Finances and Discussing Money across Generations

[Hamlet]

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.

Ultimately there are too many variables to actually optimize this. It is money that you can't truly count on, so you have to plan your finances assuming that it will not materialize.

What you can do though, is think about a plan for using any large windfall intelligently, whether it be from inheritance, extreme employment success, or extreme market largess. Frankly, most of the planning around here involves worst case scenarios, and those seldom come to be. So there is a strong chance that many of us are going to end up with large amounts of excess money at the end. Plan for that contingency.

 

[athena53]

I can understand why the planning part of your brain is trying to figure out the implications of a possible inheritance, but I agree with the others that it's really too early to know what effect it will have on your own finances. With luck you could have one or both parents around for another 30 years and a lot can happen. One near-certainty is that you won't be trying to take care of them financially in the future and you should be grateful for that. My own parents are in their mid-80s and most likely won't outlive their money but after whatever is left over s split among my 4 siblings and me I don't expect to get much!


DH and I have had "the conversation" with DS and DDIL and I also recently put together a letter with instructions on what to do if I get run over while out bicycling. It lists accounts and account numbers and contact names/numbers but no logon information. It does include balances. I have a revocable trust and I explain how that would work and provide the name of the attorney who put it together. DH, DS, DDIL and my brother who would be the trustee all have a copy.


Do your parents take vacations? That might be a good starting point for a conversation. "Every time you go on vacation DW and I realize we wouldn't know where to start if something were to happen to the two of you. What information do you think we might need?"

 

[purplesky]

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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Stop daydreaming about your future inheritance and assume it might not happen.

Because life happens and your 2 million might not happen.

Your 25 and already dreaming of early retirement in your 40s?

Sounds like you would have been better off not knowing about the $4 million.

As you build your own wealth your perspective will change in your early 30s.

 

[marko]

"An inheritance isn't an inheritance till the money's in the bank"

I don't think you're selfish and in fact understand your situation (been there, bud). This is a fairly common issue with multi-generational wealth.

You also seem to be a good planner so again I can understand your interest in making the most of what you might glean of the future.

In my family, one sure way to NOT get your inheritance was to ask about it! Beware.

Take your trust fund and live your life; gravy coming.

 

[ESRwannabe]

When it comes to inheritance I would just always assume you will get nothing and not think about it. I definitely would not make any plans that hinge on it.

You never know what will happen. So don't count your chickens before your eggs hatch.

Here is one anecdotal story for you.

One of my grandmothers became ill and died when my grandfather was in his late 70s. He had been married his whole life and was lonely after his wife passed away. So he ended up getting married again about a year latter.

This marriage caused a rift in the family as his children found it hard to accept.

Anyway long story short, when he passed away a few years latter it ended up that his wife's kids got all the money and his own children got nothing. They were only married for like 4 years, but anyway that is basically what happened.

So again you are better off not counting on any inheritance. Besides, its morbid to think about it.

 

[Music Lover]

My parents are also doing quite well in retirement and I expect there will be some sort of inheritance, but beyond that, I'm living as if it will never come. I'm retiring next year on my own dime anyway, so I'm already "set"...anything that comes later is just gravy and of no concern today.

My only request was to be sure that all the necessary information is readily available in the event that they suddenly pass, and that has been taken care of. I have a copy of instructions, wills, account numbers, etc., and they also have copies in their safety deposit box.

 

[Dash man]

My parents are also doing quite well in retirement and I expect there will be some sort of inheritance, but beyond that, I'm living as if it will never come. I'm retiring next year on my own dime anyway, so I'm already "set"...anything that comes later is just gravy and of no concern today.

My only request was to be sure that all the necessary information is readily available in the event that they suddenly pass, and that has been taken care of. I have a copy of instructions, wills, account numbers, etc., and they also have copies in their safety deposit box.

A will shouldn't be in a safety deposit box since banks won't let anyone on to get the will once they are notified of the death without a court order from a probate judge.

 

[Meadbh]

A will shouldn't be in a safety deposit box since banks won't let anyone on to get the will once they are notified of the death without a court order from a probate judge.

IANAL, but Canadian law permits the executor to open the safety deposit box for the purpose of getting the will. The bank then lists the other contents, which are retained until probate has been obtained.

Estate Law Canada: What are the executor's duties?

Estate Planning: Safety Deposit Box

My original will is in my safety deposit box. There is a second copy at my lawyer's office and a third in my home safe. A scanned copy is on my hard drive. I also have a document for my executors, listing all my account numbers and other assets, where to find them and whom to contact. My bank had a very helpful template.

YMMV.

 

[Dash man]

IANAL, but Canadian law permits the executor to open the safety deposit box for the purpose of getting the will. The bank then lists the other contents, which are retained until probate has been obtained.

