Reader’s Question #13 – Getting Rich on Dead People

I do like my inbox some days.  Jordan sent me a note with the following interesting question:

Hey Tim, I was chatting with friends last weekend about money and told them of my plan to retire early. They thought I was crazy and basically take a much different tact of using their money now and so aren’t able to put much away for the future.

One thing that came up was the subject of inheritance, they have 2 sets of parents who have been successful professionally and probably each have a net worth of a few million per family. They figure that eventually they will inherit a portion of that and count it in their financial plan for retirement. My own parents are near the same financial level, and again they think I’m crazy because I’ve never planned on getting anything.

I’m curious where you fall on this topic, I doubt you would count on it either, but is it worth avoiding completely or is there some way or even reason to plan for it?

Maybe since most people plan to retire at 65 they are at the age when inheritance might be coming and needed the most without savings of their own. Where as early retirees need a to have a more solid financial base decades before inheritance would even be likely?

Ah, inheritance.  It’s one of those sliding scale kind of issues when talking about retirement planning.  To those that expect to get nothing or near nothing they don’t worry about it.  To those that may get $500,000 plus it could be rather significant.

I personally like to rephrase the question to people.  Hi we’ve got this great new investment product that could give you up to a million dollars during your retirement.  The drawback is it’s based on a complex life insurance scheme that means we have no idea when you will see the money or the exact amount you will receive.  Do you want to invest?

Of course a rational person would go: NO!  I tend to agree and don’t plan on getting a dime from my parents after they die.  After all we are talking about people that will likely live till 90+ so they could eat up a fair amount of their wealth just on long term care or other medical costs as they age.  Also they might decide to skip their kids and give some of the money directly to their grandchildren when they are alive.  Not to mention if they even get close to the same age of their parents before they die I won’t see any money until I’m in my 60’s.  Hardly useful to me when I would have already been retired for over 15 years at that time.

Overall I suggest to people that you don’t plan on inheritance for any of your basic retirement expenses.  If you want to treat it as a vacation slush fund or buying a second home someplace warm, so be it.  It can make a good retirement just a bit nicer.  Just make sure you are not planning on that money to eat or pay rent in retirement.  Your parents already looked after you as a kid,  don’t expect them to do it when they are dead.  Be a big person now and plan for your own retirement regardless if you plan to do it early or at 65.

Well that’s my two cents on that topic.  What are your plans for any inheritance you might receive?  Would you use it in your retirement planning?  If so, how would you use it?

7 thoughts on “Reader’s Question #13 – Getting Rich on Dead People”

  1. Interesting post.

    Occasionally it does occur to me that somewhere down the line I could come in for at least 1/3 of a nice house, but I don’t see how you could plan for it. Obviously there’s the fact that your folks might decide to spend a couple of retirement years travelling (I met several older canuck couples merrily spending their way round the world when I was in Mexico). But if you’re a loooong way from your parents dying like I am, there are many other ways you could get nothing: them living to 103, having to spend on illness or other major emergency in the immediate family, investments going bad, property crash, “imprudent” decisions like selling the family home to buy a place in spain, inheritance tax laws changing, whatever.

    Which is a long way of saying that I don’t plan on getting anything.

  2. Very good advice, Tim. While it would be nice to have a little extra spending change, we subscribe to my in-law’s approach of bouncing the last check. So we might actually owe money for the dead people! (Cuts down on estate tax, huh?)

  3. Good post to read. My father comes from a very wealthy family. Currently, my grandmother, a very healthy and active 85 year old, controls 100% of the wealth. Many of my relatives on this side of the family do not work – Grandma has an odd rule; she gives $ to her children but not her grandchildren. She figures her children can share the wealth with their children. Which in my case means $0 since my dad is a bit paranoid about money and is a hoarder. My cousins not only get a nice “payout” every year but they are counting on the inherritance. I’ve never used it in any of my financial projections, instead, if it happens, it will be “bonus” money to either retire me early (I’m aiming for age 52 right now) if I haven’t retired or a “nice fund” for some luxury vacations etc. I figure my great grandmother lived to 97 and many elderly great aunts and uncles well into the 90’s then why would my grandma not live until at least 95? Maybe 100? Besides I want Grandma to live a nice long life and be happy! So that inherritance won’t get to me anyway for another 15 years. My parents money then, logically won’t get to me for another 25 years. I’d rather stand on my own and not rely on inherritance – you never know when they might decide to just leave it all to charity!

  4. Hey Tim thanks for the response. I’m glad to see a bunch of you agree with my view point, I was starting to doubt myself as being overly pessimistic.

    I like how you flipped the question around into an extremely risky investment option. That makes me wonder if there are any stats or studies out there on the chance of getting inheritance. Maybe life insurance companies know what it is.

  5. I’m not planning on it. I’m almost hoping that it does not happen (getting an inheritance) since this would mean I would end up with money I do not need. I hope they spend it all before they die. I got the same plan personally. In my opinion, if children are to be left anything, it’s values and memories, not money. Too many trust fund “babies” already.

  6. Oh, a slight correction. I expect from my parents I’ll be left with a nice little cabin on a lake. I’ll also have to figure out how to share it with my three brothers. So any cash I get will likely get rolled into the cabin to pay the bills and keep it up.

    So basically like I said. I’m using it as a slush fund.


  7. My dad has a quote from Warren Buffet that he loves: “I want to give you enough to make sure you can do anything, but not so much that you can do nothing.”

    In the ideal case, my parents would live a long life and use their savings on themselves, leaving little to no inheritance. If they should run out of time before their portfolio does, I’m not counting on getting much.

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