Finances and Discussing Money across Generations

[Music Lover]

Another twist on an inheritance: One of my uncles has 3 kids. His wife passed away many years ago and he never re-married. 2 of the kids are doing well, they have decent jobs and handle their money well. The 3rd kid is unreliable and can't hold a job and was constantly being bailed out by his dad. Finally, a few years ago the 3rd kid was cut off. The reason? His dad kept track throughout the years of all the bailouts, "loans" that were never paid back, rent payments, down payments on cars, etc., and then told him "Your share (a third) of what I expected to leave you when I die has been used up. You're on your own now."

 

[petershk]

Pretty crazy stories.

I'm on the other side. My parents don't have much (may need help actually). DW and I are at about 3.7m in liquid assets. Our kids are 2.5 and 10 months so it's probable that there will be a sizable inheritance.

While the kids grow up we plan to teach them about money but not make it easy for them nor do we live exteavgantly and thus don't plan to tell the kids how much there is. We've put money aside in a long term indexed investment account for education + a bit more. Then we plan to give them another chunk at 25-30... You know once they get past "the stupids" . How much I don't know... But not enough to do nothing.

Other than that we plan to leave anything else either to grandkids/nieces/nephews for things like college or maybe house down payment and probably give the rest away. It's also likely we'll give it away while were alive as we get older.

Last thing I want is to leave entitled kids but I do want to give them every chance to pursue their dreams.

Now if one of my kids has some great passion for philanthropy or something we might give them control over the money through a foundation or something but that would be pretty outlier situation.

Of course... Over the next 30 years a lot can happen so who knows...

Sent from my HTC One_M8 using Early Retirement Forum mobile app

 

[catman2020]

I would suggest that you do start a discussion with your folks about finances for a few reasons - not about what you might receive. I agree with the overall advice to discount any inheritance you might get from your planning.

- at a minimum you should have the basic info on accounts and contact information
- DW and I have a few older relatives with some -- to a pretty large amount that they could leave as inheritance. What I've seen, and when I went online seems to be confirmed by various studies, is that if you make to 70, 80 or 90 plus years old with substantial amount of savings you stand a very good chance of being a victim of fraud and/or suffer from some form of dementia that makes it difficult for you to effectively manage your money.

There aren't any really great solutions I have found for these issues. You can do the 'it's their money and they can do whatever they want' but when you see these kinds of things it's hard to just stand by especially when there are spouses etc who are also being impacted:

- an 80plus year old is having to change all of her account numbers etc because of identity theft and still be getting taken in even after that
- a 90plus year old 'goes into business' with a 30 something who wants to bring in a convicted felon as a partner

Start the dialogue now when everyone is clearheaded. Sounds like you and your folks are both big planners and it might be a welcome discussion. Hopefully if/when the time comes your folks can 'hand over the keys' if they need to.




Sent from my iPad using Early Retirement Forum

 

[gauss]

Perhaps you could estimate a range of inheritances to be used in the study of the robustness of your retirement plan, but I certainly would not build it into your baseline retirement plan assumptions.

If the size of the potential inheritance is large compared with your own assets then this strategy may not be appropriate.

-gauss

p.s. Remember that your parents could donate 75% of their 4m nest egg to charity and leave you and your siblings 25% of it. This would still be a sizable inheritance but perhaps not what you were originally expecting and planning for.

 

[Totoro]

.. at a minimum you should have the basic info on accounts and contact information

+1 on this, maybe with a slight twist.

Ask them to keep an overview of the information in a safe place so you can get to it when it's necessary. You don't need access right now, just know where it is (e.g. "in a green folder upstairs in the brown desk"). Same thing with items as wills, DNRs and such. You should actually do the same (let your parents or a few siblings know in case something happens to you).

This can quite naturally lead to discussions on their wishes once they grow older and start needing help. Potentially quite uncomfortable to discuss about, so you can't force it. But very essential and helpful.

Note that this is more an end of life and quality of life thing, nothing financial per se.

 

[jollystomper]

To the OP, maybe this example from my life with help.

Both DW and I decided we would live our lives and assume we would get nothing from our parents. For my parents my attitude was they sacrificed to raise 7 kids and saw that we all got good educations and became independent, let them enjoy their money however they wanted. They had a passion for helping the poor both where they lived and in the country they emigrated from, so we knew that is where they were very generous with their money, and that was fine with us. We never talked about inheritance.

My dad passed away about 20 years ago, it turns out he set aside several thousand for each of us, in our case we put it towards our kids education. My other passed away last year, and it turns out she left what we consider large inheritances for her kids and grandkids.

