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Inheritence: Have you ever gotten one?

Quote:

View: 8 Reasons You Should Not Expect an Inheritance
Source: NYTimes
posted with the TFP thread generator

8 Reasons You Should Not Expect an Inheritance
June 21, 2008
Your Money
8 Reasons You Should Not Expect an Inheritance
By RON LIEBER
You’ve probably heard about the bumper sticker, even if you haven’t seen it. It’s the one on Cadillacs in Florida and Lexuses in Arizona that says “I’m spending my children’s inheritance.”

We’ve laughed at that for years. But the truth is, retirees have a lot of demands on their savings. Out-of-pocket health care costs, for one, are rising fast. At the same time, many people are not waiting until they die to help their children and grandchildren financially. And some are finding creative ways to draw on money that would otherwise be part of their estate.

For all these reasons and many more (I’ve ticked off eight below), it would be a bad idea to plan on getting any inheritance from your older relatives.

Many people have figured this out, though not all. An AARP analysis of the Federal Reserve Board’s 2004 Survey of Consumer Finances noted that 21 percent of people born after 1964 thought they would inherit some money someday. After all, most of them still have living parents or grandparents.

But with each passing year, the pressures on the nest eggs of those older people will only grow. The truly rich will be fine, as they usually are. But a lot of other people, even retirees with net worths well into the seven figures, could end up spending every dime before they die.

There is nothing wrong with that, by the way. This is a judgment-free column on that front. There is no moral obligation to leave a cent to the next generation. And there are some people who struggle each day to make ends meet who only wish they could leave an inheritance.

But for those who thought that they would have something to pass on, or that money would be coming to them, here are some of the things that may get in the way.

People who make it to 65 will live a lot longer. As of 2005, according to National Center for Health Statistics data, males aged 65 could expect to live to 82; for females, it was 85. That’s 37 years of living expenses for couples, and it isn’t easy or fun to scale back your standard of living.

Want to get a sense of how long you or your older relatives may live? Drop the phrase “How long will I live” into a search engine and play with some of the longevity questionnaires that pop up on the results page.

Social Security and Medicare will probably change. It’s hard to find anyone who thinks those programs will get much more generous. Medicare premiums will rise, and the program may cover fewer procedures or not cover emerging ones. Meanwhile, taxes on Social Security benefits may rise, and everyone may have to wait longer to collect.

Fewer people have pensions, so they’re more wedded to the markets. In 2005, according to the Employee Benefits Research Institute, 63 percent of workers in the private sector worked for employers who offered only 401(k) or similar plans, not traditional pensions.

As pensions continue to disappear, retirees and those close to the final quitting time will depend more heavily on how their investments perform. And as large numbers bet heavily on stocks to finance 20-plus years of retirement cruises and Cadillacs, some will inevitably lose big.

Out-of-pocket health care costs for retirees may soon hit seven figures a couple. Sounds crazy, right? Sure, these postretirement costs probably won’t get that high for people who have employer-provided retiree health insurance, though few in the private sector do anymore.

For those who don’t have such insurance and are retiring this year at age 65, the mutual fund giant Fidelity figures they will need $225,000 to cover their health care costs in retirement, though that doesn’t include over-the-counter drugs, dentistry or nursing home expenses.

For 55-year-old couples, the numbers could go much higher, according to projections by the Employee Benefit Research Institute. Once these people hit 65, if they pay all Medicare costs, purchase Medigap coverage beyond that and have prescription costs higher than 90 percent of their peers, they’ll need $1,064,000 in savings to finance these costs over the rest of their lives.

Divorced individuals may pass on less money. Splitting up can be expensive in itself, and maintaining two households for decades afterward will often cost more than sharing a dwelling.

Even if the parents have money left over, the ones who didn’t have custody of the children may be less inclined to pass an inheritance on to them. “The ties that parents have with kids and their interest in supporting them could well be weakened by the fact that they haven’t spent much time with them,” said Laurence J. Kotlikoff, an economics professor at Boston University and the co-author of “Spend ’Til the End,” which gives readers a new way to think about financial planning.

