Receiving a large inheritance can be a life-changing event. But without the proper planning and guidance, it can easily turn into a cautionary tale, as many find themselves unprepared to manage a sudden windfall. This is exactly what happened to Sarah Faith Jacobsen, a woman whose story highlights the importance of financial literacy and preparation when receiving an inheritance. Her journey serves as a reminder of why estate planning is crucial—not just for protecting your assets, but for ensuring that your heirs use those assets wisely.
In 2021, Jacobsen received a $250,000 inheritance from her grandmother, consisting of $175,000 from a life insurance policy and $75,000 from the estate. It was more money than she had ever seen at once, and initially, it seemed like a relief. However, without a clear plan or financial literacy, the newfound wealth quickly slipped through her fingers. She indulged in cross-country road trips, expensive dinners, and luxury purchases, only to find herself back to square one—financially uncertain and in need of a stable income.
Jacobsen’s story is not unique. Many people who receive sudden inheritances or windfalls struggle with managing their money. According to studies, a substantial amount of wealth is expected to change hands over the next two decades—around $84 trillion in assets. For many, this could be a much-needed financial boost, but without the right planning, it can become a missed opportunity, or worse, a source of financial stress.
If you or a loved one is expecting to receive an inheritance, it’s crucial to have a plan in place. Here are some key steps to consider to avoid the pitfalls that often come with a windfall:
1. Understand Your Relationship with Money: As Jacobsen learned the hard way, financial habits and beliefs developed over a lifetime can influence how we manage sudden wealth. Addressing any anxieties or misconceptions about money is an important first step to making thoughtful decisions.
2. Seek Professional Guidance: Working with a financial advisor can make all the difference. An advisor can help create a plan tailored to your needs and goals—whether that means paying off debt, investing in retirement, or purchasing a home. While Jacobsen initially “ghosted” her advisor, it was only when she returned for guidance that she began to turn her financial situation around.
3. Focus on Long-Term Goals: Many inheritances get spent quickly because recipients don’t define their priorities. Identify how you want to use the inheritance to better your life, whether through investments, building a nest egg, or funding future goals. A solid plan helps transform an inheritance from a short-term luxury to a lasting benefit.
4. Consider the Next Generation: If you’re the one leaving a legacy, it’s wise to ensure your beneficiaries have the resources and knowledge to manage their inheritance. Working with an estate planning attorney can help establish structures like trusts that provide guidance and protection, ensuring that your hard-earned wealth benefits your loved ones in the long run.
At Stouffer Legal, we make it easy to put these safeguards in place. Through comprehensive estate planning, we help our clients establish clear paths for their wealth, reducing the risk of financial mismanagement and securing a better future for their heirs.
Sarah Jacobsen’s story is a powerful reminder that an inheritance is only as valuable as the plan behind it. By taking the time to address your relationship with money and seeking out professional advice, you can ensure that the wealth you pass on—or receive—doesn’t end up funding a fleeting lifestyle. Instead, it can become a stepping stone to a more secure future for yourself and your loved ones.
If you’re looking to create an estate plan that prioritizes long-term benefits for your family, contact Stouffer Legal today. We’re here to help you navigate the complexities of estate planning with a focus on education, support, and peace of mind.
