The last time I wrote about leaving an inheritance was six or seven years ago. I remember there were strong feelings expressed on all sides of the issue. The comments expressed powerful opinions like these:
*Yes, I feel I should leave my family enough to make their lives a bit easier. I have plenty, and I know others would benefit by what I can leave them. My parents left me an inheritance that was tremendously helpful. It's my turn."
*I scrimped and saved for retirement, supporting others, and forgoing some of what I have always dreamed of. So, No, I will not shortchange this time of life so I can get gratitude after I am gone."
*My adult children have the same opportunities I did. I don't want them to depend on what I can leave them."
*I plan on leaving my grandkids as much as I can. The world is a tough place, and I want to make it easier for them."
For most of us, retirement requires some serious financial planning and often a fair amount of sacrifice and delayed gratification. One part of that financial planning that isn't talked about very often is the issue of leaving an inheritance to children, grandchildren, relatives, or an organization we feel strongly about.
You have probably seen the bumper sticker, "I'm spending my kid's inheritance," on the back of a large RV. We may also know people who live a very restricted and limited retirement so money can be left for others after their passing.
I kept an email received from a reader not too long ago that asked what degree of sacrifice we are comfortable making in this regard. If your parents left you part of their estate, do you feel you should do the same? Or, was their decision theirs to make and not necessarily yours to follow?
One thing about the place of inheritance in retirement planning is that there is no correct answer. I believe this is a very personal choice. Family dynamics, your own feeling of financial security, what relatives did, and your lifestyle choices all affect how you respond.
Basic Internet research refers to some studies that show somewhere around one-half of all retirees plan on leaving an inheritance. Of course, "leaving an inheritance" doesn't say if that means a large nest egg or enough to handle end-of-life expenses with some money left over.
But, that research makes it clear that maybe 50% of us do not actively plan on leaving an inheritance. If it happens, OK. If not, fine. So many retirees are worried about providing for themselves without being a burden on their adult children or relatives that the thought of leaving extra money is a non-starter.
I could find no historical data that indicates whether these percentages are affected by recessions or boom times. This decision seems to be driven more by emotion than economics.
So, Here are some key questions for you to mull over:
*Is it a "responsibility" of the parents to help their kids or relatives with a good-sized portfolio?
*Or, rather than a responsibility, is an inheritance a way we can show love?
I could find no historical data that indicates whether these percentages are affected by recessions or boom times. This decision seems to be driven more by emotion than economics.
So, Here are some key questions for you to mull over:
*Is it a "responsibility" of the parents to help their kids or relatives with a good-sized portfolio?
*Or, rather than a responsibility, is an inheritance a way we can show love?
*Or, have we decided to start distributing our projected inheritance now, over time, rather than waiting until we are gone?
*Or, do we live our retired life wisely yet fully, not scrimping to the point of discomfort or forgoing experiences, but not trying to "die broke" by spending everything we have this side of the grass?
*Or, do we believe that we spent a tremendous amount raising our kids and now it is finally our turn to enjoy our retirement money? If there is something left over, great.
I readily admit this subject is a toughie. It was one raised when I asked for topics to write about a few weeks ago. You may feel strongly one way or the other. Or, maybe you are struggling to make a decision and are looking for feedback from others.
I ask for your responses with one important restriction: please leave no comment that implies one way or another is selfish. As I have said, your thoughts about inheritance are very personal. Every decision and expression of that decision deserves our respect. We may disagree with the choice someone makes, but it is not up to us to tell them they are wrong.
So, what are your thoughts? What part does inheritance play in your financial planning? How can you help us all work through what is the best choice for us?
Hi Bob, this is Chris. To be honest, what I have mostly seen in my extended family is that the nursing home gets it all in the end anyway. Not all of our parents have passed, though. One set has been giving a small amount each year to each of the “kids” since they turned 80, and we have been grateful for it. It helped us pay off our house. We hope to do the same if we are in the same position at that age. We do not expect an inheritance from any of our parents and are planning accordingly. We are in the group who don’t want to be a burden to our children.
ReplyDeleteChris, I like how you think. We give our kids and grandkids a small amount each year now, but I think I'd be inclined to up that amount when we turn 80, if circumstances allow. As it is, I've been so nervous that what we've saved won't be enough that I feel like I try to hold onto it more than I probably need to. My hubby wanted to completely remodel our home this year (it needed it! - nothing's been updated since it was built in 1987) and putting out that kind of money (nearly $100,000) has seriously stressed me out. lol I finally gave in.
