Erin: Jordan, good to see you. This story is wild. How to make sure your inheritance doesn’t disappear. And I’m bringing this up because I came across this article, which was crazy. A surprising new study found that 42% of heirs see their net worth fall back to or below pre-inheritance levels within just one year. And the average inheritance studied, the average amount was $133,000. gone in one year. What’s driving this behavior?
Jordan: I think people just, they get emotional. They get inheritance. They quickly spend it. They don’t have a plan and poof, within a year it’s gone.
Erin: Yeah, and I’m glad you brought that up because this, they found it was even different than another windfall, like winning the lottery. Inheritances are just different when it comes to keeping that wealth. Why do you think that is?
Jordan:
I think money is tied to our emotions. And when somebody inherits money, maybe they’re like, oh, mom and dad, or mom wanted me to do this thing, or I wanted to buy this fancy car, or maybe they wanted me to upgrade this house, or that emotional tie, you’re grieving, you’re going through a tough time. And maybe you’re trying to find that quick fix to kind of tie that emotional weakness you have from just losing somebody.
And maybe you spend money freely or more freely. And that’s where a lot of people get in trouble. People buy sometimes these bigger houses and they buy these fancy cars and they get an inheritance real quick. But then quickly they don’t realize you got to pay more in property taxes, more in maintenance, more in car insurance. And that catches up to them real fast.
Erin:
And what mistakes do you see families making when it comes to passing down wealth? I know you’ve been doing this for a while. I bet you have some stories.
Jordan: Yeah, I think the biggest mistake is not having open dialogue and having a conversation with the kids. And again, maybe you don’t have to go over every single detail of how much you have and your net worth, but talk to your kids on your intention for the money. You know, maybe you have multiple houses, maybe it’s a summer lake house and maybe you have two kids. One kid must love, might love going to that summer lake house. There are kids like, I just want to get rid of it.
Maybe you talk about that ahead of time. So, you design your estate plan, that one child inherits the summer estate house and other gets more money.
But you need to be proactive and have a plan and have these conversations, so your kids not only know kind of what roughly they’re going to inherit, but you also got to instill the values of how you want this money to be spent.
Erin: I’m glad you mentioned an estate plan because this really can help ensure that an inheritance actually lasts. Walk me through this, please.
Jordan: Yeah, we believe every single person have powers of attorney in an estate plan. And if you don’t have powers of attorney, by the end of this week, you should have that. Give our office a call if you need help with that. But having an estate plan really gives you kind of control where the assets go. Make sure your intentions are followed through on.
Again, I’m not saying you have to do this, but for a lot of clients, they kind of put in that trust or their legal documents what this money can be used for. Maybe they can’t get it lump sum. Maybe you protect that even after death that, hey, this is over a period of years or for specific reasons that they can take money out of that trust.
We have some clients that say, hey, if our child doesn’t earn money, they get nothing out of that trust. They need to earn, say, $100,000, then they can take $100,000 out of the trust. They need to have those legal documents. But, besides all the legal documents, I don’t believe it’s truly what you leave to your kids in a dollar amount. It’s really what you leave in them when it comes to values and those things. And I think those are even more important than all the legal documents, but we still need to have those legal documents.
Erin: Yeah, right. Well, and I mean financial values among them as well. And it really is about protecting your family when you’re gone, because of course, I can speak from experience. We make irrational decisions when we’re emotional, right?
So Jordan, if somebody would like your help setting up this plan, just getting the conversation started, right? Invite 2 generations into the office. What’s the best way to reach you to do that?
Jordan: Yeah, the first thing I’ll say is if you do just inheritance and you’re looking at this on YouTube or you’re looking at this and seeing what to do, our general rule of thumb is let’s wait 6 to 12 months for the dust to settle.
At time, we can create a plan. We can show you some strategies. We can make sure that we’re making wise decisions with this money, not be so quick to spend that money. Let’s have a plan first. And the first step to kind of sit down with us and help you design that is calling our main number, 847-499-3454.
Erin: Great. All right, Jordan, again, thank you for your time today. I really appreciate it.
Jordan: Thanks, Erin.
