Stomachaches. Sleepless nights. Debilitating family problems. Wrecked friendships. Hurt feelings that seem forever beyond repair.
These are the symptoms experienced by people who come into monetary windfalls? They’ve got to be kidding, right?
Wrong. Financial experts and recipients of unexpected sums of money say it’s common for such newfound wealth to feel more like a burden than a blessing — especially if the windfall came as a result of a loved one's death.
“Many people think of an inheritance as a pleasant daydream, but there are strong emotional issues involved,” said Ann Perry, author of “The Wise Inheritor: A Guide to Managing, Investing, and Enjoying Your Inheritance.”
“The most common unexpected feeling is guilt: feeling guilty about getting the money, feeling guilty that somebody had to die for you to get it,” Perry said. “And people can become very hung up on whether they’re going to make a mistake with the money. What if I do something wrong that my parents (or other relatives) wouldn’t have approved of?”
People come into large windfalls of money in a variety of ways: insurance settlements, divorce settlements, retirement packages, even lottery wins. But an inheritance is the most common path to a dramatically changed set of financial circumstances.
Inheritances in the $500,000 to $1 million range are not at all uncommon for many middle-class families, once real estate, retirement plans, stocks and life insurance policies are factored into the equation. And many people — including highly intelligent, financially literate people — are not equipped to handle that kind of money in one lump sum.
Some windfall recipients impulsively quit their jobs or leave their spouses even though they haven’t come into enough money to make them independently wealthy. Others spend the money far too quickly without planning adequately for the future — or for the taxes they don’t realize they owe.
Still others experience a paralyzing fear of doing something wrong with the money — and, as a consequence, they waste years doing nothing at all. And most experience a change in relationships with family members and others they have loved and counted on for years.
Serious family strains shocked LaKisha Cameron, 35, a California resident who inherited an unexpectedly large sum of money from the aunt who raised her. The aunt, who died suddenly last year, had always assured Cameron that she would inherit everything, and she named Cameron as the beneficiary on her life insurance policy, retirement plans and other key accounts.
But a family spat erupted over who would inherit the aunt’s house in Sacramento. Even though the aunt and niece had lived together for years as mother and daughter, Cameron technically was not her aunt’s closest kin. And because her aunt hadn’t gotten around to drawing up a will or a trust spelling out who should get the house, other close relatives came knocking.
In the end, Cameron prevailed and inherited the house. She gave two of her relatives $50,000 each to make them feel better about the outcome.
“In my heart, though, I feel like there’s permanent damage that’s been done,” Cameron said. “We had a really good relationship, I thought, before that. It surprised me to see how money could change that.”
Cameron also recalled feeling utterly overwhelmed and intimidated by her inheritance — a common reaction among many inheritors.
“My biggest fear was losing the money,” she said. “I know my aunt has passed away, but I wanted to make her proud.”
At least Cameron’s aunt had been upfront with her about how and where to access the various accounts she had left in her name. In many families, the subject of any future inheritance is so off-limits that inheritors often have no idea what they’ve got coming.
Perry calls this phenomenon the “triple taboo” — the unnerving intersection of money, death and close family relationships. Many people feel uncomfortable discussing even one of those topics honestly, let alone all three at the same time.
Jeanne Hendrickson, 38, didn’t realize she had inherited more than $500,000 from an aunt in Florida until a full calendar year after the aunt’s death. This led to a rift between Hendrickson and the relatives who didn’t inform her about the inheritance.
“Our family was always really close, very close,” said Hendrickson, who lives in the Chicago area. “But now I don’t really talk to those family members anymore.”
In addition to that stress, the inheritance led to yet another emotional roller-coaster ride. The aunt’s money came in the form of an individual retirement account, and Hendrickson’s first financial adviser encouraged her to retitle the IRA in her name. Had she done that, roughly 35 percent of the total amount would have gone straight to the Internal Revenue Service.
Hendrickson and her husband got a second opinion from a certified financial planner who helped them maintain the money’s tax-deferred status — much to the couple’s relief.
“I’m basically uneducated with this,” Hendrickson said. “I probably would have … not known any better.”
On top of the potential for lasting family problems and irreversible financial goof-ups, many inheritors also find that their friendships and marriages can go through periods of intense turbulence. Their sudden wealth can lead to shifts in the balance of power in those relationships, breeding insecurity, distrust or misunderstandings.
“People will ask me: ‘What do I say to my friend who needs dental surgery and can’t afford it? Do I give her the money? Loan it to her? Do it anonymously? How will it affect our relationship?’” said Valerie Jacobs, a San Diego-based philanthropic consultant. “Just know that it can dramatically affect your relationship, and it may never be the same. The level playing field just got very uneven.”
Of course, inheritances and other windfalls can yield enduring benefits for those on the receiving end, making it possible for them to pay off crippling debt, change careers, fund their children’s education and give to charity.
In Cameron’s case, her aunt’s generosity allowed her to shift to part-time work so she could spend more time with her 2-year-old son and also see her husband more often.
“I have to thank her for always looking out for me,” Cameron said. “She took care of me in life and she did the same in death. I would give it all back just to get her back.”