Estate Law Canada: What are the executor's duties?

Estate Planning: Safety Deposit Box

My original will is in my safety deposit box. There is a second copy at my lawyer's office and a third in my home safe. A scanned copy is on my hard drive. I also have a document for my executors, listing all my account numbers and other assets, where to find them and whom to contact. My bank had a very helpful template.

YMMV.

That works if the executor knows they are the executor and they have a certified copy of the will. We only recently convinced my 82 yo FIL to get his will out of his safety deposit box. No one had a copy or knew who he chose as executor. It was a headache waiting to happen.

 

[younginvestor2013]

Thanks for all the responses. I was hesitant to post this given the somewhat self centered aspect and morbidity.

I guess my reasoning for posting was more now focused "how should I live life now...." Given the assumed inheritance. I agree with the conservative approach you all are taking (assume that I won't get it) but I guess that isn't necessarily the viewpoint I have taken, whether I want to believe that or not.

Look at me ranting on about my indecisiveness. Can you tell I'm a 20 something millennial?

To give myself credit, I think I'm still fairly "old school" for being a millennial, given that I have chose stability and pay (corporate America) despite my attractive financial situation (inheritance aside).


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[Music Lover]

A will shouldn't be in a safety deposit box since banks won't let anyone on to get the will once they are notified of the death without a court order from a probate judge.

There is only a copy of the will in the safety deposit box. I'm also the executor and have access to the original, so access is no problem. They don't really need a copy in the safety deposit box, but they like to have copies of all their important papers "just in case".

 

[younginvestor2013]

^^^^ although, that being said, I do enjoy things in life. Meals/nights out with friends, vacations, shopping, etc.

Id say compared to the typical poster here, it seems that I don't "lybm" as much but still manage to save about 15-17% of my gross income so my savings rate is still fairly high for my age.

If I attempted to be more frugal, the marginal savings wouldn't have a huge impact on my long term FI plans given that my nest egg generates more returns In a year than my own contributions, so I view it as a partial trade off of living in the now somewhat. Plus, it's harder to maintain a social life as a 25 year old that doesn't go out to dinners with friends or to the bars .


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[rodi]

My dad and I talked finance, but not details. He let me know he was doing retirement planning well before he retired, and that was one of the reasons we didn't have all the new toys/vacations/cars that many of our neighbors had. He and my mom both retired at age 62. They had plenty of money for travel and for my dad's hobby of 4wd'ing down in Baja.

My dad let me know he would run out of money at age 100 - and then would be on our dime. He didn't live that long - but I appreciated the heads up. He didn't give me details about his balances... just that he was OK. I knew he was doing better than ok when he started flying business/first class on the big overseas vacations. I encouraged him to spend it while he could.

Money is weird and can cause a lot of family friction. I like the previous suggestions to talk to your folks about how to manage YOUR money so that you are as successful as they were.

 

[Fedup]

I don't think it's a good idea to count that inheritance. My 24 year old is still busting her butt creating her business. They know in the back of their mind there will be some money left but they are not actively counting mine yet.


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[truenorth418]

My father is in his 80s and ailing. We discussed his finances the other night and he confirmed that my siblings and I stand to collect a decent inheritance from him. I asked him why he didn't spend more of his money and enjoyed life more. He said he has had a good life and there was nothing else he really wanted to buy. He was proud to leave a nice financial legacy. Sure, I would appreciate the inheritance, but I wish he had spent more of the money on himself and my mother.


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[Calico]

I agree with all the previous posters who recommend NOT initiating a conversation about your parents' money and what you might anticipate as an inheritance. You never know what will happen in life.

My father made piles of money in his lifetime, and he also acquired a new wife, a new house, and a new boat every 20 years or so. All of which was followed by a new divorce, new wife, wash-rinse-repeat.

I watched what he did with his money and determined to do the exact opposite. I assumed he would die owing money, and that's exactly what happened. It was his to do with as he wished, and he certainly had a good time.

Knowing there was no safety net coming from my parents at some future date was a huge contributor to my independence, financial and otherwise.

Having said all that, I hope the OP's parents stay together forever and do as they see fit with every dollar - whether that means spending all of it or leaving a large legacy.

IMHO, the best course of action for the OP is to continue on the path they are on, and if an inheritance happens to arrive at some time in the future, count their blessings.

 

[Totoro]

Bit late to the party here, here's my perspective anyway - It will sound familiar by now.

When I was more or less 25 (34 now), there was the following situation:

• I had no debt, no assets, nearing a PhD
• Parents were married, worth about roughly $2M in today money
• Grandparents well off (another $1M or so at one side with parent only child, >$5M but don't really know on the other side with 4 children).

