NEW YORK (AdviceIQ) -- As inherited money passes from one generation to the next, it is treasured and nurtured, right? Not at all. Often it is frittered away."I've never seen money passed from one generation to another in a manner that actually benefited the recipient." When a psychologist said this to me several years ago, I was dumbfounded. Many parents scrimp, save and sacrifice so they can "leave something to the kids," with the intention of doing them good. It's hard to accept that inheritances may actually do harm instead. Most of us have expectations about bequests that are far more optimistic. I used to hold several beliefs about inheritances. One was that leaving money to your children is a loving thing to do. Another was that parents should always leave their money to their children. A third was that anyone who received an inheritance would invest it wisely, using only the earnings to improve their lives. Lost Inheritances, a Wall Street Journal story published online March 7. According to this article, 70% of those who get an inheritance of any size spend it all in their lifetimes. For the 30% with something left to pass on, 70% of their kids also blow everything they get. That means by the end of the third generation, only one-tenth of the money originally passed down is left.
By Rick Kahler
While it's easy to understand how an inheritance of $10,000 may evaporate, it's difficult to understand that inheritances in the hundreds of millions vanish just as quickly. How is that possible? Is the average American just incompetent at managing money? According to Sullivan, a study done by the Williams Group found that poor investment decisions were not the culprit. About 60% of large inheritances disappeared because of a lack of trust and communication among family members. For another 25% of them, money dissolved because the parents failed to prepare the next generation to handle their impending inheritance. Poor investment advice and high fees were the cause in less than 15% of cases. If more high-net-worth parents knew that only 10% of their hard-earned estates would be around at the end of their grandchildren's lives, I wonder if they might do a few things differently. Kahler Financial Group in in Rapid City, S.D. AdviceIQ is a network of financial advisors that writes insightful articles for the public about investing and wealth management. All articles are edited by AdviceIQ's editor in chief, Larry Light. AdviceIQ certifies that all its advisors have no regulatory infractions. To subscribe to AdviceIQ's Rss feed for personal finance articles written by financial advisors and AdviceIQ editors,
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