Planning to receive an inheritance

[jerome len]

I absolutely do not believe in the concept of inter-generational wealth. The best path would be to settle the estate and give the rest to charity. (of your choice) That way, you know you made your way in this world by merit and without the windfall which you had nothing to do with. You can probably guess, I do not have to worry about receiving an inheritance.

Let me start by saying I agree and disagree with you.

I have some wealth and will limit what I give my children. I want to give them enough so they don't have to worry....not enough so they don't have to work. I want to give my grandchildren an education....I want to give those close to me enough for a down payment on a comfortable home. Yet, I'd hate to see my money abused via gambling, booze and drugs.

So, I've establised a trust.....and, I'm giving to charity as well. I worked hard for not only my security but my families security as well. And, I'm giving back to the community rather than adding to my childrens wealth.

I guess I'm looking for balance. My parents lived through the depression. They knew what it meant to not have a job, not enough money to enjoy a modest life.....my kids won't have that life......nor will they have enough to be lazy. Is my plan perfect....nope, just the best I can do.

 

[Texas Proud]

This scenario (the two dying simultaneously) is actually pretty unlikely, for a couple of reasons:
- It is way more likely with people of their age (I'm assuming they're over 50) that one will die of something mundane, rather than an accident.
- Even in the case of an accident, simultaneous death is not always assumed. Very often, especially nowadays with safety cages and airbags, people get to hospital alive after even the worst car crashes, but it's the internal injuries from deceleration that kills them - at different speeds.

There were fights in some families after the PanAm 103 (Lockerbie) plane was blown up because the way wills were drawn up meant that a lot of money changed direction depending on who died first. Lawyers got to arguing as to whether a person seated close to the bomb would have been killed by the blast or thrown from the plane before it crashed, whether a small child in a seat would hit the ground after a large adult due to a slightly lower terminal velocity, etc etc. It was horrific, in all senses.

It sounds like that won't make too much of a difference to your planning, but I wanted to make that point that planning for car and plane crashes is unlikely to be a very productive use of time. (You might, however, want to consider including clauses about "If my spouse dies within one year of my death", etc)

That is why good wills will specify what is meant by dying at the same time... IOW, way back when I did estate taxes.... most had a 30 day clause where if the second person died within 30 days of the first, it was deemed that they died at the same time...

I have never seen a one year clause... but it might be legal....

 

[RenoJay]

I'm potentially in line to split a mid 7 figure inheritance with one sibling, although I do not consider one dime of it in my financial plans. I try to encourage my parents to go out and enjoy life (and they are doing some remodeling and taking an international vacation) but overall they're just extremely frugal. I agree with the OP that it's important to have a plan for what to do with a sudden windfall. My plan is to spend about half of it on gambling, drinking and fun and then to just kind of waste the other half.

 

[Katsmeow]

A systems analyst gave me this tibit for settling an estate:

Divide the estate into equal monitary "piles" by assigning values to hierlooms (furniture, china, the piano ...). One pile for each heir.

Now each heir draws a stick (varying in size shortest to longest).

Shortest stick picks a pile ... then the next shortest stick picks until the longest stick remains.

The longest stick chooses ANY pile (swapping with another - if needed).

This ensures everyone had a choice between piles.

I don't actually like that one at all. It is way too subject to abuse and could create risk. That is, someone has to decide what goes in each pile and sometimes that can be a matter of opinion. Also, lets say I know that X really really wants 2 particular items which maybe no one else cares about at all, but I really don't like X. Really easy for me to just put the 2 items in different piles and force X to have to choose between them.


Another way to divide tangible items that I like better is simply to alternate and pick.

For example, in divorce situations, sometimes to divide household items you have one spouse pick an item, then the other one picks, then the first one picks, then the other picks.

Now for items that are very high value - house, auto, etc. - then it makes sense to sell it and split the proceeds. In some instances one person may buy the item from the other heirs.

 

[W2R]

Wow. When my mother passed away, the executor was my very trustworthy brother. We each told him what, if anything, we wanted. He had those (very few) things that were wanted appraised, and sold or donated the rest, adding any money obtained to the estate.

