Should I count on an inheritance?
If you are expecting to inherit some money from your parents someday, this blog is for you.
Baby boomers have amassed more wealth than any other generation. Most are well into retirement (in their 70s and 80s) and many are leaving significant sums to their adult children or heirs. According to the Financial Post, baby boomers who plan to leave all of their assets to their millennial children expect to leave an average of $940,000.1 That’s more than many millennials are expecting. With so much money on the way, should you plan on it?
The life-changing gift
An inheritance can be the one final gift from your parents or family member that can be life-changing. While losing your parents is never easy, an inheritance can help you fulfill dreams that seemed unattainable only yesterday. For example, it could help you make a big downpayment on your first home, get caught up on retirement and savings plans, take a long wished for trip, or send your children to college.
But is it a good idea to plan on it?
- · What if your parents spend it or need long-term care, which can be very expensive?2
- · What if they live a lot longer than expected and use up most of the money?
- · What if they decide to give a lot to another family member or to charity?
--These are all good questions to ask before assuming that you’ll receive a million dollars.
Too many unknowns
When I am building financial plans, in general I advise clients to exclude assets they might inherit. The amount is usually unknown and the parents’ expenses can be unpredictable. They could unexpectedly develop chronic conditions or need skilled nursing services. Unless one or both parents have less than six months to live, assuming a certain amount can be an unwise approach to creating a reliable financial plan.
A false sense of security
Including an inheritance now in your financial plans can also breed a false sense of security. By planning on the assets, it could cause you to back off needed saving, spending cuts and investing to achieve your long-term goals. However, a significant potential inheritance should
not be completely ignored, especially if your parents have been transparent about where their money is going to go when they die and how much you’ll get.
Starting the conversation
Too often I meet people who think there will be an inheritance but have no idea what they might get. Asking about it can create an uncomfortable situation. After all, who wants to say:
“Hey, dad. When you die, how much money will I get?”
You might not get a good answer to that question, but I encourage you to have a conversation with your parents, especially if you suspect that there may be an inheritance. It might start this way:
“Hey, dad. You’ve been so great about making sure that I had everything I needed when growing up. Now, I am trying to do some financial planning of my own and it would be helpful to know more about your intentions for leaving an inheritance to me—or not.”
While every family situation is different and having conversations about money with your parents may not be easy, it can show them that you are trying to be responsible by planning ahead. Parents are often interested in helping their grandchildren get a great start by funding some or all of their college expenses. This might be an easier way for them to remain in control of their funds while helping you and your children out in a big way.
Putting a legacy to work
I remember how hard it was for me and my family when my mom passed away 20 years ago. But she left an important and lasting financial gift that helped me get my start as a financial planner. For that inheritance, I am eternally grateful. That gift continues to play an important role in my life every day. Someday it will be my time to return the favor to my children. I am looking forward to that day. In order to prepare my kids, I will be sure to let them know our intentions in advance.
If you are expecting to receive an inheritance and would like to find out more about how to plan for it—including how taxes may play a role—give me a call. I’m here to help. You can schedule a quick call with me by clicking HERE.
Lyman H. Jackson
Lyman@PlanWithFPS.com
617-653-3303
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1Source: According to a survey from Sun Life Financial Inc., conducted by Ipsos and reported in the Financial Post, “Posthaste: Baby boomers expect to leave $1 million or more to their kids — much to millennials' surprise”, posted 11/8/2023, https://financialpost.com/news/baby-boomers-leave-1-million-more-millennials
2The average cost of a one year stay in a skilled nursing facility in Boston, MA in 2023 was $169,728. Source: CareScout, a Genworth company: https://www.carescout.com/cost-of-care?b62518c6_page=2, 2/13/2025
©2024 by Financial Planning Solutions, LLC (FPS), a Registered Investment Advisor. Reprinting or redistribution only by permission. This blog was written by a professional with 30 years’ of real world experience in finance. AI did not write this article. FPS provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client after entering into an advisory relationship. Information herein includes opinions and forward-looking statements that may not come to pass. Information is derived from sources believed to be reliable. Information is at a point in time and subject to change without notice. Such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.