Q&A: Inheritance vs Reality

Dear Liz: I have really bad credit. I always have because I have never really had any money. So now I am inheriting a lot of property and some cash. Most of the property is rental properties that bring in income. There are no mortgages on them. I may want to sell one or two of them and buy a four- or five-unit apartment building so I can live in one and rent the others out. How do I do that? Unfortunately, it isn’t happening as quickly as it should since one of my siblings thinks it is all hers. So I have to go through litigation first.

Answer: Let’s start with some reality checks.

The kind of litigation you’re talking about can get expensive fast and eat into the estate’s assets. If your sister happens to be the executor, she may be able to have the estate pay for her defense. You’ll need to come up with the money to hire your own attorney to advise you, but often in these cases a settlement makes a lot more sense than a family war.

The next reality check has to do with your bad credit. Yes, it’s harder to pay your bills on a low income, but people do it. In fact, income is not even a factor in credit scoring formulas, since how much money you make doesn’t predict whether you’ll pay your debts. If you have bad credit, it’s because you borrowed money that you didn’t pay back on time, not because you “never really had any money.”

What will change if you get your hands on a substantial amount of money is that your creditors will renew their efforts to get paid. You’ll probably need some more legal advice to deal with those efforts and to avoid getting sued.

What probably won’t change, without some effort, is your poor money management skills. If you don’t improve, you’ll probably blow right through your inheritance. So you should add to your list of advisors a fee-only planner who can help you with budgeting, rebuilding your credit, investing and retirement planning. Seeking good advice and following it are the key to making money last. You can get referrals to fee-only planners from the Garrett Planning Network, http://www.garrettplanningnetwork.com. Another option is the National Assn. of Personal Financial Advisors at http://www.napfa.org.


  1. CharlieS says

    I’d invest in setting up some kind of simple low fee UnRevocable Trust, so you have the money given to you in pieces each month or quarter. This will keep you from “running thru” the cash and possible get you set on a budget you can live on. It may also keep any further lawsuits at bay and keep any Creditors away from you since it can be set up so you really don’t have control of the money being distributed to you until you have it in your personal account. It will put the Assets out of reach of any vultures trying to take them.

  2. Sheri fierro says

    Funny that a response came today. We settled Monday.
    My brother and I got the majority of the properties. It all goes in a trust. We got no cash, but a lot of rental income. We know how to property manage. Figure it would be good to hire first thing an accountant. What’s important to know about hiring one?

    • Liz Weston says

      Membership in the AICPA is a good start, and I’d look for someone who specializes in real estate. Other landlords may be able to give you referrals. Glad this worked out for you.