There was ZERO bickering, probably because we mourned her death for a long time (and probably still are, a little). We were far too fragile to bicker with those she loved. Every single one of us would have given up all of it, if we could have exchanged it for just a little more time with her.

 

[jollystomper]

DW and I are having some interesting discussions with by MIL on this topic. DW is her only child who has stayed completely financially independent of her (I pushed this when we got married, and MIL was angry at me for a while, but now sees how wise it was and has apologized). Her other siblings have all lived off of their mother, and have pushed her to provide everything from home down payments to paying for vacations. When they visit they expect her to pay for food while they are there and do not help her out. They are already fighting over who deserves her money when she dies (she is 82 but in good health).

Based on the precedent set when her Dad died (a looong story), I had told DW to simply assume no inheritance and to stay out of it. Well in the last year MIL and her lawyer have asked me to be put in her will as the executor of her estate, and wants to leave the majority of her assets to our children. I'm not comfortable with this knowing the strife it will bring, but MIL's attitude is "I've spent so much on the others and have barely gotten any thanks, while you and DW and your kids have done a lot for me and never asked for or wanted anything, so it balances out". Even with that we are still not assuming anything (and are saying nothing to our kids).

 

[Texas Proud]

Wow. When my mother passed away, the executor was my very trustworthy brother. We each told him what, if anything, we wanted. He had those (very few) things that were wanted appraised, and sold or donated the rest, adding any money obtained to the estate.

There was ZERO bickering, probably because we mourned her death for a long time (and probably still are, a little). We were far too fragile to bicker with those she loved. Every single one of us would have given up all of it, if we could have exchanged it for just a little more time with her.

I will basically do the same... and if two people want the same item.... it is an auction....

But, there is little that people want as my mom does not buy anything that is worth much...

 

[jerome len]

DW and I are having some interesting discussions with by MIL on this topic. DW is her only child who has stayed completely financially independent of her (I pushed this when we got married, and MIL was angry at me for a while, but now sees how wise it was and has apologized). Her other siblings have all lived off of their mother, and have pushed her to provide everything from home down payments to paying for vacations. When they visit they expect her to pay for food while they are there and do not help her out. They are already fighting over who deserves her money when she dies (she is 82 but in good health).

Based on the precedent set when her Dad died (a looong story), I had told DW to simply assume no inheritance and to stay out of it. Well in the last year MIL and her lawyer have asked me to be put in her will as the executor of her estate, and wants to leave the majority of her assets to our children. I'm not comfortable with this knowing the strife it will bring, but MIL's attitude is "I've spent so much on the others and have barely gotten any thanks, while you and DW and your kids have done a lot for me and never asked for or wanted anything, so it balances out". Even with that we are still not assuming anything (and are saying nothing to our kids).

For goodness sakes let her do it for your kids. It's her money, it's her wish, and in her mind it does balance out. If others are upset, tough. Old folks have generally worked hard for their money, should get enjoyment in giving it to loved ones......even if it upsets others. Your goal? Help Mom enjoy giving and the rest of her life! She trusts you.....be honored and accept her trust in your family

 

[Texas Proud]

DW and I are having some interesting discussions with by MIL on this topic. DW is her only child who has stayed completely financially independent of her (I pushed this when we got married, and MIL was angry at me for a while, but now sees how wise it was and has apologized). Her other siblings have all lived off of their mother, and have pushed her to provide everything from home down payments to paying for vacations. When they visit they expect her to pay for food while they are there and do not help her out. They are already fighting over who deserves her money when she dies (she is 82 but in good health).

Based on the precedent set when her Dad died (a looong story), I had told DW to simply assume no inheritance and to stay out of it. Well in the last year MIL and her lawyer have asked me to be put in her will as the executor of her estate, and wants to leave the majority of her assets to our children. I'm not comfortable with this knowing the strife it will bring, but MIL's attitude is "I've spent so much on the others and have barely gotten any thanks, while you and DW and your kids have done a lot for me and never asked for or wanted anything, so it balances out". Even with that we are still not assuming anything (and are saying nothing to our kids).