Here's roughly what happened in the next 5 years:

• Parents got divorced
• Got completely cut off from one side of the family

As a result, any likely inheritance coming my way now will be 'a bit' vs. 'very sizeable'. And it may be in 30 years, or tomorrow. Or the 'cut off' side will leave me money anyway - no way to know.



Anyway, here is what I realized: basically the inheritance factor is very much out of your control, so you can't plan for it.



What I did do: I went for the high-stress high-paying job because I wanted to be (economically) free as soon as possible. Also didn't see the point of working 40 hours a week for the rest of my life, when I could also work 60 hours and 'graduate' to economic freedom before I was 40. Also shifted careers and move geography, but that was serendipity along the way, not much planning. By happenstance I picked up alot of valuable social skills and a fun network of people, both of which improved my life in a big way.



All this to say: Act as if no inheritance will be there. If you do well in your career and manage to build some wealth by LBYM, start sharing that fact with your parents. It will likely make them proud. Stop there.



Do not start up conversations about inheriting and estate planning yourself, it's intrusive and can damage your relation with them. Do however show your own interest in asset management by showing what you are doing with your money (hopefully succesfully!).



In my case this lead to me managing the finances of the 'non cut-off' side of the family. Basically because they believe I know what I am doing better than they do, and trust my character to handle these things with integrity.



In addition, professional skills you pick up in the beginning of your career can be very helpful in all sorts of areas in life. So the learning value alone is a big boon. And with any luck you meet a few interesting people along the way.

And just to finish off: Once you start getting financially independent (or free) yourself, you'll notice that your perspective will start to shift, in a good way. The inheritance thoughts will diminish, and move more towards time and enjoying the family you have, while you have it.

... so get cracking on your own financial path

 

[athena53]

If I attempted to be more frugal, the marginal savings wouldn't have a huge impact on my long term FI plans given that my nest egg generates more returns In a year than my own contributions, so I view it as a partial trade off of living in the now somewhat. Plus, it's harder to maintain a social life as a 25 year old that doesn't go out to dinners with friends or to the bars .

I'm with you on that! In my case, travel was a big priority. I don't regret a dime of whatever DH and I spent over the years (supplemented by judicious use of loyalty program points). First of all, not everyone makes it to retirement, or they find when they get there that they're less able to do the things they'd planned for "someday". Second, when the market crashed during the financial crisis, I actually felt a little better that I'd enjoyed some of the money along the way. It sounds like you've found a good balance.

 

[ChicagoGal]

I have to agree with the posters here. Ignore the potential inheritance and live your life. At your age, there is so much yet to come that you can't foresee. Will you marry? Will you have kids? Will you change jobs (voluntarily or involuntarily)? Will your health change? Will you be hit with a natural disaster or win the Publishers Clearinghouse Sweepstakes (if they even still have that)? What will the markets do? What circumstances may change for your parents? And yes... will the zombie apocalypse change anything?

My dad is 77 and married to his 3rd wife. He is retired (she never worked), and by all accounts, they are fairly well off (I'm sure my grandparents left him a nice sum and he had a very successful career until he retired about 7 years ago). They're not extravagant in spending, other than the 2 houses they own, although left to her own devices, the wife would likely spend much more (she is very vocal about how he won't travel more or buy her a new kitchen, etc.) He's in pretty good health, she has MS, but otherwise is in good health. I have two sisters, both of whom have children (I'm single with no kids), and all three of us are in slightly different financial situations. So really, the inheritance situation could be a little, a lot, nothing, soon (hope not), far in the future, I have no idea. So not a factor at all in my future planning. I still should retire in the next 4-5 years.

It looks like you are seeking the right balance between enjoying life now and planning for the future. Good (So am I, btw!) And there's no right answer to that - just what works for you. And that will change over the years, so keep at it! Take time to smell the roses, but make sure you keep fertilizing them so that they continue to bloom.

 

[Gumby]

Consider the following scenario:

Mom tragically dies young. Dad remarries a younger woman and they start having kids together. Or Dad marries another woman who comes with existing children from a prior marriage. Dad then dies and leaves everything to the new wife. Who do you think will end up with the money after that? Hint - probably not you.

Live your life as if you never knew about your parents' money. If you ever get any of it, consider it icing on the cake. But you have to bake the cake yourself.

 

[marko]

^^^^ although, that being said, I do enjoy things in life. Meals/nights out with friends, vacations, shopping, etc.

Id say compared to the typical poster here, it seems that I don't "lybm" as much but still manage to save about 15-17% of my gross income so my savings rate is still fairly high for my age.

If I attempted to be more frugal, the marginal savings wouldn't have a huge impact on my long term FI plans given that my nest egg generates more returns In a year than my own contributions, so I view it as a partial trade off of living in the now somewhat. Plus, it's harder to maintain a social life as a 25 year old that doesn't go out to dinners with friends or to the bars .


