you can be sure they are a good choice. 

1. Simply enter your ZIP code below.

2. After you enter your ZIP code and answer questions about your financial goals, you can compare up to three top advisors local to you and decide which to work with.

3. Enjoy a better financial future!

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SmartAsset - copyright 2018

SmartAsset - copyright 2018