I actually kind of like this approach from MIL... she is not giving it to you or your DW, but your kids... I think this respects your decision not to live off of her money, but in MIL's mind kind of balances things out among all of her kids...

 

[FIREd]

DW is the sole heir on her mom's side. So she'll get everything, probably <$100K. I can expect more on my side of the family and my parents have started gifting my sister and me some of their assets (it is more advantageous in their tax jurisdiction to do it that way rather than leave one large estate in the end). The process has been surprisingly smooth, no bickering. My parents were both involved in nasty estate fights with their siblings and they didn't want that for us. After several family meetings (involving the family lawyer as an arbitror), we all came to an agreement regarding the split of their assets and a few months later my sister and I received the first tranche of their estate. The rest will be distributed as the tax code allows, in order to minimize transfer taxes.

 

[rodi]

I received an inheritance from my parents estate when my dad died. Not enough to retire that day - but it definitely boosted my nest egg to where I can consider ER at 55 for sure (3.5 years away), perhaps sooner, depending on the market, whether I get downsized sooner, etc.

Fortunately, there were no squabbles. It was a bypass trust and my mom predeceased my dad - her part was split evenly between my brother, sister and I. Unfortunately, my brother told off my dad (in a big way) and my dad cut him out of half of the bypass... But that was a non-issue since my brother died 2 months after my dad. (Moms money made his estate slightly positive, vs negative... and he left the balance to his church. My sister and I covered his mortgage after he could no longer work.) My dad made some bequests - to his sister and to his domestic partner... the rest was split between my sister and I. We made a pact (even before Dad and brother died) that no matter what we wouldn't squabble about it. I told her I'd walk away from an inheritance rather than lose a family member over perceived injustices. Especially since she and I are the sole survivors of our original nuclear family. 3 cancer deaths in 7 years took care of that.

My husbands family is a whole different story. His parents are needing more care now - his father recently went into a home, we'll probably be hiring in home help for his mom soon. My husband is one of 6 kids and he's the court appointed guardian for both parents. Some of the siblings are questioning his choice to put his dad in a nursing homes and looking at in home help - because "that's spending their inheritance". (This was stated in an angry email.) Seriously. It makes me sick. Others are much more reasonable (IMO) - agreeing that their parents money should be used to care for their parents needs FIRST.

 

[Rambler]

Interesting thread.

As far as receiving an inheritance, in all likelihood I will receive an amount that, while significant to my parents, amounts to about 1.2% of my own portfolio. I am executor of their estate. One glitch in their wills that leaves me a little worried is that I am to divide the estate equally by the number of siblings remaining alive, and pay that amount immediately to each sibling except one spendthrift sister, to whom I am to distribute $1,200 per year until the money runs out. If a sibling pre-deceases my parents, that sibling's family (grandchildren) receive nothing. Long story on that, but it has to do with spendthrift sister and her semi estranged n'er-do-well husband (estranged, but still comes sniffing whenever there is money to be had). I'm not even sure their distribution (to sis) plan is legal. I also have a brother who I expect will cause trouble, because he always stirs the pot at family reunions, etc. I don't want or need their money so would just as soon have someone else do it, but they don't (understandably) trust any of the others.

I would like to leave an estate up to the tax free limit, for my kids, in equal proportions. Of course, I have no plans to eat dog food to be able to do that, so if I can't leave that much, so be it. On the other hand, if it looks like we can leave more than that, we can and will gift to our kids, and perhaps their kids and spouses, up to the tax free limit each year. These gifts will come with caveats, that the money remain in specified investment accounts until either we pass or they reach an age where they can also ER, should they be desirous to receive future cash gifts. The only exceptions to this would be to fund a downpayment on a modest first home, or medical emergencies. Should they decide to withdraw the money against those caveats, then I will just enjoy more toys, more international travel, etc. in other words, I do want to share my prosperity with my posterity, but I desire for them to use the fruits of my labors wisely. If they are gonna crap it away at the craps table, for example, they should expect no more.