DeleteThat said, I don't want to wait until I'm gone for my loved ones to get my financial assistance - as long as we have sufficient for our needs. I'll reassess periodically and go from there.
My parents did the same thing, starting at about the same age: giving the children an amount each year at Christmas time.
DeleteWe started giving to our kids several years ago. We'd much rather they have the use of some of the money when their expenses are the highest, rather that waiting for any estate to settle.
Hubster knows nothing of inheritance in his family either even though most of the family was within 120 miles of our current location. We know his parents remortgaged the home they've been in for nearly 45 years and we assume we'll be paying bills when they leave earth. As a child immigrant, I know nothing of family inheritance but nothing came to the USA. My grandparents all visited twice before they turned 80 so I did get to "meet them". Mom and Dad didn't have much but Mom managed to give us each a small inheritance. By then, we were nearly debt-free. As she would have loved, I tithed 10% to a young church for a piano. The remains were spent on her 20 something grandchildren for HS or college graduation checks, plane tickets, skiing and such fun things we couldn't afford when we were starting out. I always called it Grandma money. When it was gone, it was gone. (I asked her to give it to them directly but she told me I'd have to do it if that's what I wanted).
ReplyDeleteAs for us, we have no children and our Trust does not leave $ to family or friends. We are leaving our small mountain property to my youngest nephew as he and his bride love the area and call it "our favorite place on earth". They honeymooned here just last year. (They do not know about this). Should our investments outlive us, they will be distributed to our local foodbank, Women's/Children's shelter for those escaping violence and scholarships to our Alma Mater and specifically to our majors.
I retired nearly 4y ago. Hubster is winding down his career and may work another 2y or so but definitely retiring by January 2026. We've begun our traveling/experience list so spending the IRA has begun in earnest. We're taking advantage of being in our 60s and fully able! We can eat beans and rice when we're 80 if we have to ;-)
I'm a firm believer that there are no "Must" "Should" labels on the topic of inheritance. Have a dream list? Do it. Have a travel list? Do it. Want to leave kids/grands $? Give it to them now when they need it most! We had zero help with college, home purchase etc. I took a ton of extra work hours to pay for it so we could graduate without loans (I was tired for many years).
When hubster's Grandmother was in her 80s, we were in our 20s. She said "You kids need $ and I have $. But I'm not giving it to you". She laughed and laughed. Perhaps we learned our lesson young?
Well, I can guess which one distributed Gramdma money.
DeleteThank you for sharing your situation. With relatives and definite organization that could use your remaining money, but with every intention of not shortchanging yourselves, you have presented a very common scenario.
We plan on enjoying retirement and the rest of our lives with the funds we have saved. With that said, there should be a decent amount left to our two kids which would include our home and what's left of the 401K. We are also investing in 529 college plans for each grandchild to help them out with college expenses. We have taken our kids and grandkids on one cruise and have another planned for this year. We hope to fund one family trip every year to make great memories vs. a temporary purchase. I think a good balance of living fully in your retirement and living it responsibly is the way to go.
ReplyDeleteThe question is what is the right balance. Clearly, the answer is different for each of us.
DeletePersonally, we lean toward your mix of self and family. All family members prefer experiences and shared memories but welcome financial help as long as it doesn't shortchange us.
Because we sacrificed to pay for all 3 of our kids college educations, we believe we invested them with tools needed to succeed. We weren’t able to fully fund our retirees accounts during this period so now we plan to judiciously spend what we have to be comfortable and not a burden. Try have all become very successful so it was a great investment.
ReplyDeleteChildren are expensive! To fund their education and increase the odds of future success is a tremendous gift , but involves sacrifices.
DeleteHere's hoping you and your spouse do have a very fulfilling retirement even after the earlier sacrifices.
What part does inheritance play in our financial planning? None I would have to say. We are firmly in the camp of now it is finally our turn to enjoy our retirement money and if there is something left over, great. You know me Bob, "If I didn't save it so I could spend it then why did I save it?"
ReplyDeleteThat said, I doubt we'll be down to zero when we die. In reality, for me, I can't imagine dying penniless as a mark of personal financial success. Our plan is to sell the house when/if we move into a facility with supports. There may be money left from that or not but we figure better to spend the money there than to be a burden on our children in our very old age.
