Growing up, we used to play a slightly morbid game in my home. For lack of a proper name, I will call it the “Inheritance Allocation Game.” If I said something that perturbed my father I’d be properly reprimanded by hearing just how much of my inheritance I’d lost. It would go something like this:
Setting: Dinner table with casual conversation being had.
Me: “I think I want to get a tattoo.”
Father: “If you get a tattoo, your sister will get 100 percent.”
Setting: Watching the movie Friday Night Lights.
Sister: “Oh, I get this. Football is kind of like rugby.”
Father: “Okay, you just lost 20 percent. Also, we have failed you as American parents.”
Even though we played this game with some regularity, and mostly in jest except for that tattoo example, I never really thought about any sort of inheritance — until recently. My parents, like any proactive and financially savvy grownups, recently settled their affairs to prepare for their twilight years (even though they’re likely many decades away). My younger sister and I received a letter explaining the chain of command and subsequent consequences in the instances of: my father’s passing, mother’s passing or – Lord forbid – both simultaneously.
There was no exchange of information about actual numbers, but merely how to contact their legal representation who holds the will and knows how to find various investments and bank accounts. I find it none of my business if there will be a certain amount of money passed down after my parents leave this earth. Mostly because it is just that: their money. They can do exactly with it as they see fit.
There is another important factor at play for my desire to stay in the dark about any possible financial windfall: you cannot account for what could happen in the future.
What happens to those poor souls who fall prey to the Bernie Madoffs (or Jordan Belforts) of the world, or pour a majority of their portfolio into one investment which tanks close to retirement, or suffer an unforeseen medical emergency? Their money vanishes.
It seems unwise to live life under the assumption that a certain allocation of money is set to come your way. How easy it would be to justify larger purchases and incur debt if you knew one day a large sum would be put in your bank account.
According to a recent survey from HSBC, the average inheritance in America is approximately $177,000. Don’t get too excited — a lot of one-percenters are seriously skewing that average because only 56% of Americans plan to leave money to their children. I also assume that number is before Uncle Sam gets to claim his share.
That means nearly HALF of Americans will not be seeing an influx of cash from the people who gave them life.
It may sound morbid to discuss, but planning for what happens to your assets after death is an important part of your financial life and plan.
But I digress — slightly — the original point at hand was whether or not we are owed an inheritance from our beloved parents (or other relatives).
The short answer: no.
The long answer: mostly no.
The caveat being if you have incurred significant costs while taking care of a loved one, then I understand the passing down of money to help cover the debt. But even that argument can be weak at best because your parents certainly shouldered a financial burden by clothing, sheltering, feeding and quite possibly educating you.
It is also important to have a conversation with your parents about their expectations of you in their golden years. Some cultures dictate the social norms of taking in your parents and caring for them as they did for you. So perhaps you already know they’ll be moving in with you later in life. However, if your parents haven’t taken out long-term care insurance, don’t have assets to cover them in retirement or any savings to speak of, then you should know if you’ll be called upon to support them.
The pennies dear old Mom and Dad managed to pinch, invest and save up while supporting your needy behind, is what should be carrying them through retirement or possible enabling them to retire early.
If Ma and Pa want to spend time traveling around the world, or living in a luxury retirement community, or not doing anything lavish but simply living off the money they’ve accrued; then it’s their prerogative. A shared bloodline does not entitle you to their hard-earned assets.
Do you expect to receive an inheritance? Is it something you’d discuss with your parents?
Another interesting take on inheritances can be found over at Financial Samurai. Sam has some other interesting stats and perspectives.
[Image taken from Flickr]
My parents wrote their will about two years ago. It’s morbid but it also provides a lo of peace-of-mind. Everything is taken care of and planned out. I actually hope that my parents burn through most of their wealth. they’ve worked so hard I want them to {hopefully} retire and be able to really enjoy life.
I’ve told my parents to loosen the purse strings soon. Like you said, they deserve it!
