How do you factor in potential inheritance?

[FLBiker]

I'm 46, DW is 42.  We've got investments totalling ~$1.2M and an annual spend of ~$60K, so we're closing in on FI.

My question is how folks factor in potential inheritances in terms of determining that they've reached the point of work being optional.  My dad is pretty wealthy, and I'm likely going to inherit $1M-$1.5M from him.  He's 75 and healthy, though, so who knows when this will be.  Regardless, even if it came in 20 years, it would be enough.  On the one hand, it seems risky to count on it, as it isn't ours yet and things can always change.  At the same time, he's pretty careful about it -- he gets $4000 per month from SS and still works part-time, so he's re-investing his RMDs.  And he has a prenup with his fiancee.  Thus, just as it seems risky to count on it, it seems a bit foolish to ignore it completely.

For folks in similar situations, how do bring potential future inheritances into your financial picture?

[GilesMM]

Best to ignore inheritances as they are not guaranteed. If they ever arrive, then treat them as a windfall.   But don't ramp up spending now because you hope to get money decades from now.  Anything could happen between now and then.

[slappy]

You don't.

[ATtiny85]

Same, we fully ignore any potential of an inheritance. If  check shows up, it will go right to Vanguard.

[Greystache]

My wife and I are probably going to inherit a couple hundred grand from her mother in the near future. There is also the possibility that her mother could hang on for years in a very expensive care facility and we would inherit nothing. When we retired we knew that her mother had this wealth and that we might be inheriting it someday, but we never included it in our plans.  We made sure our numbers worked out with zero inheritance and if we do get anything, it is just a bonus.

[uniwelder]

I'm not factoring inheritance into my FIRE calculations at all.  I assume I'll get something when my mom passes away, but its entirely possible money gets diverted elsewhere, or will happen long enough from now to not matter financially.

For OP, if you're able to have serious financial discussions with your dad, you should start talking now.  If he has more money than he'll ever need, he could start gifting 17k annually to you and another 17k to your wife.  However, since he's still working, he obviously is hanging tight to all that cash.  Has he discussed his will with you?  Maybe he's going to donate it all to charity instead, because its possible his obsession with saving money could be a signal that everyone needs to earn their own in life.

[StarBright]

We are in the same age bracket as you and your wife.

In general, we don't factor it in. Both sets of parents have told us that they intend to leave us money and/or property.

But healthcare, long term care, changing minds, changing plans can all happen and we have not factored it in.

Last summer my husband and I did talk about buying a bit of property where we would like to have a vacation home. We figured we can afford the property now, and afford to build a home on it in a decade. If our parents actually left us the money they said they intend to, then that would probably be in a decade too and we could easily afford it without having to even think about it.

Knowing that our parents have every intention of leaving an inheritance made the future vacation home conversation easier to think through for us. (though we ultimately decided against purchasing the property for now).

My husband and I are really lucky that both sets of our parents are good financial planners who want to make sure their estate plans are clear while they are still in good health. My dad even asked me to zoom in to his last meeting with his financial advisor.

[FLBiker]

Thanks for all the feedback.  We've definitely been ignoring it to this point, which seems to be the consensus.

But don't ramp up spending now because you hope to get money decades from now.  Anything could happen between now and then.

Absolutely -- sorry if I wasn't clear, this has nothing to do with ramping up our spending.  I'm asking in terms of accelerating my "is work optional?" calculation only.

For OP, if you're able to have serious financial discussions with your dad, you should start talking now.  If he has more money than he'll ever need, he could start gifting 17k annually to you and another 17k to your wife.  However, since he's still working, he obviously is hanging tight to all that cash.  Has he discussed his will with you?  Maybe he's going to donate it all to charity instead, because its possible his obsession with saving money could be a signal that everyone needs to earn their own in life.

Again, sorry for not being clearer upfront -- Dad is currently giving me and my 2 siblings $1000 per month.  And he's currently having his will redone and he's shared drafts with the three of us.  If he dies before his wife, his assets are split 4 ways (25% to wife, 25% to me and my two siblings).  If she dies before him, it will be split 3 ways.

