Taking Inheritance into Account for Retirement Planning

[Alan]

Not quite true AFAICS: see here, which suggests that for "permanent" nursing home care, if there's no surviving spouse living in the home, "its value can be taken into account" (aka, they can force you to sell it).

BTW, your use of "England" is correct here. I know you know that. But the changes in the UK's governance structures over the last 10-12 years can't have made things much easier for the average American to understand... see also "Lockerbie". :roll:

It looks like these are the new rules coming into effect in October this year so I stand corrected.

The only reason I believe that the rules had changed was because back in 1998 DW's parents signed over the ownership of their house to their 4 children to avoid the value in the home being used in means testing for permanent nursing home care. (BIL is a lawyer specializing in civil law).

MIL died in September last year and FIL in June this year. The house has now been sold and capital gains tax will be due. BIL said that the means testing law had changed since 1998 so they didn't need to have transferred the house. (also, neither of them ended up needing nursing home care).

As you point out, the rules are changing again and I think with any forms of taxation, financial planning based on future tax policy is pretty dicey. If the house had stayed in their name there would be no tax due at all since the total estate is well below the threshold that would trigger any taxes.

 

[SecondCor521]

In my case, I will probably receive 1/3 of my parents' estate (two sisters and my parents have always given me the impression they are splitting things evenly). Right now that would be roughly 2-3X my FI requirements. Thus I am unfortunately currently in the situation that my parents death would result in me being FI. I find that potential unappealing on multiple levels, which is one of the main reasons I am trying to be FI ASAP.

2Cor521

 

[growing_older]

I received a modest inheritance when my grandparents passed and I am expecting a substantial amount when my parents do. However I do not make any plan that is dependent on it and I am concerned that my siblings that do will be disappointed. It's possible the inheritance could be consumed by medical costs or (more likely) mostly given away in charitable bequests. In any case, family history leads me to think I will be about 80 years old before my parents demise (long life on both sides, started their family when still quite young) so I better have my own retirement plan. Since I don't expect to need the money, I'll probably turn it into some future generation educational fund, or perhaps they will do that themselves.

I suppose I should be aware of the possibilities and prepared for whatever could happen, but it does feel ghoulish to me to be thinking of what I might get when they are gone. It's unsettling to realize that I would be FI based on the inheritance, so I'd rather get there on my own and not have to second guess it. Besides, I'd rather they stick around as long as possible.

 

[mews]

My parents died when I was 25, and I used the small inheritance as a downpayment on my place.

No more $$ heading my way - no rich uncles, no lottery-winning sibs, nada...

I just have to live long and prosper!

ta,
mew

 

[chinaco]

...
Yes I know it may be considered insensitve, greedy, even tacky to talk about getting other people's money upon their demise. ...

You didn't provide enough detail about the scenario. Is it an irrevocable trust with you named in it... that is one thing. If you are in a will or a bene.... that is entirely different

Assuming it is a Will, Generally speaking...


Your description is perhaps accurate in a social norm context.

In a financial planning context, the accurate description would be: "Foolish"!

Anything can happen, there is no guarantee!

You could be cut out of the will later, you may not be in the will now, dispute over the will. Unknown creditors, drawn out health problem, on and on ad nauseam.

IMO - Plan based on your ability... your wages and assets (conservatively). If the windfall happens, you then adjust your plans.


Consider this: You go along for years planning on the windfall, it doesn't occur or perhaps it is much less than expected... now time has passed and you are much older without the time to make up the shortfall. The only options, cut your lifestyle or work much longer!

 

[CoopersBeach]

You didn't provide enough detail about the scenario. Is it an irrevocable trust with you named in it... that is one thing. If you are in a will or a bene.... that is entirely different

Assuming it is a Will, Generally speaking...


Your description is perhaps accurate in a social norm context.

In a financial planning context, the accurate description would be: "Foolish"!

Anything can happen, there is no guarantee!