There is some "spend the money now" on our children but mostly it's to keep one of our daughters that struggles a little with money solvent. When it comes to money one daughter never seems to get it and for better or worse we can't bring ourselves to seeing our single daughter and her child living out on the street or in a shelter. We went that route when she was in her late teens early 20s (long before she had a child). It was hell for her and for us, and she still didn't fully "learn her lesson". We do try to keep it even between our daughters though and figure that with our other daughter having had, courtesy of us, a debt free university education and a nice wedding paid for evens it up. Is that giving them their inheritance now? Maybe, it depends on how you look at it. I do think though that Lennon–McCartney probably said it best "Can't Buy Me Love" and we don't intend to try.
My parents and my wife's parents left estates that amounted to some savings and their house but being divided up between the number children meant that the amount of inheritance from each was nice but not a life changing amount. I am talking an amount that would fund maybe a very nice overseas holiday trip or something. If we live into our late 80s or longer as they did I expect we'll be leaving about the same. Like our parents, the estate will be the residual of a life well spent but not lavish. If we die in our 70s or sooner, and who really knows the answer to that, the estate will of course be larger.
Looking back at my comment I guess we are, as you put it Bob, trying to live our retired life wisely yet fully, not scrimping to the point of discomfort or forgoing experiences, but not trying to "die broke" by spending everything we have this side of the grass. We do this not so we can leave an estate but rather to not die penniless for our own mental comfort.
Trying to time one's passing with the balance left in investments is obviously foolish, and impoosible to game perfectly.
DeleteYou have shared the story of your one child who continues to require support before, and many of us can relate. Letting an offspring struggle to live a decently safe life is just not an option when there are options.
Like you, we will sell our house to fund the entrance fee into our chosen retirement community., so no damage will be done to our investment accounts.
Good question. My thoughts have changed over the years. As I have two adult boys with autism who cannot live independently, my primary concern is to be sure they are taken care of, so the bulk of whatever estate I have will fund a special needs trust for them. The issue then is what about my daughters. They know that they will not get a share equal to the boys, and they are fine with that. I used to think I didn't need to leave them much because I got them through their education debt free. But in today's world, I see them working hard and still not able to do much "extra." So I am leaving them more than I had originally planned.
ReplyDeleteI had some money left to me when my parents died. It helped me pay off my house, and also provide some extras for the kids when they were growing up. I'm grateful for that, so I'm happy to pass that along. I see that my kids work hard and are not expecting a handout, which makes me more willing to do that.
And, like others have said, I will take care of myself first and make sure I have what I need to live the rest of my life comfortably.
I'm enjoying all the perspectives represented here. It's clear there is no one right way.
This is one of the few topics I can explore knowing there is no one answer, no right answer. That is why having so many varied life circumstances revealed can show us how unique each of our lives really is.
DeleteYou have added to that narrative with the fact of both your sons' situations and whether keeping everything in balance between children is some sort of absolute.
We don't have kids so it's not an issue with us. But, we are happily spending our retirement savings and plan to leave whatever is left to our favorite charities/causes. I have to say that it's kind of fun figuring out where it's going when we are gone.
ReplyDeleteHave the causes and charities that most interest you changed over the years? I know I would pick very different homes for my funds now than I would have in my 40s.
DeleteYes they have to some extent, and we adjust here and there. We also like being a bigger fish in a smaller pond vs. small fish, big pond. For instance, we give an annual amount (and have earmarked them in our estate plan) to our local public broadcast station at a level that allows us to be invited to some pretty interesting special events. If we gave the same amount to, say, the Sierra Club, we'd be one of many thousands.
DeleteI received an inheritance from my parents; my husband Art, one of ten children, did not. I want my children to have some of what my parents left me; it doesn't matter to him. But as we have a blended familly (I have two children, he has six), we have a trust that will distribute the remainder of our assets when both of us are gone. We have helped our children where necessary, but I sometimes worry that one of us will need nursing care that will take most of what we've accumulated. I hope not.
ReplyDeleteNursing care can upend the best laid plans. A Trust sounds like a wise approach. Good idea. And, here's hoping you and Art have a smooth ride ahead.
DeleteI don't think we owe our adult children anything, esp. if we worked hard and earned money and raised them with a middle-class lifestyle of a nice home and decent clothes and sports or musical equipment or whatever . . . and also got them through college without too much debt. That said, I wouldn't waste my nestegg just to spend it down, and if there's something left over when I die, I'd feel good knowing I left them something to help pay off their mortgage, or send their kids to college, or some other worthy cause.