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You seem to have your act together financially and otherwise. Why not just play this back-of-the-envelope game:

Give your parents what?, another 25 years and figure out what their net worth might be at that time.

Divide the parents estate by how many siblings you have and consider their charities and be sure to include taxes and other distributions etc. (i.e. your net inheritance)

Figure out what YOUR NW would be at that time.

You may realize that by that time, your inheritance might not be as great an influence to your lifestyle as you suspected.

The way you're going, I'd guess that your own NW will be such that any inheritance may be a nice piece of gravy but not enough to greatly change your life nor would it notably improve or change your road to that point.

 

[Andre1969]

You seem to have your act together financially and otherwise. Why not just play this back-of-the-envelope game:

Give your parents what?, another 25 years and figure out what their net worth might be at that time.

Divide the parents estate by how many siblings you have and consider their charities and be sure to include taxes and other distributions etc. (i.e. your net inheritance)

Figure out what YOUR NW would be at that time.

You may realize that by that time, your inheritance might not be as great an influence to your lifestyle as you suspected.

The way you're going, I'd guess that your own NW will be such that any inheritance may be a nice piece of gravy but not enough to greatly change your life nor would it notably improve or change your road to that point.

I've thought about that myself, sometimes. I'm an only child, and the only grandkid on Mom's side of the family. So, I do stand to inherit a pretty good amount of money. Mom and stepdad are 66 and 62, respectively. I also have an uncle who's 62, and I'm his beneficiary. And my 91 year old Grandmom has left me part of her estate.

However, a lot of things could happen. Grandmom is in assisted living, and burning about $10,000 per month. My uncle is on dialysis, and while he probably won't live to a ripe old age, I could also see him running up some bills as he gets older. My Mom and stepdad don't have any signs of impending doom. However, they told me that their estate is set to go half to me, and the other half would go to his sister and half-brother. This is regardless of whoever dies first. However, who knows? My Mom could go first, and my stepdad could change his mind.

So, because of all that, I'm not counting on anything. And I figure anything that I do get, as another poster put it, is merely icing on a cake that I baked myself. Even if Grandmom passed away tomorrow, the amount I'd get wouldn't be life changing. My uncle hasn't done too badly, partly because I've helped manage his 401k and IRA. But, I figure he could still live another 10 years, maybe more. In another 10 years, I'll be 55 and should be setting pretty, all on my own. And chances are either my Mom or stepdad could easily go another 20-25 years, so that would put me around 65-70. By that point, if I haven't saved up for early retirement, then I think I missed the train!

 

[marko]

However, a lot of things could happen. Grandmom is in assisted living, and burning about $10,000 per month. My uncle is on dialysis, and while he probably won't live to a ripe old age, I could also see him running up some bills as he gets older. My Mom and stepdad don't have any signs of impending doom. However, they told me that their estate is set to go half to me, and the other half would go to his sister and half-brother. This is regardless of whoever dies first. However, who knows? My Mom could go first, and my stepdad could change his mind.

So, because of all that, I'm not counting on anything.

Agreed and that is the consensus of the contributors here.

I could write a book on several of my friends who were expecting big inheritances only to one day find that the money went to: new wives, unknown mistresses, undeclared siblings, a dog park, 'save the whales', a housekeeper, taxes, a sibling who was kinder to the old man than they were, a drug rehab center ("there you go junior, you can go there for free now...tell 'em I sent you") and so on.

I was only suggesting that after some very quick math the OP might find that his (best case) inheritance will be a drop in the bucket compared to his overall NW when the time comes.

 

[FUEGO]

+1 on the inheritances gone wrong train. My brother just got disinherited from my parents, and they are leaving everything to me with the understanding that I'll look after my brother's kids (my parents grandkids) as necessary. Of course, not being an a$$ could prevent this fate from befalling you!

My neighbor died recently. She left everything to her caretaker (some guy that lived in the neighborhood) and didn't give anything to her children (I assume they weren't very active in her life and lived on the other side of the country). No idea if the estate was $150k (just the house) or a million or more, but see never seemed to lack money. Bet there was some disappointed children when they found out mom died and didn't leave anything to them.

 

[Dog]

Another story. I have an old friend that was the apple of her father's eye. Her parents were divorced a while back. He met, dated and eventually married a younger woman. My friend and this woman got along very well and my friend felt sure that she would be taken care of (she is a spendthrift and floats from place to place, job-to-job and a couple of divorces. Dad always bailed her out). Anyway, her father and new wife moved out of state, he became ill and at some point the will was changed to the new wife inheriting everything and basically telling my friend to kiss off. My friend received nothing, has zero assets and is now trying to build a career in her late 50s.
She should have never counted on an inheritance.



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