Finally, a word or two about "why" I would like to share my prosperity with my kids. When they were young, 11 and 7 years old, I uprooted them from their lives and friends here in the US to take the assignment in Japan. It was to last a year, but extended over and over until we had been there for nearly 14 years. My kids did get to experience a lot of things due to my assignment that other kids did not get to experience. Still, there were myriad sacrifices for them as well. I guess to an extent, I would like to compensate for some of those sacrifices (although in reality the experiences they gained as a result probably more than compensate for what they may have missed).

R

 

[cranberryjoe]

I never included an inheritance in my retirement planning. Even if you think there might be a lot of money, you might not get what you expect.

When we had to put mom into a nursing home, if she had stayed there enough years the estate would have all gone to the nursing home. In the end, my share was enough to pull up my ER by about 3 years, but I wasn't able to count on that until the very end. My siblings and I were worried mom might have decided to change her will to leave it all to one of her end-of-life caretakers she was particularly fond of, but fortunately that did not happen. We were also worried the cat was going to get a share - long story, but that too did not come to pass.

 

[jollystomper]

For goodness sakes let her do it for your kids. It's her money, it's her wish, and in her mind it does balance out. If others are upset, tough. Old folks have generally worked hard for their money, should get enjoyment in giving it to loved ones......even if it upsets others. Your goal? Help Mom enjoy giving and the rest of her life! She trusts you.....be honored and accept her trust in your family

Thanks. Its not so much a matter of accepting her trust, I'm just not liking the mess that will occur. Our discussions are more about how much she plans to reveal to DW siblings. Based on what happened when DW's Dad passed away it could turn into quite the mess - which is 10+ years running and which we avoided by simply walking away from what DW was due and letting karma work its magic. I'm also spoiled because things are so much smoother with my siblings. But you are right, it is the right thing to do and that is not always the easy thing to do.

I actually kind of like this approach from MIL... she is not giving it to you or your DW, but your kids... I think this respects your decision not to live off of her money, but in MIL's mind kind of balances things out among all of her kids...

Thanks. Perhaps we were stubborn when younger, but we never wanted our parents to help us out... if we needed extra money one or both of us would rather get another job, or delay and spend less/save more. Call it the immigrant attitude.

Given how we think our kids/nephew/nieces generation are going to fare, it seems more sensible to let any inheritance from our parents go to them.

 

[MooreBonds]

I don't actually like that one at all. It is way too subject to abuse and could create risk. That is, someone has to decide what goes in each pile and sometimes that can be a matter of opinion. Also, lets say I know that X really really wants 2 particular items which maybe no one else cares about at all, but I really don't like X. Really easy for me to just put the 2 items in different piles and force X to have to choose between them.

There is actually a mathematical proof on dividing something up for any number of people, solved a few years ago. It's just a few pages worth of reading...I find it a fascinating story (with a great twist on how to make it envy-free and guaranteed to achieve fairness), with amazing implications for the world:

Dividing the Spoils

An 'average Joe' mathematician solved this famous challenge somewhat unexpectedly as he proctored a final exam for his class.

I was walking through the library in college and happened to see a back issue of Discovery magazine in the old stacks section from a year ago, with a picture on the cover of someone cutting cake.

I made sure to save a copy of that article for future reference.

 

[kcowan]

My Dad was a simple man and his estate was primarily his house and his cottage. My brother and I divided everything 50-50 and Dad compensated for the difference between the house and cottage value with a cash bequest. My brother complained that the cottage plus cash was too generous when compared to the house. I volunteered to switch the bequests while Dad was alive. Dad agreed and Bro declined. So we avoided an argument simply by caving to his demands (potentially).

When Dad died, it turned out that the house was worth more so Bro was happy with his choice. Bro lived in the house which was why he got it.

Of course it could have been handled with professional appraisals but my Dad was a simple man.

 

[BigNick]

Wow. When my mother passed away, the executor was my very trustworthy brother. We each told him what, if anything, we wanted. He had those (very few) things that were wanted appraised, and sold or donated the rest, adding any money obtained to the estate.