I think you’re correct. It’s better to assume you’ll get nothing and, if you do, great. Planning/expecting isn’t a good thing. My parents always talk about how they’re trying to leave us something. We always tell them to go have a good time golfing and traveling. They won’t. Regardless, none of the kids plan to receive an inheritance. If we do, we’ll consider it a surprise and take it from there.
A healthy mentality to have! I hope they do start to enjoy their accumulated wealth.
We had a similar game in our house. It was always just morbid banter, saying how my father was worth more dead than alive, especially if he went accidentally. He always played along with saying myself or my brother would be cut out.
I don’t expect an inheritance, in terms of “I am owed this”, but I do know there will be money left over even if they live until 95 each. That being said, I am not banking on anything in my retirement calculations because I hope they’re still around when I retire (My Dad just retired two years ago, and his mother is still kicking – same with my Mom’s parents).
Sometimes it’s best to lead into such conversations with a little laughter. At least it gets you talking!
I absolutely do not think anyone should EXPECT an inheritance, and I also do not believe parents should EXPECT their children to take care of them in old age. That sounds bitchy, but here’s what I mean.
It is a person’s job to save up enough to take care of themselves in old age. Having children with the expectation they will in turn take you in because you saved nothing is wrong. Parents take care of kids, and those kids take care of their own kids (if they choose to have them).
I would never expect a dime from any of my family members (nor would I want to think about it, because I’d rather they just stay alive, obviously). But I also hope I’m granted that same courtesy and no one expects to move in with me in old age unless I offer that to them. Depending on the person, it can truly wreak havoc on your finances, your family dynamic, and you sanity.
And keeping with this, I would NEVER expect my kids to take care of me in old age.
I don’t think parents should expect it unless it was previously discussed and agreed upon. It absolutely has the ability to ruin relationships and wreck financial situations, especially if there are big medical bills or the loved one is just a spender.
My parents are retiring this year – awesome for them! They have been incredibly frugal and great with money their entire lives. They have recently starting talking about inheritance with me in the same way as your parents have with you – mainly logistics.
I have always been frugal as well, but the amazing thing about creating a fully-formed plan for myself is that I tell them, without any remorse, that they should spend, enjoy, and give away their money.
I honestly don’t need it.
That said, they will probably want to give me an inheritance anyway – mainly with the hopes that it will go to a grandchild’s college fund some day (or a great grandchild’s hopefully, since I am expecting modern medicine to keep them alive for quite a few more years). But I will just probably end up passing whatever money that amounts to down to my potential offspring as well.
It is a great feeling to say, just spend it because I’m a-okay! I’ve always maintained that I don’t need so they shouldn’t feel obligated to pass anything on. Granted, if they do then I’ll of course take it — but don’t expect it either. Perhaps I would also save it for any future children.
I would be delighted if our parents spent all their money before their deaths – and rather think it could happen, with rising medical costs. But I am thinking that we might receive an inheritance from my husband’s parents and will have to support mine somewhat. I hope that point is several decades away, still! We have a lot of financial challenges we’ll have to get through on our own and I’m not anticipating (nor do I want) bailouts from our parents during those phases. My husband’s parents are on top of their wills and estate planning and such and have talked with him about it whereas mine have not communicated anything about it to me or my siblings.
Would you feel comfortable bringing it up with your parents since you’ve seen your husband have the conversation with his folks? I do hope we’re many decades away from needing to know anything about my parents’ assets, but I know it gives them peace of mine to know everything is protected and planned for and it gives me some peace of mind to know someone knows all the details.
Erin – I still think the tattoo “incentive” was a good call. Not only did I not expect an inheritance; I also planned as if social security would not be there in those looming twilight years.
Those temporary tattoos always looked great!
My parents have been fortunate enough to accumulate significant wealth. I am the successor trustee of their living trust and the trustee of their life insurance trust. My father included me in meetings with his attorney when they created the trusts last year. I encouraged my parents to leave a portion of the estate to their favorite charity, and I frequently remind them that you never see a Brinks truck following the hearse to a funeral. In other words, I want my parents to fully enjoy the fruits of their hard work while they are here, and to use their resources to help those who are less fortunate.
