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An inheritance should not be your financial plan

It certainly works into an individual's financial favor if they inherit property, money or other assets when a loved one passes away. Inheritances are a common aspect of estate planning and a good way to leave loved ones with monetary gifts upon death. However, some of the beneficiaries of these blessings have the wrong mindset on how to treat them.

In large, wealthy estates, inheritances left behind for loved ones can be of a substantial amount. The mistake that many beneficiaries make is focusing in on this large sum of money and living their financial lives like they already have it. They might run up substantial debt just because they know that fortune will some day be theirs.

Men and women tend to do this with impending inheritances from their parents. But, this is a completely wrong financial mindset to have. In fact, this is just another case of immature children relying on their parents' money to make ends meet. When school age kids still live in the house, parents often help them with purchases and money to cover everyday necessities. This arrangement tends to change when a young adult goes to college and finds that their parents are paying for less. By relying on an inheritance so heavily, a man or woman is conceding the fact that they cannot make it financially unless they have money from their parents to help.

Not only is this a foolish game, but also a dangerous one. It is possible that an inheritance can shrink if the investments go bad or it is hit with taxes. If a person relies on an inheritance to fund their life, and then misjudges how much they will receive, they still end up in a hole.

Another morbid aspect to this mindset is an individual is essentially left waiting for a parent or loved one to die in order to receive the inheritance. What son or daughter should be waiting for that day to come in order to appear to have gained financial independence?

Source: The Globe and Mail, "An inheritance should be a windfall, not a financial plan," Preet Banerjee, Feb. 9, 2012

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