Finances and Discussing Money across Generations

[younginvestor2013]

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!


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[Katiek]

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.

 

[GrayHare]

Pretend that money doesn't exist because, well, for one there is the possibility it might not come your way. Do not let it interfere with you learning your way through life, mistakes and all. Such experiences will better prepare you for FIRE, and you'll be able to relish them. And, it's probably best not to tell potential spouses about that money so you'll be able to know they are attracted to YOU rather than Benjamin (Franklin).

 

[Keim]

Pretend that money doesn't exist because, well, for one there is the possibility it might not come your way. Do not let it interfere with you learning your way through life, mistakes and all. Such experiences will better prepare you for FIRE, and you'll be able to relish them. And, it's probably best not to tell potential spouses about that money so you'll be able to know they are attracted to YOU rather than Benjamin (Franklin).

I agree with the others. Pretend that money doesn't exist and continue on your current path.

I am 43, and also stand to inherent a similar amount-possibly. Or maybe not. My parents have never brought it up, and neither my brother or I are asking. Seems like a pointless conversation. Too many end of life variables.

 

[unno2002]

[FONT=&quot]My parents were “broke”. It is my desire to leave significant assets to our daughter, BUT, I’ve made it clear to her for her safety she needs to plan/act as though there will NOT be any inheritance. [/FONT]

 

[Meadbh]

What Katiek said.

It's best not to count on an inheritance no matter how obvious it seems that one is in the offing. The unexpected can and does happen, including family feuds, market crashes and (most likely) long lived parents who need all of their assets to fund years of long term care.

That said, good communication is key, especially since you and your siblings might find yourselves making healthcare and or financial decisions for your parents at some point. It's important that everyone is on the same page. Do they have a POA, living will, etc?

Many families are reluctant to discuss money. You can take the first step by sharing your own circumstances and asking for some feedback. It's important that your parents feel you genuinely want their input as successful money managers, and not that you are "after their money". Hopefully a series of conversations can help them to trust you and feel more comfortable sharing their details. There are benefits to your parents from being open with you. For example, you may be able to help them avoid getting scammed.

The process I am describing worked with my parents and made everything much smoother.

 

[pb4uski]

+1 with the others... ignore it and if it happens then it is gravy. I'll tell you why. I have a friend whose retirement plan seemed to be inheritances from his parents and a rich uncle. He had a messy divorce and his parents hated his ex and the idea that the ex might benefit from an inheritance to the friend... at the same time this friend's sister had a couple kids that have special needs. Well before my friend knows it the inheritance that he was planning on is spent on his parent's care in their final years, trusts for the special needs grandkids, etc and he ends up with a fraction of what he was planning on. And in the process, the rich uncle becomes less keen on my friend so that money evaporates as well.

Similar to you, I expect a nice inheritance from my mom (I manage her money for her) but I don't include any of it in my planning and will splurge some if it does happen.

I've told our kids (about your age) that if there is an inheritance left it is because I messed up and didn't spend enough or died earlier than planned (in other words, don't count on anything) even though I know it is more likely than not that there will be a nice inheritance when the time comes.

 

[younginvestor2013]

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.

 

[MichaelB]

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

Am I selfish for thinking about such a possibility?

We are all human and cannot easily stop thinking about these things. What we can do is avoid taking the next steps, which involve taking specific actions and making plans for them to happen. Keep this possibility as a dream, and if it does happen, it will be a pleasant surprise.

 

[steelyman]

We are all human and cannot easily stop thinking about these things. What we can do is avoid taking the next steps, which involve taking specific actions and making plans for them to happen. Keep this possibility as a dream, and if it does happen, it will be a pleasant surprise.

That's a good perspective. My addition is that it's good to know where assets are, not necessarily how much there is. It can be very difficult to find things, especially if they are scattered to the winds (personal experience).

 

[BTravlin]

I can attest to the wisdom of not counting on any inheritance.

My wife's mother died a few months ago and this prompted some financial discussions between DW and her father. Her father had worked hard during his career and saved diligently such that he now has a net worth of $1.6 million at age 80. Her parents had always said the estate would be split equally between her and her younger brother. Turns out that they revised their will in 2012 leaving $1.3 million to her brother and $300k to her. Seems as if younger brother had bemoaned his financial hardships to them for years saying he hadn't been able to save for his retirement or for college for his daughter. This in spite of the fact that he's an engineer and has been making in excess of $100k for many years. We never shared details of our finances with them because there was no need to but they felt we were in good financial shape so they made the son the executor and have willed the bulk of their estate to him.

