Three things women should know about inheritance money

Women are increasingly taking control of family finances. Research from RBC Wealth Management found that 98 percent of women are joint or sole decision-makers for family banking, while 84 percent take joint or full responsibility for family investments.

That trend is only going to strengthen: over the next several decades, an estimated $40 trillion in wealth is expected to be passed down to the next generation in the U.S.

That means many women will confront the question of how to manage—and maximize—an inheritance.

Here are four obstacles they may run into:

• Longer life expectancy: Women on average live more than five years longer than men, according to the U.S. Centers for Disease Control, and must make their wealth last longer after retirement.
• Lack of planning: Women concerned about stretching out their funds can be reluctant to develop a wealth transfer strategy for themselves or plan for charitable giving after receiving an inheritance.
• Need for guidance: Just 29 percent of women in the RBC study who were set to inherit wealth said they were given advice on how to use those assets. More than a third—36 percent—said they had no guidance at all.
• Lack of confidence: RBC’s research shows that a slim majority—just 51 percent—of women under 35 rated themselves as confident about their wealth knowledge. The number suggests that a significant number of women second-guess their ability to effectively manage their inheritance.

Make a plan

For women who may be daunted by the question of what to do with an inheritance, planning is key—and the planning process should begin now.

Angie O’Leary, head of Wealth Planning at RBC Wealth Management–U.S., recommends couples put together a “survivor’s plan” well before it is needed, particularly if the woman is expected to outlive her spouse by several years.

“A lot of the wealth that transfers to a surviving spouse goes to the woman,” O’Leary says. “What’s important is that couples have thought through that and the woman has some sort of preparation for that scenario.”

O’Leary says the key elements of a survivor’s plan include making sure the surviving spouse can handle smaller financial tasks, such as accessing online accounts, as well as bigger picture items like paying taxes, determining when to claim Social Security benefits and managing inherited wealth.

Being proactive about getting a survivor’s plan in place ensures that an inheritance is managed according to the woman’s financial needs and objectives.

Get educated

Women who expect to get an inheritance need to ask the right questions.

“Many women don’t know how much their inheritance is worth, timing of distributions or whether there are any restrictions on how their money can be used,” O’Leary says.

Discussing details like those before a wealth transfer takes place between spouses can keep women from feeling like they are in the dark on their own finances. Education can also bolster confidence as women decide what to do with an inheritance.

“If a woman has a plan that she understands, then she has the freedom to give while she’s alive, or plan and prepare the next generation to receive some of that wealth,” O’Leary says. “When women are not confident, they can become almost paralyzed in their decision-making.”

Understanding where an inheritance is coming from, how much money is involved and where it fits within an overall wealth plan can also help eliminate negative emotions—such as worrying that they will outlive their funds.

“The fear women have of not having enough is because they haven’t been educated,” O’Leary says.

Find the right support

Asking a financial advisor to evaluate an expected inheritance in the context of an overall wealth plan can help women determine how best to use it, while also considering things like charitable giving or the eventual transfer of wealth to heirs.

“It’s important for couples to make sure they’ve talked through their survivor’s plan with a financial advisor so they understand what that looks like, what’s been put in place and what that means for each of them going forward,” O’Leary says. The challenge for women lies in finding an advisor they can trust and whose personality meshes with their own.

“If you don’t trust the person or you don’t connect, try someone else,” she adds. “You will want to be comfortable with sitting down with your advisor, assessing your plan and being sure to update it regularly.”

Transparency is also important: Women want to understand what services an advisor can offer and how much they charge. This conversation should not be an afterthought.

The last thing women can afford to do is take a hands-off approach. When it comes to an inheritance, “preparation is everything,” O’Leary says.