Avoiding the Pitfalls of a Sudden Wealth

If you are in the position where you are able to leave your children or family a substantial estate, there is one little element you need to consider closely. The phenomenon of “sudden wealth syndrome” is not often discussed, but it is significant. Consider, for example, that over 70% of NFL players go bankrupt within a few years of retirement regardless of the amount of money they earned.

Though these players earned their money because of their professions, a similar phenomenon exists in situations where children inherit a large amount of wealth. These children are often not prepared to deal with the changes that come with such an inheritance and can develop feelings of guilt, isolation, depression and loss of purpose.

Compounding these effects are the general societal attitudes towards someone who becomes wealthy. In general, many, if not most people, do not have much sympathy for those whom they believe are in much better financial situations than they are. This can make it difficult for the newly wealthy to find someone in whom they can confide, as well as make it difficult for them to trust others with managing their money.

As you develop your estate plan it’s important to consider this phenomenon as it is exactly contrary to your wishes to leave your family happy. Consider limiting the amount of inheritance you leave behind, providing your children with enough to live happily but not so much that all of their desires can be met. You should also consider a professional, reliable advisor who can give your heirs financial advice and support.