I've never personally received an inheritance, but I've witnessed many people who have. In every inheritance scenario I hope the outcome will be different, but it's always the same. Someone dies, someone else gets money, and the receiver does dumb stuff with the money. Every. Time. I've written about inheritances before, but I still get pissy about them so I took to my Indy Star column to air my grievances.
But let's back up, where does an inheritance start? An inheritance starts way back when your Uncle or whoever was still alive. He/she lived a good financial life. He/she made smart decisions. He/she saved. He/she had enough left over at the end of their life to pass it along. All you did was be alive after they passed away. You didn't work for the money. You didn't scrimp and save. You just accepted money someone else worked hard for. This might annoy you, but it's the truth. This is the definition of what an inheritance is. What you do with the money is really what makes the difference.
"Once you inherit money, the inheritance immediately turns into a financial resource. If you happen to be good with financial resources, then the inheritance is simply more resources, and nothing else. Rarely does a resourceful person have his life changed by an inheritance, because to him, life isn't about resources, it's about resourcefulness. On the flip-side, if an un-resourceful person gets an inheritance, then the money can become an enabler. Every bad idea, which was previously held at bay by a lack of money, is now within reach. Anecdotally, inheritances are often blown using a herd of excuses and justifications. "Mom would have wanted it this way," is commonly the mantra. But no, no she wouldn't. Mom would never have made the decisions you're thinking about making, because if she did, you wouldn't have had this inheritance."(courtesy of the Indy Star)
It all comes down to spending money you didn't earn. It makes people do weird things. Having access to money instantly, without having worked for it, magnifies your money behavior.
"Researchers agree. As they have concluded 70% of transferred wealth evaporates by the end of the second generation. Meaning, only 30% of the money inherited by someone, gets passed onto the next generation. Sudden wealth syndrome could be the blame. Think how you feel when you reach into your winter coat and find $20 you forgot about. Now multiply that by thousands or tens of thousands. Found money, even when you found out you inherited it, is very hard to hold onto."(courtesy of the Indy Star)
There are two options to prevent 'sudden wealth syndrome' in the next generation, establishing a trust or giving all the money to charity. As you can imagine, neither are well received options. But that's okay. By donating the money or establishing a trust that pays out over time, you're helping your relatives make good decisions. And that's one great inheritance.