Now this is their money and their right to do with it as they please but this has still upset DW. We have not planned with the supposed inheritance in mind because you never know what will happen, however, two things about this were upsetting to DW. First, they rewarded the incompetence of one child while penalizing the more responsible child and, secondly, they made him executor even though he is younger and less financially savvy. Both of these facts seem to imply a favoritism of one child over the other and this was upsetting to DW. Yes, she will probably still get a sizable inheritance for which she is grateful but not the one she had been promised.

Anyway, continue to work hard and plan your own financial future without consideration of things that may or may not happen in the future. Proper planning is the only way to ensure your own FI.

 

[fh2000]

Am I selfish for thinking about such a possibility?

Yes.

 

[pb4uski]

+1 A possible inheritance wasn't anywhere near my radar screen when I was 25 years old. I was focused on career and earning my own way. While I knew Mom & Dad were well off it was their money.

 

[pb4uski]

I.......Now this is their money and their right to do with it as they please but this has still upset DW. We have not planned with the supposed inheritance in mind because you never know what will happen, however, two things about this were upsetting to DW. First, they rewarded the incompetence of one child while penalizing the more responsible child and, secondly, they made him executor even though he is younger and less financially savvy. Both of these facts seem to imply a favoritism of one child over the other and this was upsetting to DW. Yes, she will probably still get a sizable inheritance for which she is grateful but not the one she had been promised......

I can see why she would be miffed and I would be in those circumstances as well. I wonder if there may be a sexist thing going on since the male child was selected to be the executor. Also, it is quite odd that the less financially responsible child was chosen to be executor.

I hope that in time she can put it behind her and just enjoy her Dad's remaining years.

DD will be our executor because she is more knowledgeable about finance (she's a CPA) but not because she is eldest. DS probably could do it be he isn't as knowledgeable.

At this point our estate will be split evenly even though DD has been more financially successful. While DS is doing fine, to reward him and in effect penalize DD solely because DS has been less financially successful would be unfair. If we have grandchildren (none now and none on the horizon) we might be tempted to carve out an education fund for them and then have the remaining estate split 50/50.

 

[BTravlin]

I can see why she would be miffed and I would be in those circumstances as well. I wonder if there may be a sexist thing going on since the male child was selected to be the executor. Also, it is quite odd that the less financially responsible child was chosen to be executor.

I hope that in time she can put it behind her and just enjoy her Dad's remaining years.

DD will be our executor because she is more knowledgeable about finance (she's a CPA) but not because she is eldest. DS probably could do it be he isn't as knowledgeable.

At this point our estate will be split evenly even though DD has been more financially successful. While DS is doing fine, to reward him and in effect penalize DD solely because DS has been less financially successful would be unfair. If we have grandchildren (none now and none on the horizon) we might be tempted to carve out an education fund for them and then have the remaining estate split 50/50.

Yes, we believe there is a degree of sexism involved and that adds to the disappointment. Her parents were seemingly enlightened in most ways but have obviously missed the mark in this regard.

 

[kaudrey]

Hi,

You are very young to be worrying about an inheritance. Your parents will hopefully live another 20+ years. I don't plan for an inheritance although I can't see a scenario in which I won't get one. I am 46 and my parents are still in relatively good health at 77 (and hopefully for a lot longer)!

Having said that, I think you instead need to be focusing on other things. 1) It sounds like you don't like your job/chosen career path. You are young enough to do something about that - more school, change jobs/companies whatever. Even if you only work 20 more years, do you really want to spend 20 years doing something unfulfilling?

2) Life is about balance. Why do you need to be FI in your 40s, if it is at the expense of enjoying life now? LBYM is great, but you shouldn't be so focused on the future that you are not seeing today. You should save, yes, but you should also travel and do other things you enjoy, within your means. Depriving yourself unnecessarily for an arbitrary goal doesn't seem like a good life plan.

3) Life will change. You are 25. Marriage, kids, whatever, will affect whatever "plan" you have for yourself anyway. Your goals will change; life will change. Embrace it. Roll with it. Think about the time you can have with your parents, and don't worry about the money.

 

[Katiek]

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.