Yes, one day – hopefully many years from now – I will probably inherit significant assets. But, nothing in life is certain, and I do not live my life with that expectation.
It’s wonderful that you still encourage them to enjoy the fruits of their labor and while you know you likely will inherit money you live as if you won’t.
I have been trying to get my parents to talk about “after life” plans for years now. Boomer parent’s are the worst. They want to think they are immortal but no one is. Earlier last year, my mom’s husband died, and I took it as an opportunity to have the conversation. And more than inheritance, it is important to know where their financial information is and how you need to straighten their affairs when they are gone because it can be a messy and time consuming process. Thankfully, we have everything in order and because of that, I am sure they will live until 90. 🙂
The knowing where their financial information factor is the one reason I’m so pleased my parents met with someone to have their affairs in order. It is a huge sigh of relief for us all that someone other than my parents knows what to do and I don’t have to be carrying that information around. Glad you’re comfortable speaking to your parents about the topic!
I’m not expecting to get anything from my parents. They have given me enough already, but they’re also still in debt. I’ve told my mom I have no issues with her living with me (hopefully in the very distant future), or at least within very close proximity to me. My grandma was only six minutes away from us growing up, and it made me feel better in case there was ever an emergency.
I admire you already telling your mom that she can live with you or really close. A lot of people wouldn’t want to take on that responsibility and I’m sure it makes her feel better knowing she has the option.
I definitely don’t expect it and don’t even feel the need to discuss it period with my family. It’s 100% their money and like you said – they supported me for 18ish years (more like 20) so they owe me absolutely nothing. I hope they use up all their money on stuff that makes them happy, and honestly, I’d feel terribly guilty if they continued to save until they passed just so I would get something. I think that’s crazy! Again, it’s their money and I hope they enjoy spending it on THEM.
Couldn’t agree more about your point on feeling guilty if they saved just to have money to pass on. They should spend it on themselves because it’s THEIR money!
Great post! Inheritance is such an interesting topic. If you think about it, the government actually taxes this twice. You pay ordinary income, corporate, capital gains, etc, etc throughout your life while earning it. Then your heirs get to pay estate tax when you pass it along to them. This is horrible, the govt gets more than the heirs in many instances!!
I know it! I find it incredibly infuriating (and frankly illegal). I understand why some people start passing on money years before they die to avoid some taxes.
i actually find it one of the most fair taxes there is. once you are dead you have no rights and no use for the money personally. their is no constitutional right to leave or receive an inheritance. encouraging extremely high wealth to spend large portions of their money to avoid it going to the government is about the only way to get trickle down economics to actually work and is extremely important to prevent accumulation of wealth over the course of generations that imbalances the economy as a whole. I’m personally in favor of keeping the graduated income tax but adding more brackets to it culminating in a 100% bracket for the exceedingly large estates. where exactly the bracket would be is a matter for policy discussion but probably in the couple hundred million range would be good
I don’t think there’s any way my single mother would ever have significant assets to pass on as an inheritance. I’ve always expected that I will get nothing. Honestly, I have the opposite worry- I worry that she will outlive her assets (she’s very healthy but as a single mother was never able to save much in the years of her life when it would have benefited her most). I hope if that turns out to be the case that we’ll have enough to help her out.
I understand that worry. Do you budget at all as if that will happen or just hope you’re prepared if it does?
My father secretly allocated me as the sole heir to 100% of his income. He is not giving any to his wife (she gets the house, cars, and all of his property). But I will inherit about 200k + stock options + life insurance. Neither my brother and sister, nor his wife or any other family member know of this.
He did write a notorized letter stating that I am to divvy up the stock options to my nieces and nephews. But my brother and sister are not to get any of the money or property.
Yeah. I am not looking forward to him passing when they find that out.
I totally should add that I do not feel entitled to this money. I most likely will give it to charity or put it in trusts for my children. I will also probably backhandedly give a portion to my sister and brother if I am able to do so legally.