ReplyDeleteYour take on the situation is a good one: not obliged but not adverse to having money left over. Spending all one has just to prove a point strikes me as selfish and frankly, pointless.
DeleteMy husband inherited enough for a nice boat when his mother passed. He buys a boat, enjoys it, fixes it, sells it and on to another. I think there was a motorcycle one year as well. Still, he has used the money wisely for 20 years.
ReplyDeleteI inherited a sum when my mother passed. I gave a tenth away ( food banks, homeless programs,,,), put some toward our grandkids’ college, and invested the rest (My eyes are shut when the market opens).
With the money WE saved, we are doing a yearly trip for the family. If they choose to go, great. If not, we get it. We visit them twice a year. Otherwise, we are enjoying travel and play as we fit. It is plenty. Our house should easily fund our end of life accommodations,
We have always paid an amount to grandchild lessons and school expenses. It seems to work. In turn, Both our kids did college through the military- so no debt there. Our kids are set on good paths, so I am not worried about them inheriting something in their late 60s or 70s.
If we pass with extra $$ we hope they follow the tradition of Nana and Papa money. We also hope they follow our example and give 10% away. Like you stated, Bob, our charities change…why give something that we chose 20years before giving? I think they will chose wisely- giving, keeping, spending. Ultimately, it is their decision. I hope I can watch it unfold from heaven. - Janette
Ultimately it is their decision. If raised well, the concept of enjoying and sharing is likely to continue.
DeleteLike yours, our kids got out of college with no debt which is probably one of the most important gifts a parent can give. I shudder to think of the future of those facing tens of thousands of dollars in student loans.
There were many things we didn’t do in our younger years so we could build our nest egg. We decided that we would provide our adult children with experiences and memories now instead of waiting until we’re gone to get some $$. The math appears to point to them getting both but we are very much enjoying sharing wonderful family experiences and allowing them to save for their retirement.
ReplyDeleteThat is exactly what we have been doing since our kids were born. They have continued that approach with their kids or friends and family.
DeleteOur math calculations are very much like yours: these experiences will eventually be followed by a financial inheritance, but not one at the expense of our future or our times together.
No one has mentioned an issue that my husband and I feel strongly about, and that is how are your children/grandchildren treating you. We have indulged grandchildren with fantastic trips, both day long and complete vacations. But don't feel we have gotten much back. There are no invitations for holidays from any of our children, no birthday lunches and it has gotten to the point where grandchildren don't even return texts. We are in our 70s and 80s but there is no checking on us. We don't want to be these hyper sensitive cranky old folks, but really......a bit of attention a couple of times a year would be nice. We have five grandchildren, but only two are in our will. Are we the only ones having these kinds of problems?
ReplyDeleteYou have raised a sensitive and not unheard of situation. How much reciprocation should be expected? Too often the feelings of those who live a distance away are overlooked.
DeleteI don't pretend to have an answer, so I hope others may leave their thoughts.
This is a great topic and a necessary one. I have a slightly different situation with "inheritance". After a heart attack at 49 years of age, my husband and father of our two sons, took out an expensive life insurance policy to have our two sons' future college expenses covered. Thankfully, he lived another 25 years and saw them complete their college education, marry, and bless us with grandchildren. Sadly, he passed away this last November and now his life insurance will be arriving. I want to honor my husband’s original intention and payoff our sons' college debt.
ReplyDeleteHere is my question…our sons have different college debt amounts. In fact, one is four times the other…by thousands. Do I just pay off each debt…or do I give EQUALLY to each son and, thus, one son will have a bit more "fun" money than the other? Yes, they are somewhat aware of each other’s financial situations.
Thanks for any insights or experiences you and your readers can share. I love and am so thankful for our sons and their families. They are truly helping me navigate this new season of widowhood.
Charlene H
P/S I forgot to mention…we paid for their four year degrees. The debt is incurred from graduate school goals that were achieved.
DeleteFirstly, my I say I am so sorry for your loss. It is blessing that your sons and their families are part of your life.
DeleteThe only question I can ask that might give your some clarity is what do you think your husband might have wanted? If his intention was to relieve your sons of the burden of educational debt, that might help you make a decision in how to handle the insurance money.
Trust that whatever you decide your family will appreciate the thought and concern you are showing in this matter.