Fundamentally, I guess my question is one of risk.  I've always been comfortable with risk in terms of asset allocations -- I was 100% equity most of the way, and now we're at 90/10.  And while it seems risky to count on an inheritance (just as it is "risky" to be in equities) it seems foolish to ignore it (just as [to me] it would be foolish to be all in "safe" investments like CDs and bonds).

[ChickenStash]

I don't factor it in. If that happens then it will just get invested as I would any windfall. Granted, this is probably easier for me to say since it is unlikely I will inherit an amount large enough to make an impact.

[Ichabod]

Inheritances seem too contingent to plan on. The value of the future estate depends on your father's investing strategy, withdrawal rate, and date of death. He could change his will for all kinds of reasons (maybe he changes his pre-nup with wife because she assists him in his old age; maybe his alma mater or favorite charity calls at the right time). His withdrawal rate could change because of medical needs. If his investing strategy is conservative and high inflation persists, the real value of his wealth could decline.

@uniwelder suggestion of discussing an "early inheritance" might work. I'd feel odd having that conversation with my parents, and I'm skeptical they'd be open to it. But I like to think I'd consider it for my own children.

You seem pretty close to FI on your own. If you're anxious to make the leap, I feel like adding in an estimated NPV for your SS or even accepting a higher withdrawal rate and its accompanying risks are more reasonable options.

Edit: I think a lot about how it's common to have lottery fantasies (I have them myself, and I've never played). But I don't have inheritance fantasies, and even thinking about it makes me feel weird, and I think counting on a future inheritance is similar. That's my idiosyncratic preference.

[Metalcat]

I think it's important to actually examine the "risk" of equities.

They aren't high risk, they are high risk for variability. Meaning you can't predict what the value will be at any one given time. But that doesn't mean that. 100% equities investment plan is "high risk" in general.

[Laura33]

I think it's important to actually examine the "risk" of equities.

They aren't high risk, they are high risk for variability. Meaning you can't predict what the value will be at any one given time. But that doesn't mean that. 100% equities investment plan is "high risk" in general.

This.  I don't think it's fair to equate the "risk" of equities to the "risk" of an inheritance going away.  When you buy equities, you are buying the right to future profits from a company that makes or sells things people find useful or pretty or whatever.  Sure, there are going to be market swings, and there are going to be bubbles where the lure of the story trumps hard data, but over the long-term, most companies have real value.  And perhaps more importantly, by and large you can manage that risk -- do your research before buying or selling, maintaining a cushion so you aren't vulnerable to those times when the market periodically runs around like the proverbial headless chicken.

An inheritance, well, you can't "buy" a piece of paper that gives you a right to it.  Your dad can change his mind any time; the fact that you're in the will today doesn't mean you will be tomorrow, and there is literally nothing you can legally do to enforce a promise that you'll inherit something.  In addition, there are many many more ways that the value of the inheritance can go to zero.  He could kill someone and get sued; he could spend 20 years in an Alzheimer's care unit; he could get taken advantage of by con artists as he gets older; etc.  And worse:  there is literally nothing you can do to manage that risk.  If you don't like where a stock is going, you can sell it and buy another to mitigate the losses; if your dad needs to go into LTC, or decide that the new wife actually needs 50%, there's not a damn thing you can do.

IOW, while both entail "risks," those risks are so fundamentally different that they barely merit the same word.  Which is part of the reason for the very strong "I don't consider it at all" theme here -- we like to focus on things that are at least somewhat within our control, and not count on luck to get us there.

[GuitarStv]

I don't expect any inheritance, and plan accordingly.

[oldladystache]

My last parent was 103 when he died. I'm glad I didn't count on any inheritance. I did get a nice inheritance but by then I was way past needing it.

[nereo]

This seems like yet another reason why a person should draft an Investor Policy Statement (IPS).  A good one will not only outline what they should be invested in, but also outline life goals, risk tolerance, how to treat windfalls and when and how to deal with a surplus of money (the 'philanthropic stage' many of us here will likely find ourselves in later in life).

