It is the rare person in California or anywhere who is glad to lose a parent or grandparent. However, a piece of good news connected with the loss of a loved one, is a potential inheritance.
A recent study titled “Do People Save or Spend Their Inheritances? Understanding What Happens to Inherited Wealth,” looks at estate taxes, IRAs, spending and saving and other issues related to inheritance.
According to the study, about half of inherited wealth is simply spent. People might buy new items, or pay down debts, or a combination of those two activities. This is good news for the retail industry and businesses such as car sales, but it is bad news for our national habit of insufficient savings. In recent decades we have gone from a nation of savers to a nation of spenders.
The author of the study proposes a few changes to our tax laws which could encourage people to save or invest more of their inheritance.
The study was conducted at Ohio State University’s Center for Human Resource Research. The study’s author maintains that not having enough in savings can be a drain on our overall economy if people go into foreclosure or default on loans. Having more in savings could prevent those types of outcomes.
Whether you are the person who will be giving or receiving the inheritance, it makes sense to work with professionals who can take your entire financial picture and estate plan into account.
Source: FOX Business, “Inheritance: Should You Invest or Spend?” Mitch Strohm, June 4, 2012.
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