What to Do With an Inheritance

Research shows that more adult children may find themselves unexpectedly inheriting wealth over the next two decades. The silent generation, or people born roughly between 1928 and 1945, and its successors, the baby boomers, are expected to transfer significant wealth to members of Generation X and millennials over the next 20 years, according to the Wealth Report, a publication from Knight Frank, a London global property consultant.

Federal Reserve figures show that half of all inheritances are less than $50,000, but with boomers reaching 80 and beyond, members of their family may begin to inherit more wealth. More than half of millennials who are anticipating an inheritance from their parents or another relative expect to gain at least $350,000, according to a survey by Alliant Credit Union in Chicago. (Whether they actually receive that much is another question.)

An inheritance can feel like a gift, but it can also create stress, particularly for younger heirs. Many millennials lack the financial education to manage a large inheritance, said Katherine Fox, founder and adviser at Sunnybranch Wealth in Portland, Ore., and they typically don’t have a financial adviser to help them.

“I see a wide variety of preparedness levels, but an overwhelming majority are totally unprepared to inherit and, when money actually comes, don’t know what to do,” said Ms. Fox, who works exclusively with inheritors between the ages of 25 and 55. In these cases, millennial heirs are essentially trading one set of stressors — not being able to save money, not being able to buy a home and not preparing for retirement — for a new set of stressors related to managing the money.

“I’ve seen people become paralyzed by the money they inherited and burden of it because they want to make sure they steward it and grow it,” Ms. Fox said. Inheriting significant wealth at a relatively young age can give someone an incredible advantage that few people have — but for many inheritors, there is a fear of failure and losing something they didn’t earn.