The 5 Stages of Managing a New Inheritance

Stacy Allred, Head of Family Engagement and Governance, J.P. Morgan Wealth Management
July 25, 2023

  • Inheriting significant financial wealth can be overwhelming at first, but it doesn’t have to be.
  • Most inheritors go through five stages on their journey toward learning to use financial wealth to benefit themselves and others.
  • It’s imperative to seek the appropriate support at each stage, from coaching or counseling to consulting with a trusted financial advisor.

Discovering your parents or grandparents have willed you a life-changing amount of money can be a wonderful surprise but also surprisingly unsettling. While many imagine a financial inheritance to be a lucky turn of fate, the experience can also be overwhelming if it’s unexpected and you haven’t been able to prepare.

For those who feel overwhelmed, it doesn’t need to last forever. By methodically taking steps and seeking support, you can become more empowered to use financial wealth to enhance your own life and benefit causes you care about.

Engage early and often

People who have reason to believe their parents or others are likely gifting them significant assets — but haven’t discussed it — probably feel uncertain about what may be expected of them down the road. We encourage family members to engage in meaningful conversation sooner rather than later.

Asking directly about financial wealth can create anxiety on both sides. Starting with a qualitative dialogue centered around values about earning, saving, spending and sharing money can be an effective onramp.

Consider this scenario. When Emma was in her early 30s, she considered a career change and began applying for graduate programs. She knew her parents had established trusts for her benefit but had little additional information. Approaching her parents, she asked if they could set aside time over a weekend to talk about what mattered most to them. As the dialogue with Emma and her parents unfolded, she shared her desire to make thoughtful, informed decisions. Sensing she was ready, her parents became more willing to share information through a subsequent series of thoughtful conversations.

People giving the gift will likely welcome hearing that you’re interested in preparing yourself for a financially responsible future.     

Navigating the 5 stages

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Getting Ready

As you begin to receive gifts or become aware of a future inheritance, emotions can range from feeling excitement to jittery. It’s helpful to pause, label each feeling and, through a lens of curiosity, identify the needs behind the feelings. Marc Brackett, a founding director for the Yale Center for Emotional Intelligence, encourages us to be emotion scientists, individuals who actively practice emotional reflection, empathy and curiosity.     

Roberto received annual gifts of around $30,000 per year, with little context or communication.  Not wanting to disappoint his parents by using the gift in a way that didn’t live up to their expectations, he put the funds in the bank and ignored it.   

What to do: However the response materializes, know that it’s a normal reaction to have a variety of feelings in these situations. Give yourself time to resolve emotions that surface from the gift or inheritance. It may be a strong desire to be responsible yet not knowing exactly what that looks like, unease over receiving gifted money, or it may bring existing pain in family dynamics to the forefront. Other times, the desire to create one’s path independent of family money is so strong that a pause is needed to rein in the initial emotional response. Being an effective giver or receiver is a skill and building skills requires doing, as shared in The Cycle of the Gift:  Family, Wealth and Wisdom by James E. Hughes Jr., Susan E. Massenzio and Keith Whitaker.

How to create support: Tap into a life coach, a wise family member, a therapist or another person who can provide unbiased guidance. Consider making room for growth or a healing modality, e.g., journaling or making time for introspection.

Stage 1: Realization

This is a period of clarity when you realize you’re ready to become more active in your own — or your family’s — financial landscape.

What to do: If your parents or other benefactors are alive, consider this question: What would be a reasonable conversation to simply get the process started? Often parents either don’t know where to start or don’t want visibility into family assets to undermine the recipient’s motivation, so they hold off on initiating gift and inheritance conversations. Starting with a conversation about values and purpose (i.e., the why) can establish the groundwork for a follow-up dialogue about their plans and intentions.

Be sure the benefactor understands why you’re asking; reinforcing that you respect their decisions, and this bit of relevant information can help you make wiser career, lifestyle or life milestone decisions.

How to create support: Your financial advisor can guide you when preparing for this conversation, helping you proceed in ways that are more likely to elicit productive communication and understanding.

Stage 2: Engagement

At this stage, you feel more comfortable showing up to learn and contribute.

What to do: Being active in the engagement stage is a core practice for success. You may start by designing a learning journey, attending family meetings, or observing board meetings at your family’s foundation or business. Find opportunities to use your skills by helping with a shared family vacation home or arranging site visits to organizations your family is considering giving to. It’s OK to not know how everything works right away — by working with your family, their attorneys and financial advisors, you become more emboldened to ask questions and learn.

How to create support: Connect with financial advisors, accountants, attorneys, consultants and peer learning groups and do your own reading and research.

Stage 3: Holistic planning

This stage involves both qualitative and quantitative planning. You start to see how financial wealth aligns to your personal journey and can begin to engage with financial wealth in ways that honor who you are and where you’ve come from.

What to do: Spend time engaging in exercises to explore, identify and document your own values. Use them to create operating principles that will simplify decision-making.

How to create support: Your advisors can facilitate these exercises and help translate values and operating principles into practical structures such as budgets and policies.

Stage 4: Evolution

Change is inevitable, and your financial needs and goals will evolve over time.

What to do: Continue to engage closely with your trusted advisors. Once you have a plan in place, regularly perform a “relevance review” to see how it relates to who you currently are.

For example, as you reach life milestones — having children, getting married, initiating a divorce or selling a business — it’s likely time to update your life and financial plans. These events may lead you to devote significantly more resources to philanthropy or set aside more for your children. Continuing to update your plan is key to managing your own legacy.

How to create support: Create a checklist and consider building in the habit of reviewing it with trusted advisors annually.

Moving forward, making progress

One day, you may be in a similar position as your own parents once were: considering how to engage your family in your gift and estate plans. Giving yourself time to integrate change and building the support you need to manage your resources thoughtfully can set you up to leave your own lasting legacy. Contact your financial advisor to help you map out a plan toward greater financial empowerment.

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