If there’s one topic more uncomfortable than discussing how much money you make or where babies come from, it’s the topic of inheritance. Talking about inheritance just feels wrong due to the greed it connotes and the finality of it all. But 100% of us will die, and 100% of us should be thinking about how we should give our assets away in an equitable manner. The best withdrawal rate in retirement doesn’t touch principle so we can ensure there’s money left over for others.
Dave’s post on taking care of his 97 year old grandmother got me thinking about a curious outcome that may occur. No matter how much love and time Dave gives his grandmother, her irrevocable trust will likely stay the same. Most of her assets will likely go to her son, Dave’s father who has financial issues of his own, and then her grandchildren. I’m sure grandmother appreciates all of Dave’s efforts. But at the age of 97, there’s no changing the will/trust to reward Dave for all his hard work during her most difficult years.
I’ve never had the inheritance talk with my parents because to discuss such things feels like extremely poor taste. Besides, they should have decades of healthy living ahead of them.
Thinking about inheritance is similar to how folks under 40 think about Social Security. There might be something in the end, but nobody counts on it. The only people who seem to talk about inheritance are super wealthy families with family businesses succession plans or people who are financially struggling and have no shame to ask their parents for more.
NO EXPECTATIONS SINCE COLLEGE
I’ve always gone with the assumption since college I would receive nothing from my parents because they already provided me with so much. My father taught me to play sports and invest in the stock market. My mother tutored me after school and introduced me to a healthier lifestyle. They even paid for my entire college tuition.
When I learned about how much private school tuition cost ($25,000 a year in 1995) for my sister, I felt sick to my stomach. My parents couldn’t possibly make much more than $100,000 a year combined as government employees. I decided to attend The College of William & Mary instead, a public school that only cost about $3,000 a year in tuition. Many people mistake William & Mary for a private school due to its name and small size. The College was founded by Thomas Jefferson in 1693 and is the second oldest university in the nation with the oldest academic building in use (Wren Building).
I knew we were squarely in the middle class given we drove a seven year old 1987 Toyota Camry and lived in a modest townhouse. I made it a goal to pay my parents back by getting a job and having them not worry about me after graduation. All they want is for me to have opportunities to pursue my interests and be happy.
When I finally saved up enough money to pay them back, I asked if I could reimburse them and they politely declined. I remember my father saying he saved equal buckets of money for my sister and my college education and to not worry about things. Only as a reflective personal finance writer do I fully appreciate how financially savvy they were to be able to support a family of four on their middle class salaries.
THE FIRST REALIZATION ABOUT INHERITANCES
I used to always play this car fantasy game with my buddies growing up. We loved cars and I’d ask them, “Let’s say a genie gave you $80,000 to spend on a car, which would you buy?” Most of my friends would choose the fanciest car possible for the money allotted – Porsche, Supra, NSX etc. After they’d get done sharing their desires, I’d tell them I would buy a $12,000 Honda Civic and pocket the difference! Some would change their mind for a more economical car, but most would just laugh.
I went the economical route in college because I felt bad for having my parents spend so much. I couldn’t afford paying for private school on my own working $4-$5 an hour jobs at McDonald’s. Going the private school route would also add a lot more pressure to find a decent job after graduation. Besides, William & Mary was a great school and I was fortunate to get in. But what I realize now as a personal finance writer is that if you don’t use it, you lose it.
From my parents point of view the reallocation of education funds to my sister makes a ton of sense. In the back of their minds I’m sure they were breathing a sigh of relief I decided to attend a public school instead of a private school. They see child raising as a total cost whereas it’s difficult for kids to see the big picture at the time. I have spoken to many teenagers who don’t seem to care at all about the cost of education because their parents will pay or they’ll get a loan. All they focus on is fit and what they want. It’s no wonder why we have such a massive student loan crisis.
One day at the age of 32, I couldn’t help but ask my father what happened to the remaining money earmarked for my college education since I went the $100,000 cheaper route over four years and paid for my MBA on my own. He said the remaining money went to pay for my sister’s private graduate school education. Very interesting! I was making a comfortable living at the time and didn’t really think about the issue after that day. I was happy that my sister was able to attend the private schools of her choice.
