Future Inheritance Considerations in FIRE?

[kite_rider]

Interesting thread, my plan has always been to 'die broke' but not be broke the day before.

A potential inheritance complicates the plan a little bit since my MIL has a fair amount of assets and the same goes for my own aging mother.
In the mean time, MIL wants DW (and me too I guess) to spend more time with her at her home in the LA suburbs. DW's family bought it new in the 80's and it's overdue for a re-model. So MIL is hoping DW will do a fairly major remodel (at MIL's expense) and for the effort she will give us the house when she dies. We're thinking this might not be such a bad plan since the property taxes, utilities, etc. on the house are really cheap due to Prop 13. I'll probably be posting a separate thread about CA prop 13 and how a remodel affects property taxes. But curious to hear what others think of this proposal.

 

[Keim]

We may also get an inheritance. Parents on both sides have done fairly well. We've taken the "assume it won't happen" stance. Live in first house, bought 20 years ago (paid off), used cars, shop at thrift stores and sales, etc.

The only time its really factored into a decision was when we bought a foreclosed vacation remote mountain cabin for mid 5 figures. It sat empty from the 09 crisis to 2018. Said cabin required an adjustment to saving rate. DW and I commented that you only live once, and we MIGHT inherit some money someday. We still made sure said purchase didn't overly impact savings. I guess you could say the idea eased our minds in taking a calculated risk. Justified the decision with the knowledge that we got it at a 40% discount. After fixing it up, we could likely cover any financial mistake by the profit.

 

[gwraigty]

Interesting thread, my plan has always been to 'die broke' but not be broke the day before.

A potential inheritance complicates the plan a little bit since my MIL has a fair amount of assets and the same goes for my own aging mother.
In the mean time, MIL wants DW (and me too I guess) to spend more time with her at her home in the LA suburbs. DW's family bought it new in the 80's and it's overdue for a re-model. So MIL is hoping DW will do a fairly major remodel (at MIL's expense) and for the effort she will give us the house when she dies. We're thinking this might not be such a bad plan since the property taxes, utilities, etc. on the house are really cheap due to Prop 13. I'll probably be posting a separate thread about CA prop 13 and how a remodel affects property taxes. But curious to hear what others think of this proposal.

My primary thought is that it's great that your MIL is interested in updating the house. Some elderly folks (certainly not anyone at ER ) don't want to change anything even though they have plenty of money. There may be various reasons for this which aren't worth getting into for the sake of this discussion.

I know the focus of this topic is financial inheritance. But sometimes the heirs are wondering how they're going to unload this house where nothing (even flooring) has been updated since 1976 and things that have broken have gone without repair to the point that certain areas are a lawsuit waiting to happen. Yet the old folks think it's fine to make it their heirs problem.

But I digress. Whether you should move into the house is a matter you can decide later. Keep it in mind when making your decorating choices though.

 

[gcgang]

Thanks for the feedback to this point, and hope to hear more.
I fear I wasn't clear in my question as to my intentions or motivations.
DW & I are very blessed and comfortable leading into our FIRE next year. So hearing my question called 'moneygrubbing' couldn't be further from the truth. I have zero intention of discussing anything with the in-laws.
Since I'm asking strangers about their own experiences, I didn't think anyone would be offended by a situation we'll eventually have to face.
My reason for posting was primarily wanting feedback from folks who've dealt with this issue, not just opinions on how I should handle it, or whether to just forget about it. It seems prudent to keep future windfalls in mind when RE, whether you're counting on them or not.
I liked the idea of planning the correct way to handle any future proceeds, and will definitely do that. We have two grown sons (and hopefully grandchildren some day) so I can see a potential Trust for college tuition or first homes.
I also like looking at it as a potential safety net for unforeseen issues and live the life we have planned.
Thanks to all who've taken time to respond!

Just for a macabre version of "fun", run a few scenarios showing a range of inheritance amounts received now-10 years in the future. See what the financial implications are. Have a discussion (with spouse) about what you'd do different. For example, if you received $5mm today, what would you consider doing?

Hopefully this would help you be prepared if it does happen.

 

[street]

DW's parents own real estate valued around $3 million (farmland) When DW's mother died three years ago her sister stepped in and handled everything, very secretively. DW didn't get a copy of her mother's will and the topic hasn't even come up with her sister or father. We're just assuming DW's father, age 93, inherited everything and DW will find out when (and if) she's in his will someday. I told DW to not even ask about her mom's will for fear she'll be looked at as a money grubbing, greedy heir want-to-be. We reached FIRE without any help and have no plans on using any potential inheritance in the future. I've seen too many people lose their ambition waiting for their parents to die. Please know I'm not talking about you, it sounds like you've got your priorities in order. Best wishes to you.

I wouldn't bring the topic up if I were you, and I wouldn't let it influence your FIRE plan.


Also, some people really change when a loved one dies, especially when there is money involved. Try hard to keep peace in the family.

Very well said.

 

[Sojourner]

My DW's parents are fairly wealthy and in their mid 80's. While in pretty good health, we recognize at some point they will not be with us. At that time, DW and her brother will share a fairly sizable inheritance (that I estimate to be in the millions).

