Planning to receive an inheritance

[BigNick]

This subject might not to be to everyone's taste, I guess.

So far, when planning how big the pile needs to be, I haven't taken into account how much we might inherit. Having done some thinking about it, perhaps I should do.

My Dad is gone, my Mum is 86 and in reasonable health. My parents have both always been very open about their finances and so I know her net worth is about 400K. Her estate will be split between me and my sister.

Mum's sister is 90, in great shape, and is probably worth 600K. She has no children of her own. The most likely candidates for her will are her four nieces and nephews, of whom I am one. I don't think that she will leave all the money to her cat or the nice people from the Meals on Wheels service, but you never know.

DW's parents are 89 and 84, and not in good shape. (MIL (84) is bedridden after multiple strokes; FIL (89) is worn out from caring for her and has heart problems. DW hopes MIL will go first but we rather fear that FIL will keel over before her.) I estimate their net worth to be about 250K, mostly in their house. This will be split between DW and BIL. (BIL has power of attorney for both parents, which is a good move.) An annuity to pay for nursing care for MIL would cost about 70K.

All of that means that at some time in the next ten years or so, we are likely to inherit somewhere between 240K and 480K. This will make quite a difference to the size of the retirement fund. In fact, if I knew for a fact that I had 300K coming my way in 5 years, I would be in a position to FIRE today.

Anyone have any experience with this? I feel slightly grubby for even mentioning it, but as I mentioned, our family has always been pretty up-front about the whole thing. (DW is from a working-class background where having enough money to pay for your own funeral was the extent of most people's retirement planning...)

 

[figner]

I wouldn't take any inheritance into account in my financial planning, unless there are steps you can take in advance (like tax planning) that would have an impact on receiving the inheritance. Too many possibilities that it won't pan out: parent needs extremely expensive health care, lives to be 100+, remarries after death of spouse, gets scammed by financial advisor, etc...

 

[Khan]

Don't plan on an inheritance until the check has cleared.

 

[easysurfer]

I wouldn't take an inheritance into account either. If you do get one, consider it a bonus and treasure the kindness that you were thought of in the will.

 

[W2R]

Yes, I have some experience with this.

Because of this I agree with Khan, figner, and easysurfer. Until the check clears the bank, I would urge you not to count on an inheritance. You never know what life will bring. End of life expenses can be tremendously high, and of course some older people change their wills at the last minute, whether that seems likely or not. If something should happen so that the inheritance is not received, you still want to be be able to think kindly of the parent and not think of them with anger and fury for "ruining" your plans.

Ironically, the prospect of possibly inheriting money means extra work for someone planning retirement. While you can't count on that money, and need to plan your retirement without it, you still need an alternate plan for handling that money should you come into it. So, you may want to develop dual financial plans. New heirs can be tempted to "blow it all" on houses, boats, cars, airplanes, etc but it helps to visualize how you would invest it and to have that all planned out.

 

[nun]

I'm anxious to ER and, embarrassingly, I have found myself adding up what I'll inherit from my Mum. I think most people do this, but then feel guilty and push it to the back of their mind. My mum is 86 and she's starting to get the common chronic conditions of old age including high blood pressure and low level diabeties, so the inheritance has crossed my mind as the $120k I might get would put me over my ER threshold. Still my position is that it should never really be considered in ER planning, there are just too many variables and most of all it's creepy and time with Mum is worth more than anything!

 

[Telly]

snip
This will make quite a difference to the size of the retirement fund. In fact, if I knew for a fact that I had 300K coming my way in 5 years, I would be in a position to FIRE today.

It's a nice thought, financially-speaking... but even if it were a "fact", would you really bail out today?

Even with all those eggs, you still might not get a chicken dinner after all. Best to pack your own lunch... you can always use the chicken as a dessert, if it arrives

 

[FIREd]

I will eventually receive a sizable inheritance in the 7-figure range (my dad opened up about his estate and intentions a few months ago). Most of it consists of European real estate. While I do not include that inheritance in my FIRE planning, I now make sure to underweight European currencies and real estate in general in my own portfolio.