Personally, we don't factor our anticipated inheritance into our current plans NOT because we are worried about the uncertainty of getting one or even what that amount might be, but because we expect and hope to be 'Fat-FI" long before our parents pass on.  Of course it could be sooner, which is why there's the IPS.  It's worth noting that a male who has reached the age of 75 with no terminal illnesses has a 50% chance of living at least another decade, according to actuary tables.
OP - based on your numbers I'd be very surprised if you weren't fully FIRE within 5 years

Final note: We are pretty terrible as a society at discussing death, expectations and inheritances. Some people actually prefer to transfer some of their wealth to their heirs while they are still alive so that they can see the impact it has. At a minimum it might be worth having an open conversation with your father about what his wishes are for his estate and whether there are any logistics you should be aware of. He might not wish to talk about it (that's fine) but he also might welcome the opportunity to have such a difficult conversation. I'm one of three children, and my two older siblings cannot bring themselves to have such a conversation with our parents, but they have been completely open with me. Consequentially I'm the one they've entrusted with information, including who the executor is and what they want seen done with their estate. 

[charis]

I wouldn't factor it into your FI plans or asset allocation at all.  Anything could happen that could cause your father to spend that money, either by choice or necessity.  It just doesn't make sense to even vaguely think of someone else's money as yours until it's in your hand.  At most, you can fantasize about how you'd put the money to good use in the future, but don't let it influence any current decisions.  My parents gift us a relatively small amount each Christmas and it goes straight to our kids 529 plans.  We could put it in our taxable Vanguard investment account, but even now I don't think of their $ as mine, and I don't feel great about taking it.  But I do feel ok about using it to improve their grandchildren's education opportunities.

[zygote]

I'm in the very fortunate position that both my parents and my wife's parents have more money than they could ever spend, even if long term care gets involved. My wife is an only child and I only have one sibling, so we will both almost certainly be getting 7 figure inheritances at some point.

That said, I am not including it in my planning. I hope I don't receive any inheritance until I am long retired and am well past it being useful. And that's not unrealistic - my parents are in their 60s, and 3 of their 4 parents are still alive. My mother in law is in her 70s, and her last parent only passed 2 years ago. I would be thrilled if my parents are still around when I am that age.

My parents have started gifting me cash every once in a while, sort of as an early inheritance. That has been a very nice bonus, and has enabled me to fully max out my 403b a few years I wouldn't have been able to otherwise. I'm very grateful they chose to give me something now when it would be more helpful, but I do not count on it continuing. Also, I do appreciate that their financial position means I don't need to consider adding any buffer to help them financially in their later years.

Even though I'm not outright changing any of my spending or saving based on potential inheritance, I will be honest that it gives me some peace of mind to protect against OMY syndrome. I'm very risk averse, so I expect I will find it hard to turn off the firehose of cash even when I rationally have enough. Even though I am not including any inheritance in my definition of what enough is, it is nice to have it in the back of my mind as a long term safety net.

[Sandi_k]

We are not counting on it in our planning, at all. We're now in our late 50's, and work is pretty minimally needed, given our frugality, investments, and my pension.

You'd think we would be more comfortable beginning to "see" the inheritance coming our way, since the parents are in their late 80's. The risks to that are quite clear:

- Liability. My FIL continued to drive until age 88, and we'd urged MIL to take the keys away for 2+ years prior to that. When she refused, I asked her to talk to her insurance agent regarding an umbrella policy, as they have an expensive ranchette in SoCal. Her response: "What's an umbrella policy?" Oh, boy.

And indeed, what eventually caused her to take the keys was him crashing his truck on a major freeway, driving home from his son's workplace. We are EXTREMELY lucky that he didn't take out a family of four on the drive home. He either lost consciousness, or over-corrected a lane maneuver - regardless, it totaled his truck, but he didn't involve any other vehicle in his crash.

- Long term care. The ILs have boasted for years that they have LTCI. I took a look at the policy last year. It pays $100 per DAY.