THE SECOND REALIZATION
After my three-week company offsite in Oahu, I went over to visit my parents for the final week. During this time I trimmed some trees, bought and planted a pomelo tree and himmayudin mango tree in their yard (I love plants thanks to my grandfather who was a farmer), and spent roughly $1,350 to buy them two new LED TVs, a Chromebook, and a DVD player. The worst was not the cost of the electronic items but the time and energy spent going to Best Buy, carrying out the heavy CRT TVs, and setting up the equipment. The reason why I got them a 50″ LED TV and not larger was because that was the largest I could comfortably carry with my wingspan! Besides, the price point was good compared to a 55″ or 60″ beast.
My parents were really happy I was able to upgrade all their electronic equipment and I was happy to have helped. I even hooked them up with Netflix and Pandora. After watching a bad movie on Netflix, I had a nice long conversation with my father about the main property. Without getting into specifics, the property was gifted to multiple individuals by my grandparents. I asked him whether I should consider buying out the other owners in order to generate some rental income in the second house on the property. My sister is one of the owners who lives on the East Coast and doesn’t ever plan to move back to Hawaii.
Dad said I could try and that I’d get his share of ownership, but that still left my sister’s share to purchase. This was the first time my father ever mentioned anything about inheritance. We kinda joked about things to keep the topic light, but in that moment I realized that no matter how much time I spend with my parents or help them with things around the house their will/trust would likely be split evenly between my sister and I.
I fully expect to take care of my parents when they are older. They don’t need to worry about any expenses beyond what their insurance will cover, including the thousands of dollars a month in long-term care if needed. I haven’t spoken to my sister about caring for our parents yet, but I have my doubts she’ll be taking care of them because she has her own family to take care of on the East Coast.
FORGET ABOUT THE MONEY
Because love is unconditional, it doesn’t matter who is the more caring sibling. As a parent, I have to imagine one of the key tenets is to never show favoritism for one child over another. The inheritance is the most crystal way to demonstrate equal treatment, therefore no sibling should ever expect to get more than another sibling.
Besides, it costs money and takes time to change a will/trust. There’s also the fear that the paperwork could get lost or misinterpreted in the process as I’ve seen happen before. I’ve got no intention of changing the contents of my will unless I absolutely have to.
Every time I see my father I joke with him whether he’s doing a good job spending his entire pension money every month and whether he needs any help. He is a super saver who needs a lot encouragement since he still likes to save for retirement in retirement.
But maybe I’ve got it all wrong. Maybe my father is building a massive financial nut to leave to his children. So instead of encouraging him to spend all his money and live it up, I should be encouraging him to save even more. Who am I to try and change someone’s spending habits if they are happy?
I never want to have the inheritance talk with my parents unless they initiate the conversation. I hate thinking about money and family because so often money tears relationships apart. The best way I can make my parents happy is to regularly keep in touch, be happy with my own life, and not let them worry about me. Connecting is one of the main reasons why I’ve been writing so methodically online for the past four and a half years. If they’re ever wondering what I’m up to, they can always stop by for a virtual visit.
1) Do things for your parents because you love them, not because you think your actions will do anything to change their will.
2) Your good deeds will likely go unrewarded when it’s time because parents want to treat their children equally. It’s too cumbersome and expensive to change a trust/will.
3) Your motivation to be a loving son or daughter will naturally dip the day you realize your siblings will get exactly the same, even if you never thought about doing anything for a larger inheritance in the first place. It’s like working hard for an A all year until your teacher says everybody will get a B.
4) Don’t ever expect anything more from your parents once you’re an adult. Instead, change your mindset to paying them back. If you are expecting an inheritance to take care of your financial needs, you are planning to fail. A TD America study in 2012 said that 40% of of those ages 14-22 expect to receive an inheritance while only 16% of parents expected to leave one!
5) Parents should consider overweighting their assets towards children who care for them the most, if not for selfish reasons. Nobody wants to spend their years alone. It’s perfectly rational to provide an incentive system for children, even if no incentive system is needed.
6) If you’re going to marry, you might as well marry an Australian or Singaporean! They’ve got fantastic government retirement systems that ensure long term wealth.
Readers, have you ever had an official talk with your parents about inheritance? Do you think the inheritance will be split equally among your siblings no matter what? Should parents adjust their inheritance amounts based on who takes care of them most?