Becoming a wealthy individual overnight can be overwhelming and challenging for heirs who are not adequately prepared for the transition.
Eric Enslin, CEO of FNB Private Wealth and RMB Private Bank, says a majority of high net-worth individuals and families are advised well in advance to prepare heirs for their inheritance. “In some cases, heirs are either too young to grasp the context of the conversation,” Enslin says, “or they simply get overwhelmed when reality sets in.”
How to effectively manage a new inheritance:
- Don’t make rash decisions
When inheriting substantial wealth, you often go through an emotional and psychological phase. As a result, avoid putting yourself under pressure to make important decisions immediately. Rather take your time, come to terms with reality and gradually manage the transition.
- Watch your spending
Spoil yourself within reason but be careful not to fall into the trap of spending recklessly, as this can easily become a bad habit when overlooked. Moreover, help out where you can, but don’t be emotionally blackmailed to financially assist family and friends.
- Don’t just quit your job
Many people assume that after getting a windfall there is no need to carry on working. However, the decision has to be weighed on its own merit. For example, if you will be actively managing or overseeing family businesses, it makes sense to quit and narrow down your focus. On the other hand, if your inheritance does not require you to be hands on, it may be worth continuing to work to manage daily living expenses and pay for luxuries and hobbies, such as travelling overseas once or twice a year, instead of tapping into your inheritance all the time.
- Consult reputable wealth advisers
Every wealth management strategy involves a team of dedicated professionals who offer a range of solutions that you will need throughout your wealth journey from preserving wealth, managing tax and investments to retirement and estate planning.
As a beneficiary, you become responsible for protecting and maintaining the family legacy while growing and preserving its wealth for future generations. Maintaining the family values and principles while merging them with your own aspirations is absolutely essential.
Source: FNB. Images: Pixabay