The dark side of financial windfalls

Stomachaches. Sleepless nights. Debilitating family problems. Wrecked friendships. Hurt feelings that seem forever beyond repair.

These are the symptoms experienced by people who come into monetary windfalls? They’ve got to be kidding, right?

Wrong. Financial experts and recipients of unexpected sums of money say it’s common for such newfound wealth to feel more like a burden than a blessing — especially if the windfall came as a result of a loved one's death.

“Many people think of an inheritance as a pleasant daydream, but there are strong emotional issues involved,” said Ann Perry, author of “The Wise Inheritor: A Guide to Managing, Investing, and Enjoying Your Inheritance.”

“The most common unexpected feeling is guilt: feeling guilty about getting the money, feeling guilty that somebody had to die for you to get it,” Perry said. “And people can become very hung up on whether they’re going to make a mistake with the money. What if I do something wrong that my parents (or other relatives) wouldn’t have approved of?”

People come into large windfalls of money in a variety of ways: insurance settlements, divorce settlements, retirement packages, even lottery wins. But an inheritance is the most common path to a dramatically changed set of financial circumstances.

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Inheritances in the $500,000 to $1 million range are not at all uncommon for many middle-class families, once real estate, retirement plans, stocks and life insurance policies are factored into the equation. And many people — including highly intelligent, financially literate people — are not equipped to handle that kind of money in one lump sum.

Some windfall recipients impulsively quit their jobs or leave their spouses even though they haven’t come into enough money to make them independently wealthy. Others spend the money far too quickly without planning adequately for the future — or for the taxes they don’t realize they owe.

Still others experience a paralyzing fear of doing something wrong with the money — and, as a consequence, they waste years doing nothing at all. And most experience a change in relationships with family members and others they have loved and counted on for years.

Serious family strains shocked LaKisha Cameron, 35, a California resident who inherited an unexpectedly large sum of money from the aunt who raised her. The aunt, who died suddenly last year, had always assured Cameron that she would inherit everything, and she named Cameron as the beneficiary on her life insurance policy, retirement plans and other key accounts.

But a family spat erupted over who would inherit the aunt’s house in Sacramento. Even though the aunt and niece had lived together for years as mother and daughter, Cameron technically was not her aunt’s closest kin. And because her aunt hadn’t gotten around to drawing up a will or a trust spelling out who should get the house, other close relatives came knocking.

In the end, Cameron prevailed and inherited the house. She gave two of her relatives $50,000 each to make them feel better about the outcome.

“In my heart, though, I feel like there’s permanent damage that’s been done,” Cameron said. “We had a really good relationship, I thought, before that. It surprised me to see how money could change that.”

Cameron also recalled feeling utterly overwhelmed and intimidated by her inheritance — a common reaction among many inheritors.

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