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]