When planning for FIRE, my wife and I pretend there is no inheritance coming. We save over 70% of our net income and we will reach FIRE in our own right (at the 3% SWR level) years before the inheritance comes our way. We regard my inheritance as backup just in case our plan fizzles out later in life.

 

[73ss454]

Seems like the only one in my family likely to leave an inheritance is me. (heh)

 

[BigNick]

It's a nice thought, financially-speaking... but even if it were a "fact", would you really bail out today?

If I knew - say, I had a CD which would only mature in 5 years and I couldn't touch until then? Yes, I would.

The point of my OP was to show that I have several plausible inheritance sources, and I guess that many people may have more than that. I'm not going to assume that I will get the maximum possible out of all of them, but equally, I would hate to spend 3 years too much at w*rk and then find that I could buy a yacht or a Ferrari which I don't want.

To me, the possibility of X amount being added to the pile with a varying degree of probability is the same, whether that's based on a series of possible succession outcomes or three good years on the NASDAQ. While I would love for all of the above-mentioned people to live for as long as possible (except MIL, who has already gone in all but body), I don't feel that it should be taboo - or considered wildly optimistic - to assume that out of all of those situations, the most realistic outcome is $0.

But maybe this is all influenced by the fact that I just got back to w*rk after a week's vacation to 164 e-mails, 90% of them BS...

 

[W2R]

Still my position is that it should never really be considered in ER planning, there are just too many variables and most of all it's creepy and time with Mum is worth more than anything!

That is so true!! I miss my mother and think about her every day. At age ~98 she had to go, but to me the world is a lesser place without her.

Anytime I want to see her I can, though - - by looking in the mirror. When I want to hear her voice, I listen to my own. So much of her remains, in me, and that is a comfort. She still inspires me in so many ways.

 

[CuppaJoe]

....
Mum's sister is 90, in great shape, and is probably worth 600K. She has no children of her own. The most likely candidates for her will are her four nieces and nephews, of whom I am one....

Anyone have any experience with this?....

Experience? So far I have survived many aunts and uncles and, of course, my parents. Ditto to what others say about not counting your chickens. Four of my aunts had no descendants; I didn't see their wills but enough time has gone by that it is safe to assume I inherited nothing. Most of them outlived my brother which is another thing to consider.

It always amazes me that so many people on this forum think they can estimate other people's net worth as I and members of my family don't share that kind of info with friends or family. I was in my parents' wills and the amount I received made no difference in my retirement planning, but it was nice to be included. I did the routine of spending a small percentage of it right away as mad money--I still have some cashmere sweaters that work very well in my retirement wardrobe as they did as part of the work wardrobe. Wearing them reminds me of when and why I bought them.

 

[Khan]

Might have told this story before: Mother's sister (never married, no children) wanted to leave something to my sister. Over the years, Sister got various papers to sign and return.
Aunt died at 89. Towards the end, Sister was sometimes sending money for caretaker.
Sister's inheritance: a box full of papers and photos.

 

[BigNick]

It always amazes me that so many people on this forum think they can estimate other people's net worth as I and members of my family don't share that kind of info with friends or family.

In the two cases which aren't my Mum, I've included only an estimate of the market value of their houses. My Mum proudly shows me the bank statements every time I go round there.

 

[NW Landlady]

We have my MIL living with us. She is in her early 80s. As is common during those later years, she has started to have healthy/mental issues that are degenerating & we are now faced with the probability of putting her in a home healthcare facility. She has $400k in savings & we think none of this will end up in childrens hands as inheritance, because it will be gone after 5 years or less of being in a home. Longevity runs in her family, so does Alzheimers.

 

[BigNick]

We have my MIL living with us. She is in her early 80s. As is common during those later years, she has started to have healthy/mental issues that are degenerating & we are now faced with the probability of putting her in a home healthcare facility. She has $400k in savings & we think none of this will end up in childrens hands as inheritance, because it will be gone after 5 years or less of being in a home. Longevity runs in her family, so does Alzheimers.

