Have you ever dreamed that a wealthy relative died and left you a fortune? Nice fantasy, right?
It happened to David, an accountant who lives in Dayton, Ohio. He got a call from a lawyer in Cleveland. It seems that David’s late mother had a half sister named Lucy. David knew Lucy only vaguely; no one ever told him the family backstory, but bad blood flowed between Aunt Lucy and David’s mother.
Lucy had one son (David’s cousin) who dutifully set up a trust for the benefit of his mother. Unfortunately, her son never got around to changing the beneficiary in case he died before his mother.
Which he did.
Who gets the inheritance?
When Lucy died, she had no other children, grandchildren, or siblings, so next in line to inherit were David and his younger brother. They were stunned to find out they were entitled to a windfall of “a considerable amount of money,” the lawyer said.
Six figures. Hundreds of thousands of dollars.
Aunt Lucy must be rolling in her grave.
What to do with all that money?
I asked David what he planned to do with the money. New house? Car? Trip around the world?
No, David’s an accountant, and fortunately he’s too practical to blow his fortune. When he gets the money in a few months (assuming there’s no challenge by an even more distant relative), he plans to stash it away and wait a year to figure it out rather than spending it all on luxuries. He’ll probably put it towards college costs for his young kids. Quite reasonable.
Lesson: Update Your Beneficiary
Think of a relative who’s not exactly your favorite person. Now, imagine you worked hard and did quite well financially during your lifetime. You die and that person gets all your money and possessions. Can you see the look of glee on their face? They’re not going to turn it down, even if you disliked each other, right?
Lesson? Keep your will, trust, and other estate documents up to date. Name a contingent beneficiary for your life insurance policy and IRA and 401(k) accounts. Play out all the scenarios of what will happen if people don’t die in the “logical” order of oldest first.
Don’t inadvertently give yourself a reason to pirouette in your mausoleum.
Are your beneficiaries up to date?
What would you do if you inherited a fortune?
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