This brings to mind what happened to my dad when his "wealthy" uncle died many years ago. Dad was the executor of his estate, and his uncle had always implied my dad was going to receive a large portion of his estate (they were very close) and that the estate was quite sizable. What actually happened was—after being his uncle's close companion and trusted caretaker for a number of years while his health was declining—my dad ended up getting only a small-ish percentage of what turned out to be a surprisingly modest estate. The uncle bequeathed the majority of his money to distant relatives (cousins, second cousins, etc.) that my dad had hardly ever heard of. Luckily, my parents never really counted on getting anything from this uncle in order to be able to retire or to live a life of luxury, even though it would have been all too easy to be seduced by those "great expectations" given how close they were to Dad's uncle.

TL; DR: Don't ever make plans for the future that rely on any particular size (or timing) of inheritance.

 

[Lienlord]

Just for a macabre version of "fun", run a few scenarios showing a range of inheritance amounts received now-10 years in the future. See what the financial implications are. Have a discussion (with spouse) about what you'd do different. For example, if you received $5mm today, what would you consider doing?

Hopefully this would help you be prepared if it does happen.

OP here. Thanks for this suggestion, and probably what I'll do. A few more details...I'm an accountant, so working with $'s and financial planning is kind of second nature to me.
For anything that "might" happen financially I'll have several different "what if" scenarios in Excel!

DW's folks are 3rd generation wheat farmers and cattle ranchers, so their assets are in land, stock and equipment. They also have extensive commercial real estate investments.
I imagine it's all in a trust of some kind, but I've never asked.

I appreciate the input from everyone, and the consensus is to not include the future proceeds in any kind of planning. Fortunately, it has never played a factor in our plan to RE next February. Neither has Social Security, but in 10-15 years we'll have to make a decision on that too. Good thing I've got several "what if" scenarios for that too!

 

[robnplunder]

I appreciate the input from everyone, and the consensus is to not include the future proceeds in any kind of planning. Fortunately, it has never played a factor in our plan to RE next February. Neither has Social Security, but in 10-15 years we'll have to make a decision on that too. Good thing I've got several "what if" scenarios for that too!

Certainly, it's a good thing to muse about. I was lucky in that none of my parents, or DW's parents have anything to give away. Knowing two of my siblings, it's a blessing that we didn't have inheritance to deal with.

 

[iloveyoga]

I'd proceed as if inheritance money did not exist. Late stage medical care can burn through lots of dollars. If there's some left at the end, consider it gravy.

+1

 

[joeea]

But I'm sure this has come up with others, and curious if it played any part in your RE calculations or just plan as if it doesn't exist and deal with it then.

It doesn't exist yet.

There is so much that can happen between now and then. Market changes, spending changes, mood changes, family situation changes.

Plan on nothing. Deal with whatever actually happens when and if it happens.

 

[Dtail]

I am in charge of my parents' investments, so am fully aware of what could be coming down the road. As pointed out by others, many things can happen, although both my parents have "75-100%"LTC coverage, plus an irrevocable trust for half their assets.

Nevertheless, I/we FIRE'd without any of a potential inheritance used in the retirement calculators or future planning.

 

[audreyh1]

I am in charge of my parents' investments, so am fully aware of what could be coming down the road. As pointed out by others, many things can happen, although both my parents have "75-100%"LTC coverage, plus an irrevocable trust for half their assets.

Nevertheless, I/we FIRE'd without any of a potential inheritance used in the retirement calculators or future planning.

One thing too. Parents can live for a longtime. You don’t want to wait until they pass to retire.

 

[Chuckanut]

One thing too. Parents can live for a longtime. You don’t want to wait until they pass to retire.

+1

My buddy Charlie in the UK has been waiting not to retire but to take over the family business. But, his mom who is 90 shows no sign of wanting to retire. (His dad hasn't been very involved for years.) It looks like Charlie's oldest son may end up running the show if mom continues to hold out.

 

[FI_by_2023]

Yes, tough situation, fortunately it appears Charlie has descent place to live and a bit of help to support him as he ages.

 

[DrRoy]

DW will inherit at some point, no more than 10% of our NW. We have never done any serious planning with regard to it. She has mentioned gifting some.

 

[robnplunder]

Yes, tough situation, fortunately it appears Charlie has descent place to live and a bit of help to support him as he ages.

Yeah, he will inherit plenty of silver spoons to rely on when his DM croaks. He should count those on his firecalc calculations.

 

[GalaxyBoy]

I'd proceed as if inheritance money did not exist. Late stage medical care can burn through lots of dollars. If there's some left at the end, consider it gravy.

This is what I did. When DF passed a couple of years ago I wound up getting a windfall but I don’t regret not taking chances by retiring earlier. Now I feel even more secure about my own twilight years down the road.

