Receiving an inheritance can be meaningful and transformative, but it can also create challenges if not handled thoughtfully. Without a clear plan, an inheritor may struggle to manage assets, face creditor or tax issues, or lack the financial experience needed to preserve and grow their inheritance. A well-designed estate plan helps anticipate and reduce these risks by providing structure, guidance, and protection. If you have received—or expect—an inheritance, update or create an estate plan reflecting new circumstances and goals.
An Inheritance Can Shift Your Financial Picture
An inheritance may significantly change your financial picture, potentially shifting long-term tax, financial, and estate planning goals. If you inherit rental property, business interests, or complex investments, your plan may not address their management or distribution. A sudden wealth increase could raise your taxable estate above the federal exemption, potentially increasing estate taxes owed. Additionally, an inheritance could unintentionally create unequal distributions if your estate plan does not account for it.
Receiving an inheritance, especially a windfall inheritance, is a great reason to update your estate plan. You should review who should benefit from your estate, not to mention how should these people receive your largess. Your existing plan may already provide for children or grandchildren, but confirm distributions still align with your wishes. With increased wealth, you may want to expand beneficiaries through charitable gifts or trusts for loved ones. Thoughtful estate planning can structure distributions for inexperienced beneficiaries and protect against creditors, financial missteps, or divorce.
Preserving Your Family’s Wealth
You may have heard claims that most families lose their wealth within a few generations. Some studies estimate that 70 percent lose wealth by the second generation, and 90 percent by the third.[1] However, recent research suggests the picture is more complex and outcomes vary widely. Wealth can persist across generations, especially at the top, depending on communication, planning, and decision-making. Preserving family wealth long term requires proactive planning and open conversations. Families often avoid inheritance discussions because money can be a taboo, emotional topic. Older generations may fear younger ones become entitled if informed too early. They may also worry private financial information could be shared improperly.
Conversations about inheritance do not need to start with dollar figures. They can begin by focusing on family history (the hard work of ancestors to build the wealth enjoyed by you and your family), along with your values and desired legacy. Working with trusted professionals can help families develop shared goals and proactive plans. This collaboration fosters intergenerational trust, understanding, and fairness. It can mean the difference between lost wealth and an enduring family legacy. Comprehensive estate planning provides a foundation for proper asset management and preservation.
Seek Professional Advice
An inheritance can be quickly frittered away, but proper planning can help mitigate this risk. If you have received an inheritance—or expect to receive one in the future—seek out financial and legal advice. Estate plans should evolve as your life does, so revising your plan after receiving an inheritance can help to ensure that your wishes, tax strategy, and family goals remain aligned. Contact us to explore your options for preserving your family’s legacy. Nielsen Law PLLC Provides family-focused estate and business planning to individuals and families in Austin, Round Rock, Cedar Park, and the Central Texas area. For more information, and to learn about our firm, please contact us to learn how.
[1] Wade Wallace, CFA, CFP®, RICP®, The Biggest Threats to Multi-Generational Family Wealth, Regency Inv. Advisors (Aug. 1, 2025), https://regencyinvests.com/the-biggest-threats-to-multi-generational-family-wealth.