Your intentions may be good, but I still think you shouldn't initiate any conversations about a potential inheritance. If you make your plans based on the idea that you're going to inherit money, you're effectively creating some obligation on the part of your parents. Suddenly, if they don't end up giving you the money you expect, your plans are impacted because of them. Parents tend to worry about their kids and now if the market goes up or down, they have unexpected health issues or any number of other things come up, they have to worry about the impact to you.

It's great if they want to give gifts to you now, but that shouldn't create some implied expectation that you'll continue to receive them. Give them a gift in return by being clear that you're fine and they should use their resources for themselves, and when and if there is an inheritance, that's gravy. It's easy to adjust plans if you get an unexpected windfall, but harder to adjust them if you don't get amounts you've planned to receive.

 

[2B]

At this point our estate will be split evenly even though DD has been more financially successful. While DS is doing fine, to reward him and in effect penalize DD solely because DS has been less financially successful would be unfair. If we have grandchildren (none now and none on the horizon) we might be tempted to carve out an education fund for them and then have the remaining estate split 50/50.

Yes, we believe there is a degree of sexism involved and that adds to the disappointment. Her parents were seemingly enlightened in most ways but have obviously missed the mark in this regard.

DW wants us to redo our wills even though nothing would be changed. The only things that are different is that we live in different county (still in Texas) and I'm now retired.

I'm waiting to see if our son who is financially well off and successful gets married. I would like to put a bias in our wills to help the grandkids get a start and then worry about the inheritances to our children. Even though our son "wouldn't need the money" (at this point anyway), I can't see treating him differently than the daughters. I can justify reducing his share to make room for his nieces and nephews.

 

[fritz]

....

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? ....

Sent from my iPhone using Early Retirement Forum

We retired a little early (58/56) 5+ years ago, and live off our investments (no pensions). We've never discussed our financial net worth with our two daughters 41/35 (or anyone else for that matter), but they realize we are doing OK in retirement. We were always the typical LBYM (live below your means) people and live our retirement life the same.

We have talked about when to have this discussion with the both of them. We've decided that it would be appropriate to discuss this with them when one of us passes. We also feel that it would be an appropriate topic when we are older (say mid 70's). Our worry is that we would not realize that we're losing the ability to handle our own finances, and risk being taken advantage of by unscrupulous people..

I manage our finances as DW has no real interest in handling it. Given that scenario, it's all pretty much set up on auto pilot, and DW has simple 2-page instrs. on what to do and when (I go). Both daughters are very capable of taking over for us - should the need arise. They are both good with money, and we feel that we have taught them well in the area. They have both done well in life, but one is married to a person that likes to spend money to the detriment of her family. He earns well, but spends it all. Their retirement relies on a nice pension, as of now. The other daughter's husband is a good person, but not running with the big dogs. She married him recently, and has a nice nest egg for retirement already.

I wanted to give you our background so that you could get a perspective on what we feel is the right time to bring up our "official" discussion of money, and how it's all set up for our beneficiaries (FYI - plans are now that it all goes to them 50/50 - they'll have to pass it along as they see fit to their heirs).

We've not wanted to influence their decision making throughout their lives, with the knowledge of our net worth that would be heading their way eventually. We've felt that when they do inherit what's left - we wanted them to be independent of it in their lives and it just be a nice benefit to be added to their future well-being. Hope that this makes sense to you.

 

[FUEGO]

Hey younginvestor2013. Basically ignore your parents' money and potential for inheritance. Put it in your back pocket and consider it a good plan D if A, B, and C don't work out. That's what I do anyway.

At 25, I was getting started on the path to FIRE and reached that point at 33 when I pulled the plug with a very low seven figure portfolio.

My parents are similarly situated as yours. A couple million (maybe 3) in invested assets plus a house. And they are a couple years away from full retirement age and SS payments. 2x SS payments plus a pension will probably provide more than they spend in a year, even if they ramp up travel (dad is still working, mom has a few weeks till retirement). In any event, I'm statistically likely to get a big inheritance in the next several decades that would significantly boost my FIRE stash.

But what's the point of waiting and planning on an inheritance that's unknown as to size, timing, or even existence (surviving parent goes senile, gets bamboozled by new young love or elder predator, finds religion in a casino and loses it all, etc). I hope my parents live till they're 110 and spend every dime (well, leave a few of them to cover the check to the undertaker so I'm not on the hook ).

 

[MRG]

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

Am I selfish for thinking about such a possibility?