You should perhaps look into what (in the UK at least) is called an "immediate needs annuity". In essence, you make a single payment which is a certain multiple of a year's nursing home care, and the insurance company pays out for the care until death. See for example here.

 

[heyduke]

yep... put me in the camp of... everyone in my family is waiting for me die...

 

[ronin]

A potential inheritance of maybe 250K within possibly the next 10 yrs. includes 3 too many what-ifs to do much more than file it away for future consideration in our case.

It may bring a bit of a good cushion for my spouse's later years as her family regularly bumps up against (and occasionally) over the century mark.

 

[LOL!]

Here's how it worked when my MIL died:

Stock market tanked in the year before, so we lost a ton of money in the stock market.

Inherited some money, but not enough to recover the losses in the stock market, so it just seemed like a "That's nice, but no big deal."

Retirement plans stayed mostly on track.

So I predict just before you inherit any money, your retirement assets will have dropped even more. There is no way the inheritance will have a material affect on your plans even though you think it might.

 

[FUEGO]

I'll probably get something sizable from my parents. But they are still in their 50's (sorry to make fellow forumites feel old... ). So I don't include receipt of any bequests in my FIRE plan. It's kinda like SS - I'll probably get it, but I can't necessarily count on it.

I have been helping my parents, grandparents and uncles lately with some minor estate planning and estate structuring, so I kind of know what will happen eventually. Like when I ask them "what do you want to do with grandma's house when it becomes your house?" and they say "well, it or the proceeds from it will be yours one day".

 

[Texas Proud]

For me, there is not enough to worry about... there are 6 kids if my mother dies... there are 5 others if my oldest sister dies... there are 5 others if my oldest brother dies (and nobody thinks he will leave it to us even though he has no family of his own... we just don't see him that much anymore... his choosing)... all others have kids, so nothing coming from them...

And as someone pointed out... I lost more in a month during the crash as I would get from my mom... and a good number of times more than from what my sister would leave..

So, to me it is somthing that will be nice... but not enought to make a difference in my goal...

 

[haha]

Sometimes there can be positive surprises too. One of my brothers died last fall. He was deeply in debt, so sister, BIL and I did some emergency maneuvers in his final days to be sure there was money to bury him.

After he died and the smoke cleared, turns out he had transferred by beneficiary designation about $150,000 to my other brother -completely out of the reach of his creditors. This was slightly annoying, as the one who got the money was one who was no help and in fact was a pita during brother's illness. I did at least get a laugh out of the CC companies being the ones to pay for several years of bar bills, expensive dates, and trips. I think that the old dog might have planned it that way.

Ha

 

[jIMOh]

Don't plan on an inheritance until the check has cleared.

Don't plan on any money until check has cleared.

I will add one other comment:

To me much of the guesswork in planning is the accumulation of money. Between expenses today, market volatility savings rate, and amount current saved, those variables change (some more than others).

Those factors will change and therefore change "when" retirement can happen on their own accord. An inheritance is just one more accumulation unknown which cannot be factored in until you have the money.

It might be a turbo boost to allow you to retire once the check is cashed. It might shave 5-10 years of w*rk if it is received early enough in life.

My parents have told me their assets get split 25-25-25-25 to each kid. No idea how the money is being passed on (trust, beneficiary, cash assets etc...) and no idea when parents will pass (I am 37, parents are 72 and 67, each in moderate health) so its possible I will retire before money is received anyways.

Its not part of the plan, but if (and when) it happens, it just gets added into the buckets of money I have already (I assume some money inherited will be in IRA form and some will be cash, but I don't even know that). I will deal with the taxes when it happens (oh well) and not count on the money at all.

 

[Dawg52]

I would just consider an inheritance as gravy. Don't plan on it though.

 

[rescueme]

I planned on receiving nothing from my parents.

They did not disappoint me ...