Meanwhile, my DW's parents are have been talking about inheritance with DW and their kids, and IMHO it has been a disaster. When DW and I married we we in our mid-twenties they were very well off and MIL particularly tried to use her wealth to influence to "take her side" on issues, which I refused and let to estrangement from MIL for a while. I was able to convince DW to get out of those "what is due for you if you keep me happy" discussions, which was hard for her as all of her siblings were quite happy to benefit from them and on the surface it seemed their lives were better because of it.

Fast forward over the years... FIL and MIL end up splitting up, then FIL's health fails, and it impacts their wealth. DW siblings grow more dependent on them, to the point of being suspicious whenever FIL or MIL visit another sibling, concerned they are being influenced to get "more". FIL passes away about 15 years ago and there is a HUGE brouhaha over his possessions, I won't get into it but essentially DW got nothing But because we did not expect anything it does not impact our lifestyle or financial plans. MIL is still alive but DW siblings are evening more dependent on her, all have gone through bad times and divorces primarily due to trying to live live they had both their own money and MIL's money, MIL is in her mid 80's now and finally sees the light and slows down the gravy train and now wants DW and I to help her with her finances and talks of leaving various things to us and our kids, but I STILL tell DW to avoid those discussions, since her sibling have pretty much gone into "vulture circling" mode (even though MIL is still in very good health) - all due to focusing on MIL's money which they each think they "deserve" and "need".

So... this is long than I intended, but wanted to explain the danger, as I see it, of even *thinking* about what Mom and Dad might leave you. Divorce, illness, etc. can change things over time. Thinking about what one might get distracts one from focusing on doing what you can on your own, and leads to temptation to say "I don't need to save as much" -but one cannot assume YOUR circumstances won't change either, which can then increasing the longing for the "inheritance".

The best thing in my view, to echo what some others have said - put it put of your mind. Don't think on it. Focus on your own means. Shoot for investing and saving 25-30% or more instead of 15-17%. Then you won't be depending on the lure of a future inheritance. And if it does come? Then it is a bonus.

 

[Pilot2013]

I think I don't agree with most on here.... Not that I would initiate a discussion about inheritance, but I think EVERY family should discuss finances, and financial matters. The "old way" was that parents don't discuss how much they make, what they spend, how they plan, insurance, wills, trusts, any of it. And how do the kids learn a frickin' thing!

Talk to them. If for no other reason than to learn how they made things work so well for themselves! I agree with a previous poster that you should find out information on accounts, insurance, etc. And to let them know how well you are doing and get ideas to improve from them as they are obviously pretty savvy, unless they earned it the old fashioned way... inheritance!

 

[eta2020]

I am pretty sure there will be more then 4 Million in today’s dollars left after I am gone.

I have no problem to leave it with "successful" child. I teach my child basiscs of investing and LBYM a if things continue going as they did so far she will be worthy that money.

I would not leave it to some bum who is waiting for it though. . If she is smart she should not count on it...... and I will try to reward smartness.

When she pays attention I try to teach her few basic things about money. It is more about control then some kind of money intelligence.

 

[marko]

I think I don't agree with most on here.... Not that I would initiate a discussion about inheritance, but I think EVERY family should discuss finances, and financial matters. The "old way" was that parents don't discuss how much they make, what they spend, how they plan, insurance, wills, trusts, any of it. And how do the kids learn a frickin' thing!

The OP was asking specifically about if he should broach the subject of what his inheritance might be.

At some point in life, I believe that most children of multi-generational wealth are clued in as to what/where/how of the family finances; specific inheritance amounts being another story altogether.

 

[sheehs1]

One additional thing I would like to point out to the OP, IF he is still reading is to not ignore the affects of taxation or the Unified Tax Credit ceiling (the amount that can pass to heirs without federal and state taxation).
.
While it is currently 5.34 million (total net worth of the 2nd to die, which has to include any net worth of a marital trust), there is nothing carved in stone that says it has to stay at this level. In 2001, it was as low as $600,000, in 2002 it was a million, in 2006 it was 2 million.

In essence, the final estate may owe upwards of 55% to federal and states governments for estates in excess of the current Unified Tax Credit amount.

My point is no one knows what it may be in the future. It is pretty much unprecedented that it is currently $5.34 million. There is a lot of controversy around it. Who knows if there will be a UTC 20 years from now or if they will just tax everything. We just don't know. Just be aware of this potential "gotcha"!.

www.wikipedia.org/wiki/Estate_tax_in_the_United_States

 

[eta2020]

The OP is a child. Good child will most likely be rewarded! And a naughty who knows....
Just be a good child, don't count on much and maybe reward will be quite sweet.

 

[MikeD]

Yes.

I also think that you are being selfish. But, I think it's OK to be selfish as long as you don't hurt anyone. And by that I mean that I think you should not bring up your parents' money unless they bring it up first. Really. Plus, you'll feel like you did the right thing. I did not learn to appreciate that feeling until around age 42. I often did the right thing but did not get the rewarding feeling. I think you will learn to appreciate that kind of stuff later on in life. I think it's OK to think about it, just don't bring it up.