It’s getting easier to drain a home’s equity. Homeowners who are 62 or older (though there are some exceptions) can take out a reverse mortgage, which is roughly akin to a home equity loan that you don’t have to pay back until you (or your heirs) sell the house. So homeowners can tap the equity in their homes without having to make monthly payments to repay the debt.

So far, borrowers have taken out roughly 450,000 of these loans since 1990, according to the National Reverse Mortgage Lenders Association. But the pace is picking up. Lenders, including mainstream operations like Bank of America and Wells Fargo, wrote more than 100,000 of them for the first time in the year ended Sept. 30, 2007.

Meanwhile, the association says, retirees are increasingly using mortgages as a financial tool — and not simply as a last resort to pay for health care emergencies and the like.

Indeed, there is nothing to stop people from using the loan proceeds for vacations or cars or whatever they want. Millions just may do that someday, which makes reverse mortgages a real wild card. Their growth certainly raises the likelihood that large portions of family homesteads in America will end up belonging to banks, not heirs.

Life insurance may not offer much help. It’s now possible for people to sell their life insurance policies to investors in many circumstances. For a $1 million policy, an investor would pay some fraction of that immediately to the original policy holder, then hang on to the policy to collect the full amount when the seller dies. The more people who do this, the less money for any heirs.

Meanwhile, the popularity of term life insurance, where policy holders are covered for 10 or 20 years or so but then get nothing afterward if they don’t get a new policy, could also have an impact. Many people stop buying term life insurance after their children become adults or once a spouse dies. Their heirs will get nothing in the way of a payout.

The transfer of wealth will increasingly happen while the older generations are still alive. People in the latter halves of their lives now find themselves financing college tuition for grandchildren, chipping in when children or grandchildren graduate with five and six figures in student loan debt, supplying down payments in a tightening mortgage market and bailing the younger generations out of a host of other financial calamities.

Sometimes, this is part of a concerted effort to reduce an estate that could be subject to taxes. Other times, it’s pure necessity.

But it may well be everything you’ll ever get. If you put it to good use now, perhaps you won’t have to choose later between selling your life insurance and draining your home equity.

Have you gotten one? Do you expect one? Are your parents planning for leaving you one?

After watching many people just eat up home equity as though it were an ATM machine during the 80s and 90s, I've solidified my belief that there is no inheritance or retirement for many. Maybe my financial outlook is far to conservative for some, and archaic for others, but you can't spend your $1 more than 1 time.

The family had great wealth at one time. I personally never saw a single penny of it. Some jewels and antiques were passed from my great grandfather/grandmother to my father, but the bulk of the inheritance was split by 9 brothers (grandfather and his siblings) which left pretty much nothing left to grow.

My paternal grandmother passed away a number of years ago, and I didn't even get any personal effects. In order for her to qualify for Medicare lots of her personal money and effects were divested and distributed. I didn't care either way, but she had many grandchildren (I think about 23) so again even if she had any money it would be minimal.

My parents are planning something, some sort of trust or another. My sister and I had always agreed that we'd divy up art/antiques and jewelry. I don't have any interest in the jewelry, she doesn't have any interest in the art/antiques.

I don't have any interest in the money if there is any left. My parents planned very well for their golden years, or so they hope. I don't expect to get any money or for them to have any money left over.

Skogafoss had an aunt pass away that left her some money not alot but something more than a night out on the town.

I received some money when my maternal grandfather passed away. My paternal grandfather's money was all in an IRA that passed on to my father, uncle, and their much younger sister (who promptly cashed it out and complained that it wasn't very much, well no duh, you had to pay a fat penalty). I also received some stuff--a television/VCR combo from my maternal grandfather's death and a Dodge Dakota truck, and a large television and some furniture from my paternal grandfather. What I really wanted and valued went to my aunt instead (not that she deserves it)--my oma and Grandpa's wedding rings. I wouldn't be surprised to find out she had pawned them by now. Supposedly she has promised my mother that they will be passed on to me at some point; I never expect to see that day.