Holy cow! That is going to be a rough time when it happens. Good thing he told you ahead of time and it won’t be a big shock to you in addition to everyone else.
I like your dad’s sense of humor! I knew I would be getting something from my grandparents when they died because it was openly discussed, although still never full expected it because lots of things can happen from point a to point b. I do not have any expectations about my parents, but if anyone would be organized about it it would be my dad. My mom on the other hand…who knows.
I grew up in a very dry, sarcastic household which was delightful! Both my parents had huge families (5 and 8 siblings) so I never even pondered getting something from my grandparents other than maybe a trinket.
There’s no inheritance for me from my parents and I don’t mind. There might be one from my grandparents, but I don’t expect it will be anything substantial. I’m uncertain if an inheritance is something I would want to leave to my future children… I kind of like the idea of everyone being in charge of their own wealth.
If I had some to leave, and I believed my future children were responsible, then I think I’d leave some. But I do agree with you that the idea of cultivating your own wealth is intriguing.
I talk openly with my father about this, but I know that’s a pretty rare thing. He doesn’t trust his pension administrators to come find my siblings and I as beneficiaries, so he’s let us know about them so we can deal with it proactively, when the day comes.
It’s a totally different ballgame with my mother, who understandably doesn’t want to talk about these sort of things.
Tricky subject…no easy way to deal with it ahead of time. But kudos to your parents for establishing the wills. That’s a rarity.
At least you can speak openly with one of your parents! It is a tricky subject, but I think because of all the joking about it in my childhood that it felt more natural to chat about it now.
It’s never occurred to me that my parents would leave an inheritance. They’re in their mid 60s and still busting their butt to finish helping the last of five kids through school. I hope they spend it all and enjoy themselves in their twilight years. They deserve it.
If I had more siblings I probably never would’ve pondered it either. Or if my parents hadn’t set it all up ahead of time. It is nice to know that everything is all settled just in case, as my Dad said, they get run over by the milk truck.
Never thought about it, never talked to my parents about it, not expecting anything (though there may be something down the line). Definitely nothing coming from my husband’s side – they all live pay to pay.
Also, rugby >>> football anyday. I don’t really understand its rules, but American football makes ZERO sense. What kind of game has one team play offence and one defence?!?!
Hahaha! My beef with American football is how slow it is and then football fans have the gall to tell me soccer is a slow sport! PUH-LEASE!
Normally I do not comment on these posts,but this is such an interesting topic that I am going to chime in and say I do deserve an inheritance. That sounds very self-centered, but let me explain why.
My family has been very fortunate to accumulate moderate wealth and assets and my parents made a revocable trust with me as the successor trustee once they are both deceased. With my blended family dynamics and me being the only one they trust to follow out their wishes, they recognize that chaos is going to reign when everyone figures out what they get and who owns what moving forward. For the first couple of years after they are both gone, it WILL be a part-time job for me. So they have told me that there is a “manager’s” inheritance built into the trust for me for having to deal with the intense family drama.
That being said I have no idea what or if I am getting anything besides the manager’s inheritance. I do not expect it and I want my parents to travel and see all the places and do all the things they want to. But if I am going to have to manage upset family members I deserve the manger’s inheritance.
It doesn’t sound self-centered if you are paying yourself for what your parents would pay someone else to do. One of my mom’s brothers was an executor of their parents’ will and he got an extra bump for doing so.
Thanks for taking the time to comment!
I plan on getting absolutely zero. I think it’s likely that I will get something, especially because my parents are extremely frugal and my Dad has had a good middle class job his whole life, but there is no way I’m going to assume I will receive it. Who knows? Maybe what they really want to do is leave it to their favorite charity. If so, I don’t want to be upset when I read their will one day and see that the money I “expected” to be mine is actually gone.
Yeah, I can’t imagine feeling entitled to an inheritance and then being shocked when I didn’t get one. Takes grief to a whole different level…an incredibly self-centered one.
