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Hudson Financial Planning - Expecting a Future Inheritance is not a Financial Plan

Expecting A Future Inheritance Is Not A Financial Plan

I have spoken to many members in my 16 years at Hudson but it never ceases to shock me when I hear about an expectation of an inheritance. I’m not talking about an anticipated inheritance expected from a terminally ill parent, as an example. I’m talking about the expectation of an inheritance from offspring who neglect their own financial planning due to their wealthy and (often) healthy parents. Parents, who are nowhere near deaths door, but have this sometimes unspoken, sometimes blatantly reminded, future transaction hovering over their heads.

Case in point was a young man I spoke to years ago about investing in property, only for him to declare that his parents had an extensive property portfolio that would one day be his, so he didn’t have to invest himself.

Another example was the son living in the mother’s home (while she resided in the granny flat) and his absolute horror that she was contemplating selling the home – his future inheritance – so she could improve her lifestyle.

And another middle aged man, with a daughter, who was clearly relying on his parents’ assets to provide for her when she came of age – which left him wide open to be nonchalant about his own finances.

These are examples where offspring are literally waiting for parents to die so they can benefit from their hard work, frugality and intelligence in accumulating assets. Sounds harsh, but this sense of entitlement is what prevents individuals from creating their own path.

Technically, this is not what you would call elder abuse, but part of me absolutely feels it is!  The guilt trip inflicted upon parents for having the gall to SKI (“Spend the Kids Inheritance”)!  A Natixis US Investor Survey done in 2017 (a little outdated, but you get the idea) suggests that 70% of young people expect to get an inheritance, but only 40% of their parents plan to leave them one. Ouch.

Previous generations have passed on significant amounts of money, and the baby boomer generation have been expected to pass on a record breaking amount of assets to their heirs (“The Great Wealth Transfer”) but things are slowly changing with the cost associated with increased longevity. In addition, baby boomers are becoming more and more interested in enjoying their own money while they can.

Offspring relying on an inheritance is fraught with risk (not to mention rude!!). The risk is that they do not save and/or invest enough money now. We can learn from some of the world’s richest people (Bill Gates, Warren Buffet, Mark Zuckerberg etc) who intend on giving away their fortunes rather than handing it to their kids.

I love this declaration by New York Times’ Ron Lieber in a 2014 article he wrote, titled “Parents, the Children will be Fine. Spend the inheritance now” Mom and Dad: I expect nothing from you going forward except love, conversation, holiday meals and grandchild babysitting. Spend your money on your health and comfort and making the kinds of memories with close friends and family members that will last even as other, older ones, fade. Leave a bit aside for me or for charity if it truly makes you happy, requires no sacrifice or makes sense for tax reasons. But otherwise, spend what you have and have faith that the education and life skills you already gave me are more than enough.

I don’t want an inheritance, nor do I expect one. If any fellow adult children agree, go tell your parents the same thing this weekend.

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