 

[Markola]

Reading the many stories in this string, and having parents nearly 80, it’s a wonder to me that anyone ever receives an inheritance. Money always seems to seek to flee its owner. There’s on old, universal truism about “shirtsleeves to shirtsleeves in 3 generations.” https://www.tennessean.com/story/mo...sleeves-shirtsleeves-3-generations/639116001/

 

[Bogie]

Even though it's touchy to talk to parents with assets they need someone who cares about their wellfare. As they get older they are at more risk of unscrupulous financial people. My parents went to some of the "financial dinners" and were talked into annuties. In addition the financial planner attempted to get them to sign a contract where he would get 3% per year for equity accounts and 1% per year for non-equity income at a time that CD's were earning less than 1%. In addition, if signed, there was to be a 10% fee to leave. Fortunately they ran it by me before they committed to the guy. Also, they had a IRA's which when I looked at the beneficary designations they had a trust as beneficary which was not what they wanted. In my opinion the beneficiaries need to know about the finances as parents get older and I see nothing wrong with considering this in their own financial planning. Yes, they can abuse the relationship but who else can their parents trust. The parents know if they can trust the beneficiaries.

 

[Andre1969]

One thing too. Parents can live for a longtime. You don’t want to wait until they pass to retire.

The women on my Mom's side of the family seem to live a pretty long time. Grandmom passed away at 91. I still have a great-aunt from that side of the family, who's going to be 96 this year, I think. And a cousin who's 94.

They also tend to stay pretty healthy, right up until the end, and then go pretty quickly so they usually don't run up too much in the way of medical bills. Although, that might simply be a normal function of old age...maybe the older you are once you finally start to go downhill, the quicker the process is? My Granddad, on my Dad's side of the family, made it to about one month shy of 102. From the time he was taken from his home until his death, I think was only about 12 days.

My Mom just turned 70 this year, and she's pretty healthy. I'll be 49 in less than a month. Of course, anything could happen, but I figure she could easily make it to 90 or more, so by the time she passes on, I'll be pushing 70. With luck, I will have already been retired a good, long time by then.

 

[Souschef]

My dad died at 92, leaving my mom stocks plus their FL condo.They had set up a trust where my sis would get the condo.I never counted on the money at all.
Well she lived to 102, and exhausted all her savings and stocks. Towards the end she needed 24 hr care, which was not cheap.
I figured my sis, who was back east and handled mom's affairs, earned every penny she got..

 

[gooddog]

Like others said, don't factor it in. Even if they die and have 10M sitting in the bank, they could give it away to a stranger. Know someone that happened to....

 

[986racer]

I agree about the “don’t count on it part” but I think it is worthwhile to review the plans. I understand that that can be a touchy subject in the family though.

As an example, I reviewed my mother’s plans and she was planning to leave money to the grandchildren at specified ages (18, 25, 30). I suggested leaving it up to a trustee or perhaps giving it away while alive might be better. The oldest grandchild was already 18 (the will was created many years before) and it was clear that leaving a bunch of money to an 18 year old might not be wise.

 

[Brat]

+1

My buddy Charlie in the UK has been waiting not to retire but to take over the family business. But, his mom who is 90 shows no sign of wanting to retire. (His dad hasn't been very involved for years.) It looks like Charlie's oldest son may end up running the show if mom continues to hold out.

From your mouth to God's ear. Charlie is a cad.

 

[Freedom56]

We're turning 55 this year and have been F.I. for a few years. Planning to RE in about 12 months.
My DW's parents are fairly wealthy and in their mid 80's. While in pretty good health, we recognize at some point they will not be with us. At that time, DW and her brother will share a fairly sizable inheritance (that I estimate to be in the millions).
We're not counting on or depending on this future inheritance, and I have not considered it at all as part of any retirement calculations, but wondering if it's something that should be taken into consideration. A windfall like that in 10 years (or hopefully later) would drastically impact our spending estimates before/after that.
It feels weird to even talk about it with DW (so we don't). But I'm sure this has come up with others, and curious if it played any part in your RE calculations or just plan as if it doesn't exist and deal with it then.
My in-laws are wonderful people and I feel so blessed to have have been part of their family for the past 30 years of marriage to DW, so hoping we have many years together.
Thanks!

Welcome to the club! My wife's parents are also in their mid 80's and are very wealthy. They live in a country (Switzerland) where inheritance is part of the culture and often leads to major family feuds. My father-in-law hasn't spoken to his brothers and sisters since 1996 after his father passed away and there was a dispute over inheritance. The same issue has occurred with other Swiss families that I know personally. We did not count on inheritance when we planned our early retirement. We have done very well on our own. My father-in-law gave each of his three daughters a home in the 90's so that they wouldn't be burdened with debt due to home ownership. Homes are extremely expensive there. However, I can clearly see a scenario where my wife starts a feud with her sisters. My wife and I are the only ones who have never approached my father-in-law for money whereas her other two sisters have treated him like an ATM machine. We are also taking care of their healthcare and staffing needs while they live at home. The other two do very little other than ask for money. We don't talk about inheritance but I do observe some resentment building up. Her sisters refer to my wife as the "American Princess", which isn't helping the situation. Our goal is to keep my wife's parents healthy until their 100's.