There was ZERO bickering, probably because we mourned her death for a long time (and probably still are, a little). We were far too fragile to bicker with those she loved. Every single one of us would have given up all of it, if we could have exchanged it for just a little more time with her.

We have been very lucky too. Both DW's and my inheritances were straight 50-50 splits between two siblings, with a house to sell and some accounts to close or stocks to cash in. My sister has been a wonderful executor (my Dad executed several wills for older relatives; we kind of do "duty" in our family, and I don't live in the country where my mother died). On the other side, BiL and DW delegated the job to a probate company who seem to have done an OK job (although I just checked their online reviews and I don't think I've ever seen anything worse rated on the internet!).

DS sent me an e-mail today to tell me that she was sending me $4K because one small holding of stock that was in our mother's will looked good to her, so she kept my half rather than cashing it in. Apart from that, everything has been liquidated. DS and I have never been close, but I have total confidence in her honesty on this (and, if that made any difference, she knows that I got regular updates on the state of the numbers from our mother when she was alive!).

 

[akck]

When my mom died, she left a small inheritance to us. My sister was the executor, and she upped the amount to each grandkid from $100 to $1,000, which we all agreed. We had no problem with the remaining split, which she also slightly changed.

My wife isn't expecting anything from her dad since he remarried. Supposedly, there was a pre-nuptial, but we think it's gone by the wayside and her kids will be included, maybe to the point where she and her sister are excluded. In any case, my wife will use any inheritance to pay off any remaining student loans the kids have.

 

[rodi]

It can definitely get messy if the person married more than once.

Grandma A divorced the father of her two children (Grandpa A), and a few years later married Grandpa B.

Grandpa B adopted my dad and his sister and raised them as his own. He did not have any biological children of his own... but legally, my dad and sister were his through adoption. As I was growing up I knew him as my grandpa... (and knew there was another grandpa on that side, as well.) My dad called him dad.

Grandma A died after my dad and his sister were well into adulthood and had children of their own. (I was about 7). Grandma A and Grandpa B were married for 30 years when she died. We continued to have a relationship with Grandpa B because he was dad/grandpa.

Grandpa B married Grandma B. Grandma B didn't really like us. Not sure why. Grandpa B tried to maintain the relationship with us.

Grandma B had adult children. No minor children. They were married 30 years when she died.

Grandpa B married Grandpa C. Prenup involved. Divorce followed less than 5 years later. Divorce settlement clearly stated divorce ended all claims on future estate. Grandma C was not included in the trust/estate.

Grandpa B was long lived - lived to 92. He also invested well, and amassed a decent amount.

At the funeral it was interesting. There was very little mention of Grandma A (dad's mom)... to the point of ridiculousness. (He was married to her for 30 years). On a memory board there were literally pictures with her cropped out. (Picture board put together by Grandma B's kids/grandkids). No mention of my aunt or dad during the eulogy. My sister and I were the elephants in the room. It was pretty darn chilly for us. Only Grandma C and some of the Grandpa B's younger siblings acknowledged us... Grandpa B was the oldest of a large family - his youngest brother was the executor. He was getting button holed by all of Grandma B's children and grandchildren. They seemed upset that my sister and I were there. They must have been very upset that the trust included bequests to my aunt and my dad (and therefore my sister and I since my dad had already passed.) My dad's share was small because Grandpa B knew my dad had done well for himself and didn't need the money. My aunt's share was bigger because she didn't doesn't have a lot of assets... he wanted to provide for her.

I've never seen so much maneuvering/lobbying etc over an inheritance. I wasn't close to Grandma B - but had met her often enough through the years... But her kids/grandkids... oye - what a bunch of money grubbers.

 

[luckydude]

My dad recently passed away and I received a substantial inheritance. DW and I achieved FI three years ago so we don't need this money for a comfy retirement. However, it did push me to join the class of 2013.

Both sides of my family come from money so I've seen too many examples of how inheritance can cause infighting, jealousy, lawsuits, etc. A lot of times, money is used to control heirs, to punish and reward certain behaviors, or to redress perceived wrongs. Invariably they backfire and only make things worse. Sometimes things are planned out well beforehand, but circumstances change and they end up with unintended consequences. And then there are the issues of how much and when to bequeath, and how to do it without sapping heirs' motivation or skewing their perspectives.