I was going to say that $177,000 seemed really high since many Americans barely even have any retirement savings (aside from social security). But I think you’re right with the 1% really skewing that figure. I joke with my parents that I’ll chose their nursing home so they better be nice to me, they jab back that they leave their inheritance so I better be nice to them 😉
I tease my mom that I’ll be putting her in my “retro” room — a room I plan to decorate entirely in a very retro style with lime green walls. WHAT?!
I do not feel owed anything, but would feel a sense of responsibility to help my parents financially if they needed it. Fortunately, my parents appear to be in an okay retirement situation. They are living too far away for me to be there in the case of a health emergency, but hopefully that will change in the future.
I would also feel some responsibility if they needed help, which I seriously doubt they would. My sister and I are both pretty far away from my parents but maybe once we both decide to start settling down and possibly having families that would change a bit.
One thing I like to reiterate is the importance of your parents having a will. A family member of mine’s wife who took care of her father and gave up a big career to move home for years while taking care of him still has to split the sale of her father’s house equally with her three other siblings (one of which is MIA and a drug addict) because her father never formalized a will.
If/when a child does become a caretaker of a sick parent, it is EXTREMELY important that the parent does the right thing and change the will accordingly. My grandmother left her house to my aunt because my aunt did take care of her for 15 years. None of the four other siblings got a part of the house because my aunt took on the heavy responsibility of taking care of a wheelchair-bound, blind-in-her-final years diabetic (who later needed dialysis). Without a will, my aunt would have had to split the sale of the house with four other siblings and that really would not have been fair to the fact that my aunt gave up a lot to take care of my grand mother.
Incredibly true, Tara. So sorry that happened to your friend but glad your grandmother did right by your aunt.
My father in law told us last year that all of their assets will be split up between the 3 children. Assuming I’m still married to Mrs. 1500, this means that I’ll/we’ll get one-third.
My in-laws are very frugal people. They wear clothes that most people would have thrown out years ago and even eat moldy food (seen it first hand). However, I don’t think they’re wanting for money. My father in law was vice president of a major corporation. He has hinted that they have LOTS of money in the bank, but refuse to tell anyone how much. Talking about money is extremely taboo to them, so I’m shocked they even told us about the inheritance.
Anyway, in no way do I expect anything from anyone. I save for my own retirement with this assumption. If we inherit something, it will be icing on the money cake.
However, I do wish they’d structure the inheritance somewhat. One of Mrs. 1500’s siblings doesn’t have even a remote clue how to handle money or even life. To make matters worse, he and his wife keep on reproducing. When they inherit the money, it will be gone in the blink of an eye. If I were my in-laws, I’d set the money up in some kind of college trust for the grandchildren. At least then, there would be hope of the money doing some good.
My parents had a few strings attached to some aspects depending on what ages my sister and I were/will be. Mostly it was to protect us from making dumb moves in our youths should they meet their maker much earlier than anticipated. I agree with you that a structured will like that can often be for the greater good.
On a related note, I’ve seen people go nuts with an inheritance before. My parents inherited $400,000 and blew through it with breathtaking speed. A decade later, there is nothing to show for it. This amazes me.
I do not expect an inheritance from my parents, and I’d prefer they spend whatever they have because they deserve it after having lived frugally all their lives. Of course, they continue to live frugally in retirement, in part because they were somewhat forced into an earlier retirement than they wanted. My sister and I help them out a little bit too financially. I’m pretty sure my parents would like to leave us something though.
I do wonder how many folks depend on inheritance in their older ages to survive?
The average age of a receive had to be around 55+.
Inheritance is kinda like Social Security. Can’t be depended end on or expected.
Funny, I’ve never even considered getting an inheritance. I’m just hoping not to get too big of a bill.
My parents always talk about how they’re trying to leave us something but I don’t want an inheritance from my parents, they have given me enough already. I just want my parents to fully enjoy the fruits of their hard work while they are here. it’s their money and I hope they enjoy spending it on them.