If you’ve ever wondered what happens to those who are unprepared to deal with suddenly being confronted with having a lot of money, you need to look no further than professional sports. According to a 2009 report, about 78 percent of NFL players go bankrupt within 2 years of leaving the game, while about 60 percent of NBA players are broke within 5 years of retirement.
This phenomena isn’t exclusive to professional athletes. People who suddenly inherit wealth often succumb to ‘sudden wealth syndrome,’ a dysfunctional relationship some people have with money that leaves them worse off after their inheritance than they were before. For people creating an estate plan, this is a significant concern you’ll need to consider.
Sudden wealth and your relationships. Inheriting a lot of money often changes the relationships people have with others. Friends, co-workers, strangers and even other family members can suddenly become interested in the inheritor for all the wrong reasons. This can lead to feelings of mistrust and fear, and with few sympathetic ears to turn to.
Sloth and purpose. Much of happiness seems to come from the reward we experience after we achieve something. When we are given something, the happiness we feel isn’t as deep or as long-lasting. The phenomena of the depressed trust-fund inheritor is a perfect example of this phenomena.
Conditional gifts. Some people choose to leave gifts to their children based on certain conditions or age requirements. Some, for example, require the children to receive an education before receiving any money. Others release inheritances at intervals, with, for example, a quarter of the amount at 30, a quarter at 35, and so on.
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