Mom and Dad aren't as wealthy as you think they are.
A friend of ours was hoping to inherit from her "wealthy" relatives and was surprised to find out, when the Will was read, that the wealthy relatives weren't all that wealthy. This is a common occurrence.
Why is this? Well, Mom and Dad or Auntie and Uncle have a lot of nice shit, to be sure. They have a nice home worth a half million dollars and a vacation home worth a quarter million. So the kids think that Mom and Dad (or Auntie and Uncle) are filthy with it, when in fact, they are quite middle class.
What's that you say? They have to be rich to afford a three-quarter-million-dollars in "paid for" real estate?
You see, they bought their house for $70,000 a long time ago. And the vacation home cost them $30,000. While that was a lot of money back then, it was, in terms of today's dollar, a lot less. They could not have afforded to buy the houses they now live in (or lived in), on their accumulated wealth or income.
That is the conundrum of getting old. Oftentimes oldsters find they cannot afford to buy the house they lived in. I know I can't, and I'm only 54 years old. The house we sold in Alexandria, Virginia, went for nearly $700,000. We paid $189,000 for it, which was the highest price paid in that neighborhood at the time. We could not have afforded to buy it at $700,000, no matter what, which is why we sold. And today, there are two homes on that lot, selling for over a million each. Let's just say that I could afford neither, much less both.
So heirs think their parents are "rich" as they have all this real estate that is paid for. But in terms of actual non-real estate assets, they might be quite poor, or at least middle class. And as our older generation is the recipient of something called a "pension" (ask your Grandpa what those were) they might, in fact, have very little in the way of cash assets.
So when the estate is settled, other than the home, there are not a lot of assets to be had. Yes, the house is worth a lot of money, but when you divide it by nine (children, nephews, grandchildren, etc.) it ends up being a lot less money than you'd think.
What got me started on this was a relative who was convinced that her Auntie was "rich" as she lived in an expensive home. After all, if you live in a half-million-dollar home you must have millions in the bank, right?
Wrong. She had some money, but when divided by nine, not a lot for each heir. And the relative who was counting on this inheritance is now pissing in their pants, as they thought than Auntie would fund their retirement. As it is, Auntie left them enough to buy a nice car.
So she goes berserk. Where did all the money go? Someone must have "took it" - right?
Wrong. There never was a lot of money. Middle-class people can end up owning homes that are worth far more than their net worth or their income would ordinarily support, over time. Inflation and rising home values means that some folks end up with a real estate asset that is huge compared to the rest of their assets.
And it means they live in a home that they could otherwise not afford.
If you think you are going to inherit "a lot of money" from Mom and Dad because they live in a fancy house, think again. Even though they have a nice house, their actual income and assets may be slim. Once a house is paid-for and you have Senior tax relief, the cost of living in it is minimal. Mom and Dad might be getting by on less money than you make - in fact, far less.,