I also did not like hearing about how I would think when I got older. Try to have patience.

Mike D.

 

[Silver]

Consider the following scenario:

Mom tragically dies young. Dad remarries a younger woman and they start having kids together. Or Dad marries another woman who comes with existing children from a prior marriage. Dad then dies and leaves everything to the new wife. Who do you think will end up with the money after that? Hint - probably not you.

Live your life as if you never knew about your parents' money. If you ever get any of it, consider it icing on the cake. But you have to bake the cake yourself.

This is exactly what has happened in my DH's family. I won't bore you with the long tragic tale, but the woman my DFI married has a son who has only done handy-man type of odd jobs his entire life. He has two grown kids and five grandchildren.

My DH and his brother have had successful careers and are both FI. My DFI explained to his sons that his wife insists that all remaining funds will pass to her son's family "because they need it more."

This hasn't changed their relationship to their father because they believe he should do whatever he wants with his money. But they both will admit that it does feel bad.

 

[bclover]

My dh and I do not believe in inheritances. In every family situation that we have been apart of involving any type of wealth and believe me it's never been enough to write about, it has lead to fighting, ill will and nastiness.


My sons will get many opportunities in life, fully paid college tuitions, financial help with first house and my youngest will probably have their law school tuition paid for.


If they can't stand on their own two feet after that, me leaving them money is not going to save them.


They are fully aware of my wishes. any substantial wealth I have will go to causes I support. right now I don't have any grandbabies so I may change my mind if that occurs but as of right now, I plan on spending my hard earned cash.

 

[jjquantz]

The OP was asking specifically about if he should broach the subject of what his inheritance might be.

At some point in life, I believe that most children of multi-generational wealth are clued in as to what/where/how of the family finances; specific inheritance amounts being another story altogether.

You obviously didn't know DW's family. Not that they had LOTS OF MONEY, but...

Her grandfather kept everyone informed with yearly letters to the major heirs letting them know about wills, important papers, lawyers, etc. No details, but everyone knew what to do when the worst came.

So Grandpa passes on and Grandma moves in with FIL and MIL. We are suddenly in an information vacuum. OK, no big deal, until Grandma dies and her will (dated the day before her death with a signature that suspiciously resembles MIL's) leaves everything to MIL. Also, no big deal, until MIL's cousin convinces them that a family trust would solve their estate tax problem. Of course, their estate HAD no estate tax problem and wasn't ever going to have an estate tax problem.

A series of financial missteps occurs, including FIL selling off all of his stock holdings in the middle of the night sometime after the tech crash when he had stopped his meds. After MIL dies, FIL rewrites his will clearly outlining one distribution of his assets but then includes his live in companion on a couple of Transfer on Death accounts that make the will impossible to follow.

Despite DW's overtures, FIL would not discuss ANY aspect of the finances, simply assured her that "Everything is in order."

As a result, FIL's estate is a royal pain to settle and DW is the executor. All of this slowly comes out and almost seven years out we are still trying to get some minor things settled.

We learned two lessons that we have told our adult kids:

1) Don't count on an inheritance, things happen, and
2) We want to have conversations with you about our money - so you can help us avoid doing stupid things like your grandparents did.

 

[younginvestor2013]

Thanks for all the responses everybody. I have been reading them all.

I do feel selfish for thinking these thoughts, but I think my (first world) "dilemma" or viewpoint is a valid one. I don't think I am actually being selfish because I haven't initiated any convos about it, or altered my way of life because of an expected inheritance. I've just pondered the ".....what if ..... 25-30 years from now when Mom and dad pass, and I am already FI on my own, and my net worth doubles due to an inheritance....will I have wished I would have lived my life differently in my 20s-40s".

I know this is not a problem situation to be in, so I don't need to hear anything about how I'm being ridiculous about it It's just a valid thought/possibility to consider.

At the end of the day, I think I will be happiest long term if I:

1. Prove myself out (meaning, work hard, save, and build my OWN nest egg)
2. Stick to MY life plan, and don't adjust MY way of life based on uncertain possibilities and factors that I cannot control

That way, there are no strings attached (monetairly) to anyone in my family, and our relationship is based off other natural familial factors and love.

 

[MRG]

Thanks for all the responses everybody. I have been reading them all.

....snip.....

At the end of the day, I think I will be happiest long term if I:

1. Prove myself out (meaning, work hard, save, and build my OWN nest egg)
2. Stick to MY life plan, and don't adjust MY way of life based on uncertain possibilities and factors that I cannot control

That way, there are no strings attached (monetairly) to anyone in my family, and our relationship is based off other natural familial factors and love.

