Our generation has failed to save much for retirement and many folks are well into their 50's and starting to sweat bullets about how they are going to live when they retire - with little or no savings to fall back on. And many are looking to an inheritance as the answer to their problems.
But there are a number of inherent problems with inheritances. And things might not work out as you first imagine. Expecting to inherit - as your retirement plan - is a risky concept. You may end up broke and destitute, due to circumstances beyond your control. However, you do have control over your own savings, which is why it is a good idea to rely on that first, and not count on inheritances.
What could go wrong? A lot. A whole lot. Here is a short list of what can go wrong:
1. Waiting around for parents to die: One problem is that in order to inherit, you have to wait for someone to die. And if you are the first born, this could be a long, long time. In some instances, you may be well into retirement before Mom and Dad kick off - or they do something really rude and outlive you. Those inconsiderate bastards! Of course, you could try to help the process along, but that presents other difficulties - like prison terms and the electric chair.
2. Squashing Ambition: As I noted in an earlier post, inherited wealth squashes ambition in heirs, who often realize early on that they can live a comfortable life on inherited money, so why bother trying? And if they try - and succeed in life - often their reward is to be disinherited, as their parents feel a needy sibling needs the money more. So, heirs settle down and live half a life, waiting for parents to die and really doing nothing interesting with their own lives. And that is sad.
3. People change wills, leave heirs with nothing: You think you are set to inherit the family fortune, but then Dad goes out and gets an 18-year-old stripper girlfriend, and leaves it all to her. (And an 18-year-old stripper girlfriend will give Dad a stroke in no time). Suddenly, you are no longer "Daddy's favorite little girl" - you've got competition. And this happened to a friend of mine, who, after the funeral, found the new trailer-trash wife and her trailer park friends trashing Dad's house, and throwing all the family mementos and heirlooms out on the lawn. It happens - and their ain't nothing you can do about it! Fortunately, my friend was not waiting around for an inheritance, and had her own life - she saw the writing on the wall on this a long time ago.
4. Not as much money as first thought: A friend has a elderly Father who makes allusions to "valuable stock certificates" locked up in a trunk in the attic. There must be millions up there, from the way he talks about it! But alas, when the Estate is probated and the trunk broken open, it is filled only with worthless junk. You may think your parents are "rich", but in fact they may be poorer than you, or not much wealthier. And of course, no one likes to "talk about money" - so they never tell you how much they have or where it is invested. If you are relying on vague promises of wealth to fund your retirement, you may be in big trouble. And it is not uncommon for parents to do this, either, as we shall see.....
5. Siblings may Interfere: You and your sisters are to divide the estate in three. But alas, one sister has spent the last decade running you down to your Mother, and got her to sign a new will, leaving you with less, or putting her in charge of your money. My Uncle did this to my Mother, convincing my elderly Grandmother to sign a new will putting Mother's share into a Trust that he would conveniently administer. "You know Ellen was such a spendthrift" he said, "this way, I can make sure she is cared for" - as if he was doing this out of the goodness of his heart. Fortunately, my parents were able to get Grandma to sign a new will - but others are not so fortunate. And even if the will leaves everything "even Steven" a spiteful relative may try to steal your share, particularly if they are the executor of the Estate. You can't count on the goodwill of your siblings, if there is so much as a dollar on the table.
6. Parents may give it all away to "needy" siblings: One of the rewards of being successful on your own and building up your own wealth is that your parents may decide that one of your "needier" (i.e., lazier) siblings needs the money more than you. So, during their lifetime, they give away their estate to those they feel are "needy" and give you bubkis. And in the will, they do likewise - after all, you can "take care of yourself". And this enters into the heir mentality - heirs realize that if they appear needy to rich Mom and Dad, they will get more loot over time. So many heirs spend a lot of time posturing themselves as victims of one sort of another. Yea, it is slimy and disgusting, but I've seen it done - on numerous occasions.
7. Having to Suck Up to someone else: One problem with being an heir, is that you have to "be nice" to people who often aren't very nice in return. And this is not by accident. Parents like dangling out that inheritance as a carrot for the children to come visit them, be nice to them, and otherwise dance to their tune. And yes, this is sick and yucky and disgusting (makes me want to vomit, just writing about it). And the odd thing is this: The parents don't bother to realize that the children who are sucking up for the inheritance are doing it for just that - the money. Often the lazy children who cozy up to Mom and Dad, hoping for a free handout or a choice chunk of the Estate, are the first to say the nastiest things about their parents. They hate them - because they are dependent on them - but they swallow what little pride they had left and suck up, up, up, - all for a little bit of money. How freaking sad!
I realized fairly early in life a few things. First, my parents didn't have a lot of money - maybe $500,000 total, which they would likely spend before they died. This was not a lot of dough, divided four ways, and certainly not enough to retire on, even if they didn't spend it. Sucking up for money is bad enough. Sucking up for no money is worse.
Second, my Sister got the lion's share of inter vivos transfers in the form of gifts, cars, and money, so what estate there was, was not to be divided equally, by definition (despite my Mother's cries of how even-handed she was, hypocrisy of the worst sort).
Third, my parents were not very nice people, and I really didn't like them. As I noted before, my Mother was a psychotic, manic-depressive, alcoholic closeted Lesbian with a penchant for knife play and dramatic suicide attempts (what's not to like, there?). My Father was largely absent - and often left me alone with my Mother during her fugue states - oftentimes because he was pursuing his own recreational activities. It was only years later that I realized that that was a pretty rotten thing to do to a kid.
Free tip to you youngsters out there: Don't marry a manic-depressive, alcoholic closeted Lesbian with a penchant for knife play and dramatic suicide attempts. And yea, you can spot these things early on! Just a suggestion, here. Save yourself a lot of grief!
So the idea of sucking up to these people, for a pittance of money that I likely would never get - well, that is just disgusting to me. I realized that I would have to be my own man, make my own way in the world, and sever ties with these basically crazy people.
And you know what? Yea, it is hard work to make your own money and take care of yourself. But it is so totally worth it to be able to walk away from all that nonsense and not be beholden to crazy people. And you know what? The funny thing is, once you are independent and have your own money and are not sucking up to them all the time - they want nothing to do with you. Funny how that works.
And, yea, I know others are not so lucky. Due to circumstance or to their own actions or inaction, many folks are relying on an inheritance to fund their golden years. And they live in fear - fear that their parents will spend it all, or leave it all to one sibling, or write them out of the will, or just take too damn long to die. And those are awful things to have to deal with, or to think about with your parents.
And they sit around, waiting for their parents to die, hoping they don't piss them off too much so they get written out of the will, or that Dad re-marries a stripper, or blows it all on a Ponzi scheme.
It is too much of a surrender of control over your own life, and I feel sorry for those who go through it.
A better plan is to build up your own Estate and not count on or worry about an inheritance. And this is hard for a lot of people to do, as they cannot walk away from "all that money!" After all, if your parents will leave you millions - or even a few hundred thousand - its worthwhile to "be nice" to them and hope you are mentioned favorably in the will, right?
And I hear this all the time from people, "Well, my parents are worth millions! I have to be nice to them so I can inherit!" - and they let dysfunctional people walk all over them for years, just for a little bit of money.
But as we have seen, oftentimes these sort of plans gang aft agley, and the heir ends up with nothing but bitter stories to tell people after they've had a few drinks (and boy-howdy, I've had to listen to a few of those!).
But an inheritance isn't a birthright, and grousing about how you lost one is no answer. It is far better to just walk away from one - and not have to worry nearly as much.
Be your own man.