I hope to be able to avoid these pitfalls as I plan on how to pass down this legacy to my kids. However, human nature being what it is, I have no illusion that at some point in time, I may yet fall into some of these very same traps.

 

[BigNick]

Just explain that money is fungible.

I did. She understands that. But it's still her special pile.

 

[Texas Proud]

It can definitely get messy if the person married more than once.

Grandma A divorced the father of her two children (Grandpa A), and a few years later married Grandpa B.

Grandpa B adopted my dad and his sister and raised them as his own. He did not have any biological children of his own... but legally, my dad and sister were his through adoption. As I was growing up I knew him as my grandpa... (and knew there was another grandpa on that side, as well.) My dad called him dad.

Grandma A died after my dad and his sister were well into adulthood and had children of their own. (I was about 7). Grandma A and Grandpa B were married for 30 years when she died. We continued to have a relationship with Grandpa B because he was dad/grandpa.

Grandpa B married Grandma B. Grandma B didn't really like us. Not sure why. Grandpa B tried to maintain the relationship with us.

Grandma B had adult children. No minor children. They were married 30 years when she died.

Grandpa B married Grandpa C. Prenup involved. Divorce followed less than 5 years later. Divorce settlement clearly stated divorce ended all claims on future estate. Grandma C was not included in the trust/estate.

Grandpa B was long lived - lived to 92. He also invested well, and amassed a decent amount.

At the funeral it was interesting. There was very little mention of Grandma A (dad's mom)... to the point of ridiculousness. (He was married to her for 30 years). On a memory board there were literally pictures with her cropped out. (Picture board put together by Grandma B's kids/grandkids). No mention of my aunt or dad during the eulogy. My sister and I were the elephants in the room. It was pretty darn chilly for us. Only Grandma C and some of the Grandpa B's younger siblings acknowledged us... Grandpa B was the oldest of a large family - his youngest brother was the executor. He was getting button holed by all of Grandma B's children and grandchildren. They seemed upset that my sister and I were there. They must have been very upset that the trust included bequests to my aunt and my dad (and therefore my sister and I since my dad had already passed.) My dad's share was small because Grandpa B knew my dad had done well for himself and didn't need the money. My aunt's share was bigger because she didn't doesn't have a lot of assets... he wanted to provide for her.

I've never seen so much maneuvering/lobbying etc over an inheritance. I wasn't close to Grandma B - but had met her often enough through the years... But her kids/grandkids... oye - what a bunch of money grubbers.

Yep, those split families are sometimes tough... more so if there is a true split from one to another... I had a friend who's dad died.... they had nothing to do with him for 15 or more years... found out he had remarried and had some more kids...

The second family was not happy when they found out about the first... which from what I can guess from taking to my friend they were never told he had a prior family...


In your example, it does seem a bit strange as nobody was his blood relative when it comes to kids/grandkids... however, it should be his wishes that are followed.... that is if he had a will (or trust).... which it seems he did....

 

[Sesq]

I do not plan on it, but I'll admit I am curious.

My parents are frugal and did well. But they are very tight lipped on finances, so me and the siblings are clueless. One brother thinks we will one day need to write checks to help (which is fine, but I think unlikely).

Since I learned from them, am on my father's first career path, and personal finance is an interest of mine, I am curious in part to learn more about them.

Ultimately none of my business, I don't need it and don't count on it.

 

[MuirWannabe]

Grandpa B married Grandpa C. Prenup involved. Divorce followed less than 5 years later.

Ok. I admit I needed a flow chart to correctly follow all these family relationships in your detailed example.

But I did find this particular relationship......interesting. Such is the modern family

 

[Texas Proud]

Ok. I admit I needed a flow chart to correctly follow all these family relationships in your detailed example.

But I did find this particular relationship......interesting. Such is the modern family

I took it as a typo.... maybe I was wrong...