Over the next five to seven years as much as $1.3 trillion in wealth is expected to trickle away as people mismanage their inheritance. This article discusses statistics that show that about 35% of Americans will waste their inheritance. A groundbreaking study on cross-generational wealth transfers conducted by Ohio State University researcher Jay Zagorsky shows that even when very large bequests are at stake most if not all of the money inherited usually ends up vanishing. Setting up small trusts using a process known as a pooled trust approach can be a good way to make wealth last a long time. A special purpose trust can be used to make sure funds are allocated to pay for important things like a college education. Instead of permitting the heirs to cash out their inheritance in one lump sum a person might want to make sure to annuitize the payments.
See Scott Martin, Easy Come, Easy Go: Why 35% of Americans Squander Their Inheritance, Trust Advisor, November 18, 2015.
Special thanks to Jim Hillhouse for bringing this article to my attention.
