A caller to “The Ramsey Show” experienced a shocking twist when his mom showed up on his doorstep to tell him the two of them had just inherited a fortune — but the news also delivered a major curveball.
“A family friend who she’s known for a long time passed away,” the caller told co-hosts George Kamel and John Delony. “This individual left my mother and myself in his will, and according to the lawyer who’s handling the estate, it’s worth between $10 million and $14 million.”
That sounds like a good thing, but there was more to come. As the caller explained: “In the will, he’s designated me as his son. I’ve never met this man, never met him before in my life.”
Talk about a life-changing moment. Not only does the caller have some emotional issues to deal with, he also has to figure out what to do with his share of sudden wealth.
Understanding the details
Receiving a multimillion-dollar inheritance can be overwhelming to anyone, especially when it’s unexpected. The first key thing to do is to understand the details of what this means for your finances.
In this particular situation, the caller explained he wouldn’t just be handed the money.
“We won’t necessarily be able to collect the liquid cash,” he said. Instead, the money is being kept in a trust and will be doled out over time. “Me and my mom are splitting the dividends, the interest, and whatever income that trust brings in.”
The caller says the trustee, who was the deceased man’s lawyer, estimates the average income would be $500,000 a year.
Obviously, this is a complicated way of receiving an inheritance, so the first thing The Ramsey Show co-hosts recommended was talking to a lawyer.
Trusts are often used to pass down substantial wealth, as this method of leaving an inheritance gives the deceased person (the decedent) more control over what happens with the money. The decedent can name a trustee to manage the assets for the beneficiaries in accordance with the decedent’s instructions.
Heirs often have little control in these situations but do have the right to expect the trustee to act in their best interests. Trustees have a fiduciary duty to do so. But it can be hard to know if that’s actually happening.
Whether an inheritance is left in trust or not, it’s a good idea for heirs receiving a large sum to have their own legal advocate who looks out for their interests and who helps them understand their rights.
Build the right professional team
Under the current payment structure, while the caller won’t just be handed a big pot of cash, he’ll still be getting a lot of money from the trust each year. This will impact his tax situation, and The Ramsey Show co-hosts astutely recommended that he talk with a tax professional to try to limit the tax hit.
They also suggested talking to an insurance agent and getting an umbrella policy, which provides coverage above and beyond standard liability limits on car and home insurance policies. People with more assets can be more vulnerable because others may know they have money.
Beyond just limiting his potential liability, the caller will also need to decide what to do with the funds. Ideally, this should include taking steps to preserve and grow the large fortune he’s been given.
Investing and buying a home are likely steps to take, as the caller isn’t a homeowner. However, making responsible choices is key as someone who suddenly inherits millions risks the same fate as many lottery winners: ending up broke because they don’t know how to cope with their newfound riches.
The Ramsey co-hosts recommended the caller reach out to an investment adviser, and it may also be a good idea for them to talk with a financial planner who can help make the most of a $250,000 annual windfall.
Go slow in making lifestyle changes
Finally, Kamel and Delony recommended the caller take things slowly as he moves forward. Receiving such a large inheritance is life-changing even under normal circumstances. Acting too rashly could lead to regrettable choices.
In this case, the caller may need time to process and research so they can act based on reason rather than emotion.
He needs to come to terms with not only suddenly being rich but also a secret that was hidden from him for more than 30 years. There’s no shame in seeking a therapist to help guide one through a soul-searching journey. In the end, he may come out of this situation with a positive outlook.