Some things of my parents have more sentimental value than others, and it's those things that I want--my great-grandfather's harmonica and his tiger clock, my mother's rings, my dad's class ring and his Civil War books. My dad also has a sculpture in his possession that he made for his father when he was just a little boy--it looks like a slug but my dad swears up and down that it's a seal. It comes with a story. Things like those are what I want to hang on to.

Money is irrelevant--I just want to make sure my mother is taken care of if my father dies first, and vice versa. I know I have to help my uncle execute my father's estate when the time comes, and it's not something I look forward to or try to think about.

Received some and expect to recive more. And it's pretty secure as my wife has contol of an irrevocable trust with her mother that requires her signature for anything. Her mom is secure because my wife is an honest person. It will help with retirement!

Yes.

I got inheritance from my grandmother (some personal effects, jewellery, furniture) and also from a woman who was like a grandmother to me and recently passed (same type of things as with my gran). I wasn't expecting it but I was glad to have some of their most valued items. Among the items I have inherited that I most value are the necklace my grandfather gave to my grandmother for their engagement, several old photographs, a beautiful antique side table in mahogany, and an antique Singer sowing machine.

When my father passed, I inherited most of his personal effects and belongings, among them watches, artworks, furniture, thousands of books and CD's, a car, a house, and several other items. My most cherished item is his old mandolin. But I also inherited some of his debts...that part wasn't so great but I knew it was coming because I knew he was bad with his money.

I think if people know how to manage their money, there is no reason why they shouldn't be able to pass something on to their relatives, however small.

I received a little bit when my grandmother past away, not a lot but some.

When my mom passes away I will either receive a great sum or not much at all. Not sure how much she has as we just don't talk about money. I know she won the lotto (never talked about how much) and some other smart ventures in her times plus a good career but I also know she likes to visit the casino lol. she is a pistol and having fun in life right now. I hope never to find out what the answer is.

I received an inheritance when my father died, but he didn't die of old age. I was more shocked to see that almost 50% of it went to pay taxes... taxes that he'd already paid on money earned.

I suppose if he had lived a full life he would have used up a lot more of the money.

I got a small inheritance when my father died and when my stepmother died. I'm supposed to get an inheritance from my Grandmother, but she just went into a nursing home and the state agency that administers Medicaid is trying to get money even though the property was transferred 15 years ago. (Her life use rights may have messed that up).

I received a few hundred bucks when my grandma died, it was a bit unexpected. I honestly don't expect to receive any inheritance because even though my family is very frugal there just isn't much there to receive. I'll consider myself lucky if I don't have to pay off any relatives debts.

I've never gotten an inheritance personally and I don't expect one in the future. My parents are strapped by the very things mentioned in this article and have taken out a reverse mortgage to help finance living. I'll get some jewelry and personal stuff, but I don't expect much in the way of hard cash.

Received money from my father's accidental death (at age 32) before I was born. Not the kind of money I ever wanted to have, but it was there for me, nonetheless.

My grandma gave me an early inheritance, which was just enough to bring me to Iceland to live... and what turned out to be the defining year of my 20s, if not my life (that remains to be seen).

I have always felt a significant level of obligation and guilt related to both of these "inheritances." I have imposed a great deal of pressure on myself to do right by the sources of this money, so that they would be proud of the way I used it, and never ashamed. I was somewhat relieved that when my maternal grandmother died, she had little left to give anyone, let alone me. It made it easier, somehow. More clarity for grief, rather than guilt.

For the time being, my parents are both in their early 50s and in good health. If I do eventually get one, it's going to charity to cure whatever they passed away from. I don't see myself needing it.