IMHO, Absolutely not. Quite normal for your age.

Not to kick a dead dog, but as others have said many things can and will change. My DF/DM had always said we had 4 children our leftover assets get split equally 4 ways.

At the end DF had severe dementia. Sister had POA and a letter from his doctor stating he was incompetent. Despite that in the state he lived in his attorney claimed if he witnessed a "moment of clarity" DF could change everything. DF's sick brain had decided none of his children cared enough, and he'd give all his assets to the church and United Way. Now that never happened, but it could have. DW and I had decided years prior that despite any promises made by either parents we would not count on 10 cents.

FIL had always said how much he had, retired at 42. At one time he was worth quite a bit, but blew most of it trying to buy happiness. You never know what the future will bring.

Make your plans for zero inheritance, anything that you receive is gravy. I do agree with running YOUR plan by your parents seeking their advice. If they bring up inheritance, be grateful, smile, but let them know it's their money and you want them to enjoy their lives.

 

[FUEGO]

Here's another bite of food for thought. When your parents see you've followed in their path and pulled off FIRE in your 40's, imagine the smile on their faces. It was more like a **** eating grin on my dad's face.

 

[sheehs1]

I would NOT initiate a conversation that involved talking to them about THEIR money and what you may or may not be left as an inheritance. As a parent, if my kids did that, my response would probably be along the lines of "it is none of your business" (perhaps a bit more gentle than that). Nor would I appreciate the fact that "they" would be telling me it is a factor in how they lead THEIR lives, expecting to get something.
Second, it is not wise for you to count on it. All sorts of things can happen. Gosh forbid, something happens to one of your parents and the other remarries. There are numerous stories from friends of mine where the 2nd wife/husband (or the girlfriend/boyfriend) got it all or at least a huge chunk. Other things can happen as well.
Couple of stories: (1) My mom was sick for a few years prior to passing. She ordered a new Lexus. My older sister became furious telling her "she was spending her inheritance". The rest of us told her to spend it, it was HER money and to enjoy it. The GREED radar came out in spades and continued for many years. (2) When my mom passed, my Dad started giving money to anyone that would spend time with him or who he thought needed it more than his children. He also set up a trust for his church and funded it, gave to various causes, etc. He bought one lady a new car, sent her child to a private school, etc. No one knows to this day what he did or how much he gave away. It was HIS to give.
3) Illness. I have a cousin whose father spent years if not a decade or more in a nursing type home. It was more than assisted living. It took all of his money.

You are to young to have an eye out for our parents money at this point. I know you don't mean for it to sound that way, but actually that is what you are doing. Sorry but you are and I hope that doesn't sound too harsh. For your parents, it is not necessarily a straight shot to the grave or an easy one. Consider yourself fortunate that it appears your parents may have the financial means to fund their later years including perhaps illnesses. Some do not have that peace of mind.

As others have said, do your planning and if anything comes your way later, it will be gravy and a pleasant surprise.

Oh and congrats for thinking about this at your age, for saving and planning, etc. You should do well thru the years!

 

[GrayHare]

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.

Consider letting them know what you've done with such gifts, i.e. what it was spent on, or how it was saved/invested. When during their later years my parents gifted me a few times, I invested it via a completely separate account. After a few years I showed them the account statements, "Thank you so much for your generous gift, look how it has grown. I'm investing it separately, if you ever need it just let me know, it will be here waiting."

 

[Katiek]

While I don't think it's a good idea to talk to your parents about what you may inherit, I do think it's a good idea for people to share information and help make things easier to administer. My father passed away last year, and he had all the normal estate documents (will, POA, health proxy etc), but he also prepared a couple of long letters that he gave us to review before he died.

He listed information on all this financial dealings (not the account values, but what accounts he had, where statements were located, relevant benefit plans from work and contact phone numbers). He also described details about an old family house including details about deeds and relevant info about his Mom's will, useful info that would help my Mom about the lawn service, home heating and furnace info. He described where to find info re military benefits, discharge papers, and anything else he could think would be useful.

He gave some simple investment advice (basically the low cost index fund approach) that might be helpful to my Mom.

He wrote out all this info and gave it to us in advance so we could ask any questions. This information has been exceptionally useful since his passing, and I'm thankful he took the time to put all this information together in a useful format. When he first gave us this info, none of us wanted to consider the possibility that he wouldn't be here with us, but now we're all appreciative of his efforts.