Fallout from a young man's windfall
Updated: Dec 20, 2019
Most of us hope to receive a monetary windfall; the circumstances surrounding such a windfall may have many complications. A windfall at any age is a blessing that could make life a little easier. That same windfall could also be plagued with tragedy. If you are lucky enough to come into a little extra cash, take a breath. There is no need to feel compelled to spend money today that you don't have in your budget. Many of us might feel the urge to purchase several wish list items just because we can, but you could be setting yourself up for a tragedy. I would suggest giving the windfall a budget of its own. Limit yourself to one "nice to have" per month or at least every couple of weeks. Depending upon the neighborhood you live in, you could draw a great deal of attention to yourself if you start getting many deliveries outside of your normal behavior. While that risk is not the intention of this post, it is a risk you might consider.
This post is about what often happens to younger people who are often still struggling with all the new responsibilities of adulthood. While some of us learn to appreciate the value of a dollar early in life, that financial awareness may never come to many. The story that follows is about a young man who receives a significant financial windfall and proceeds for a time with reckless abandoned until his end.
During my most recent experience administering the probate for an elder, I was told a story by the bank manager that was handling my particular situation. So there is a young man in his late twenties whose grandfather had recently died. The young man found himself in a new financial position after the settling of his grandfather's affairs.
With his newfound money, he decided to splurge on several new toys to entertain himself. One of those toys happened to be a brand new four-wheel ATV. Within just a few months of acquiring this new toy, he managed to have an "accident" which resulted in his death. At no time after receiving this new wealth did the young man put any end-of-life documents into place. Poor contingency planning would not be an uncommon situation for someone in their twenties. Few people at that age have ever actually had a conversation regarding death, let alone considering the financial implications.
A short time after his death, two women appear before the bank manager to discuss receiving the money which the man had in the bank at the time he died. One was his sister, and the other was his ex-wife. The conversation started amiable enough; however, it quickly escalated into a heated exchange of words between the two women, or maybe I should call them sailors. The bank manager was all too familiar with just such an occurrence and let it go for a minute or two. After a short time, the exchange escalated further into the beginning of physical altercation. At this time, the bank manager was able to get the attention of the two women and was forced to ask them to leave the bank. So the two women, both unprepared for the situation leave the bank empty-handed.
The misconception here is that many of you may think that the young man needed a will to determine the distribution of any money that he had at the bank. Not true. This situation is one that the banks themselves should be trying to avoid by encouraging anyone with more than a few thousand on deposit to make a "Transfer-on-Death (TOD)" designation for the account. Banks aren't in the habit of suggesting this, given that they love this scenario as they avoid having to collect a bunch of paper to execute the payout. You see, TOD also known as "Pay-on-Death (POD)" represents a contract. That contract is one you made while you were alive, and therefore, it takes precedence over any declarations you make in a will.
Furthermore, TOD declarations are forms that are provided for FREE by your financial institution. Why worry about spending the money to update a will regularly? What if the person you were to give money to was suffering through some hardship, other than your death? Why force them to struggle with the local authority during a probate period that could last months or even years?
We all know about declaring beneficiaries for insurance policies or Individual Retirement Accounts (IRAs). TOD works similarly and is paid immediately upon proof of death. Did I forget to mention that this type of contingency planning is FREE? Therefore, you should update the information as often as life changes warrant? Life events that change relationships in your life are the number one reason to reconsider the status of your assets. Events such as marriage, divorce, births, deaths, splitting up with a partner (business or personal) should all trigger a reassessment. You don't need to be "rich" to make these plans, just a few thousand warrant such a declaration. Did I mention that it is FREE? So what are you waiting for? Get a copy of Death and Taxes: Fallout from the Baby Boom by Bridges Washington to get more tips regarding end-of-life contingency planning for both young and old.
Please let me know if this post gave you something to consider in the comments below. Good or bad let me know what you think, this is about starting a dialogue. If this post made you think about your own relationships or those of someone you know like and share it with them. If you are interested in other topics check out some of my previous posts and subscribe to get email notifications of new posts.