You got it. Good job, things will turn out just fine. Your family will benefit from your attitude.
Not all inheritances turn out ugly, IMHO the ones that don't follow the plan you just laid out.

 

[gcgang]

I am likely substantially younger (25) than the average poster here, so I think you all can give me some good advice or feedback.

As it stands now with my nest egg and savings rate, I am looking at being FI by my mid 40s with very conservative estimates.

My parents are in their 60s and FIRE'd with about a $4m net worth, with about $3.2m in investable assets. They are very conservative and practical with their money yet they've been generous with my sibling and me by providing us with UTMAs. My parents annual expenses are around $100k or less based on what they've told me and they do have a FA that I believe has done fairly well for them. I'm fairly sure that he's doing well for them because my parents have made many big ticket purchases this year that I don't think they otherwise would have purchased. And, they've also alluded to the fact that they're "one time" purchases.

I know part of my parent's plan is to leave a sizable inheritance to us, yet money is often a taboo subject in our family. My parents make random comments about their finances and plans to leave inheritances to us, but haven't had many "official" talks with us, and me and my brother know that mom and dad are "set" but no serious convos have been had.

My point in posting all of this is to ask for your advice on how I should handle the inheritance that my parents want to leave us, talking/starting a convo to my parents about it, and (most importantly) how I should live my life given all of the above?

I know everyone says to not plan for an inheritance, which makes sense and I can agree with.

But inheritance aside, I am slated to be FI at a young age (mid 40s) from the UTMA and own savings. If I factor a sizable inheritance on top of that, I could see a day where I have more money than I may ever need (possibly double the annual FI income than I'd actually need) still at a young age, and I may look back on my 20's, 30's, and 40's and wish I'd have lived them differently (whether it be travel more, take a different career path, stress out less, start my own business, etc etc).

If you were me, how would you approach life and your goals (be it professionally, socially, etc.) given the above? Also, do you think I should instigate a convo with my parents about finances and my goals?

Sorry if this is a long and deep post (maybe I have the Monday blues), but often I still find I'm searching for meaning and direction in life that corporate America leaves me yearning for, despite padding my 401k and providing a comfortable lifestyle. Then comes Wednesday, Thursday and Friday, and rinse and repeat each week!


Sent from my iPhone using Early Retirement Forum

Focus on doing what you like.

It sounds like you know much more of your parents situation already than most. What else do you need to know? Their exact departure date?

OTOH, if they think you can help them with their plans, convo away.

How old were you when they told you about the UTMA?

Sent from my iPad using Early Retirement Forum

 

[clifp]

Yeah, I guess I sort of asked for these responses.

Am I selfish for thinking about such a possibility?

I love my parents of course and think they should enjoy their earned retirement. But the INTJ/planning part of my brain is always thinking long term and how I can optimize things, so this is where my thinking on this subject comes into play.

I guess my thinking is that an honest conversation about family finances and long term goals would be beneficial to everyone involved. My parents have made frequent annual "gifts" to us <$10,000 recently, which I believe they plan to continue to do in the future, so it seems somewhat relevant. Although I see your point in the conversation being somewhat pointless, and even somewhat self-centered.

I don't think you a foolish to have this in the back of your mind. However, you are decades premature to make any type of plans about it. Life happens in those decades and often throws curve balls. My mom's dad was pretty wealthy (a few million), but by time her stepmom died she was in her late mid 70s, and the amount she and her step sister got was a several hundred thousand, no where near the >$1 million we had expected

My only advice is when your parents get into their 70s and they show any signs of dementia make a point of meeting anybody in their lives like a FA,or lawyer who has access to their financial information or control.

 

[papadad111]

Congrats on being on track in your own right, but as you predicted, I don't think you should change anything about your life or plans based on an expected inheritance. I also wouldn't suggest a conversation with your parents about the inheritance you expect to receive except to assure them that you're doing fine and they should feel free to spend their money on themselves if there are things that will bring them happiness.

I think it would be fine to talk with your parents about their own financial planning and process in terms of learning from their experience, but otherwise I think it's up to them to initiate any conversation about any inheritance.

You never know what can happen, medical illnesses, accidents or a market downturn. Continue to plan for your own FI, and when/if you do receive something you may be able to accelerate your plans. But even in your own planning while I agree with LBYM, I also think your working years need some fun and that spending on meaningful experiences is a good investment and that it shouldn't be just accumulating for a future FI.

+1. I could not have said it better. All of the above.

Perhaps ask parents if they have long term care insurance. Long term illness (Alzheimer's) can destroy a portfolio in no time, as can an extended market correction.

Glad to see your parents making the one time buys.

Ask them what kind of charitable giving they might want to do now or as part of an estate plan.

Never assume it's coming your way.