You could be cut out of the will later, you may not be in the will now, dispute over the will. Unknown creditors, drawn out health problem, on and on ad nauseam.

IMO - Plan based on your ability... your wages and assets (conservatively). If the windfall happens, you then adjust your plans.


Consider this: You go along for years planning on the windfall, it doesn't occur or perhaps it is much less than expected... now time has passed and you are much older without the time to make up the shortfall. The only options, cut your lifestyle or work much longer!

Sorry, I should have clarified my intent in posing the question, which was to get the perspectives of the folks on the board, rather than seeking specific advice regarding my personal situation.

Having said that, let me also share my perspective, as others have on this board: my parents have very substantial assets, a small percentage was given to me and my sibling when we were kids. For retirement planning purpose I do take this into account, as it is under my name and I have full control.

The rest are held in living trust (with me and bro as beneficiaries) as well as shares in family's corporate entity. For retirement planning purposes I do not take these into account. Wife and I expect to be able to hit the "magic number" in 12 years on our own and retire comfortably without counting on these assets.

 

[P.S.]

No, b/c then I wouldn't be motivated to work.

Plus, you never know what will happen.

Third, I think it's more than a little distasteful. I know my parents were more than a little disgusted, when my brother (who was then recently married and who historically did not give a rat's patootie about money) asked for access to his "trust fund" for the purposes of consolidating with his new wife. He was informed, LOL, that he did not have one, while DIL is now regarded as a money grubber.

 

[mews]

I know my parents were more than a little disgusted, when my brother (who was then recently married and who historically did not give a rat's patootie about money) asked for access to his "trust fund" for the purposes of consolidating with his new wife. He was informed, LOL, that he did not have one, while DIL is now regarded as a money grubber.

Wow! I wonder

a) why he would think he had one
b) why he would tell his wife he had one, without checking

well, it takes all kinds ...

ta,
mew

 

[Bestwifeever]

...My parents have very substantial assets, a small percentage was given to me and my sibling when we were kids. For retirement planning purpose I do take this into account, as it is under my name and I have full control.

The rest are held in living trust (with me and bro as beneficiaries) as well as shares in family's corporate entity. For retirement planning purposes I do not take these into account. Wife and I expect to be able to hit the "magic number" in 12 years on our own and retire comfortably without counting on these assets.

It sounds like you're not counting on any future inheritance to make your retirement possible, so it really doesn't matter whether you figure it in or not (it's not like our RE calculations are official documents we are presenting to someone for approval before we can do it). It must be a nice feeling though to see what you might be able to enjoy while you achieve it on your own.

No inheritance for me; DH's family may/may not have something small coming which I hope he will use for whatever he wants, but not something we would depend on for our future.

The only person I know who really counted on an inheritance was quite a spendthrift. He did receive a nice inheritance and he did spend it just as fast as he could.

 

[avengerki]

I don't count on an inheritance to fund my ER I currently have the number set needed for ER to include additional funds to help my parents out since I know they are tight financially. If they pass before I ER then I will need less.

 

[TomG]

I am absolutely expecting a nice inheritance, despite all the reasons why I shouldn't

Parents are likely going to live 20 to 30 more years and could very easily spend everything they have, either on traveling the world, medical needs, scammers, or whatever. They could cut up their estate to a lot more than just myself and my sister

Yet, to me they are rich (getting $100k when they die, to me, would go a very long way; their bank accounts are funded even higher than that and the house they own may again exceed the million dollar level over the next decade)

Also, they do express that they have a strong value on passing on something to their children. And they're my best friends

So how do I take it into account? I see it as another asset likely to come due in my 60s. It could fall apart, just as social security could, just as I could lose my ability to work two days a week. . .

Which means all I need to do is figure out how to relax as much as possible until then

 

[Keim]

So how do I take it into account? I see it as another asset likely to come due in my 60s. It could fall apart, just as social security could, just as I could lose my ability to work two days a week. . .

I echo this viewpoint.

The assets may be there for me in the future, but my planning at this time is not based on them.