When a loved one dies, you may receive an inheritance. Your departed relative or friend left cash or other valuable items as part of a loving gesture intended to make your life easier.
But an inheritance also can bring complications, said Derek Tharp, a wealth manager with Mote Wealth Management in Cedar Rapids, IA. Too often, grief-stricken inheritors become emotionally attached to the assets bequeathed to them.
“Saying goodbye to a loved one is an extremely difficult situation,” Tharp said.
Inheritors may try to cope with a loved one’s death by attaching sentimental value to the assets and holding onto them, Tharp said. That’s OK if the items are small and don’t cause a financial burden.
But in some cases, strong emotions can prevent you from making clear-headed choices. For example, keeping a loved one’s home instead of selling it may be a poor financial decision, particularly if the property remains vacant, Tharp said.
On the opposite end of the spectrum, some people who inherit an estate seem bent on liquidating it as soon as possible.
“Receiving any type of windfall can make wasteful spending very easy,” Tharp said.
People who inherit money often spend it with less forethought than they would if they earned the cash themselves, he said.
Grief also can lead to foolish spending, Tharp said. “They may be using spending as a coping mechanism and not focusing on their long-term best interest,” he said.
Tharp urges people who inherit an estate to take a step back. “They should take time to grieve and cope with the loss,” Tharp said.
Once the wounds have healed a bit, the inheritor is more likely to be thinking clearly and less emotionally.
“Instead of making impulsive financial decisions, individuals can really weigh their options and choose the route that is best for them,” he said.
The Role of Self-Storage
Some people receive physical property–such as collectibles, china or furniture–as part of their inheritance.
If you inherit physical items, keeping them in self-storage may make sense. Tom Maxfield, national operations director at Dallas-based Move It Storage Management, said the value of inherited items often goes beyond mere dollars and cents.
“These are people who are storing their memories,” he said.
Maxfield said he experienced such emotions firsthand when his mother died. He and his brother had no need for many of their mother’s items, but they put them in storage anyway.
“It was an emotional time,” he said. “We weren’t ready to deal with those memories.”
Self-storage offers a temporary home for such possessions until you’re ready to deal with them.
“Based on our experience, it takes between six months and nine months to go through that grieving process,” Maxfield said.
Maxfield said his company often recommends people in such situations rent a storage space with some extra room—typically about 25 square feet—to give estate beneficiaries room to maneuver inside the storage unit. “It gives you a chance to stack everything on one side and create an aisle,” he said.
Some inherited items shouldn’t be kept in self-storage, Maxfield said. “You don’t want anything organic, flammable or toxic,” he said.
He also urges caution when packing fragile items and important documents. And items such as gold coins probably should be kept in a bank safe-deposit box or a similarly secure location.
“It’s not to say that you can’t do it, but I would caution you about storing money and jewelry,” Maxfield said.
Tharp said he understands the emotional importance of items with sentimental value and said it’s fine to store them. But other items often should be sold so the inheritor can invest the proceeds in things like stocks and bonds, he said.
“For many physical assets, the expected return won’t be much higher than inflation,” Tharp said.
People who are on the fence about getting rid of certain items can use self-storage to keep them, at least for the time being. But such a move comes with a price, he said.
“The cost and effort of storing and maintaining physical assets is an extra burden on an investor,” Tharp said.
Top photo courtesy of relicsantiquemall.com