I have never received an inheritance. (Other than very small pocket knife that belonged to my maternal grandfather).

I unexpectedly got enough to buy my first car and pay a year of insurance from a great aunt I'd met like twice.

I have never gotten an inheritance. My parents have been pretty successful in life and so I wouldn't be surprised to get one when they pass, but I don't expect that to happen for a long, long time. And when it inevitably does happen, I could never spend that money on myself or for my own personal benefit, like for a vacation or something. No way. I'd just feel way too awkward and/or guilty. My plan is for it to go towards my currently non-existent child's college fund. They'd approve of that.

While this isn't an 'inheritance by death' situation, my mother did give me the diamond from her original wedding setting (the band had broken so she replaced it with a whole new ring) that I had set in a new setting for my engagement ring. I love the story that goes along with the ring now.

My sisters and I received one third of my grandfather's assets between us when he passed away, as well as a payout from the life insurance. The reasons for this are not worth going into. I don't think any of us actually wanted the money, but it was better than the alternative.

I don't actually know if I'll be receiving anything when my mother passes. The hope is that it will occur many years from now, and I'd rather she spend her money on stuff to make her happy while she's here than give it to me when she's gone. I can always make more money; seeing the people I love get the most out of life is more important to me.

I received a small inheritance when my grandmother passed away.
My girlfriend's grandparents actually just gifted us a good sum of money so that we could use it as a down payment on a house so that instead of getting it after they passed away we got it now while they can see us enjoying it.

My maternal grandfather died when I was 10 and left everything to his wife.

She died when I was 24 and left me £800, which I used to pay for my fiancé's wedding ring and part of the honeymoon. It was one of the most upsetting things about getting divorced, that I'd spent the money my grandmother left me on this woman - because I know it would have bothered my grandmother.

My paternal grandfather was gone before my dad grew up, and I never knew him. My paternal grandmother died with not a penny to her name, and not a care in the world - she used to say "we came into the world with nothing - if we go out in debt, we beat the house".

My parents wills provide for their estates to be split between my brother and I - I'm not counting on anything much, because with both parents in their early 60's, it could be 20 years before they die, and as the OP states it could all be gone.

Both of them have supported me financially and educationally for my entire life when they could, so I've already had the benefit. Both of them came from relatively poor families (they were the first generation to own a house, go to university, set up their own businesses) and the start they gave me is worth more than cash when they die.

I have never gotten an inheritance, however my father did tell me yesterday that the family business is mine if I want it.

My mother-in-law is about $150,000 in debt so that should be fun as my wife is an only child. My wife has herself convinced that we won't have to satisfy those debts but I think she is wrong.

Also remember, if you or someone you know becomes executor of an estate and you have a house full of stuff that you don't know what to do with... call a local auction house or an appraiser and get someone out there to see if you have anything worth money. Being in the auction business I have made a few peoples days when we find a painting or some other item that is worth tens of thousands...

Quote:

Originally Posted by Charlatan

Two words: living trust. It really helps with the first $2.5 mil.

My grandmother died two weeks ago and the estate is split evenly between her four children. I'd be lying if I said I don't care about the money (we're in serious debt since my dad died 6 years ago,) but on principle, if my uncle doesn't give us our share, I will have to fight the urge to put him through a woodchipper after the shit he's put us through over the years and when the family met after my grandmother died.

I got some antique jewelry and porcelain pieces from a great-aunt and a Pauline Trigere (sp) dress that was handmade for my grandmother in the 40s.

Those should count, ya? :D

I don't know if this counts, but my grandfather gave me some personal items, including a ring he always wore (not terribly valuable monetarily, but had sentimental value, he wore it for decades), just before he died. He didn't do this for any of the other grandchildren.

My wife had a grandparent leave her a thousand dollars a couple years ago.

My parents and in-laws are both fairly young and in good health. Both sets are comfortable but not rich. I don't really expect anything if/when that time comes.