- Scams. My mom has repeatedly breached her own financial systems, including bank account numbers, credit cards, etc.

So even though we might end up with inheritances totaling 7 figures between both sets of parents....we're very clear that counting on it is a Really Bad Idea.

[wenchsenior]

I would be extremely hesitant to make any assumptions about inheritance unless you know a lot of detail about the estate and it's very close to the end of life.

For example, if you'd asked me 10 years ago to lay bets on whether I'd inherit substantial $ from my father, I would have likely bet on that. His estate was worth about 2.5 million and he was super frugal in terms of bills. And he has worked his entire life to accumulate a lovely large piece of lakefront property as his legacy so he could pass it on to us kids.

But a huge amount changed in 10 years. First, he started to struggle with alcohol use disorder and did several stints in expensive rehab. Then he split from his wife. He also did not have LTC insurance (though his wife did). Then he burned up some additional amount of cash buying back property from his wife that they had initially split as part of the separation (b/c he viewed the property as his legacy, see above).

Then he relapsed and drank himself into complete dementia, and shortly required 24 hour professional care. But his body is still ok, so he could live for a number more years (side note: absolutely incredible, but true).

The 24 hour care started less than a year ago, but with care costing >15K per MONTH (which btw is pretty standard rate) + his regular, if modest, bills... his burn rate of cash is >18K per month and will be totally out of cash savings in about 8 or 9 months from now, despite still having an estate worth >1 million.

ETA: Whenever end of life planning comes up on this board, it always astonishes me how many people do not realize that long term care/end of life care is not covered by Medicare. And it absolutely must be planned for (esp if you are married b/c one partner can be left utterly destitute except for house and car if the other partner requires care).

So we were forced to just list some of his legacy property (which he would be absolutely devastated if he found out) b/c otherwise he'll be unable to pay for care in another few months...

The truly depressing part is how little objective 'value' that property sale is buying in terms of quality of life. Property that he obsessed on for decades, and struggled to keep together, is being sold now and will still only buy him about a year of additional care at the most. Every time I think of it I feel sick, and also hope to god he never realizes that it's happening (though if he lives longer than another year, he will b/c then we'll have to sell the lots RIGHT next to his house, and he will know when people start building). Christ, I hope he dies before then, for his own sake.

[charis]

^
This is an example of what I was thinking about.  I once asked my mother about LTC insurance, and she dismissed it out of hand - "no one can afford that" (she had one parent with early alzheimers and one with dementia).  Is LTC care the same as "the nursing home"? It sounds like it isn't.  But I'm not seeing any folks these days dying peacefully at home of old age.

[wenchsenior]

^
This is an example of what I was thinking about.  I once asked my mother about LTC insurance, and she dismissed it out of hand - "no one can afford that" (she had one parent with early alzheimers and one with dementia).  Is LTC care the same as "the nursing home"? It sounds like it isn't.  But I'm not seeing any folks these days dying peacefully at home of old age.

LTC is a large category that includes, but is not limited to, nursing home care. Nursing home care is not covered by Medicare, either, except for short stints after hospitalization.

[charis]

^
This is an example of what I was thinking about.  I once asked my mother about LTC insurance, and she dismissed it out of hand - "no one can afford that" (she had one parent with early alzheimers and one with dementia).  Is LTC care the same as "the nursing home"? It sounds like it isn't.  But I'm not seeing any folks these days dying peacefully at home of old age.

LTC is a large category that includes, but is not limited to, nursing home care. Nursing home care is not covered by Medicare, either, except for short stints after hospitalization.

Is that true?  I had an aunt who lived in a nursing home after having a stroke and she had no money, only SS and Medicare.

[wenchsenior]

^
This is an example of what I was thinking about.  I once asked my mother about LTC insurance, and she dismissed it out of hand - "no one can afford that" (she had one parent with early alzheimers and one with dementia).  Is LTC care the same as "the nursing home"? It sounds like it isn't.  But I'm not seeing any folks these days dying peacefully at home of old age.

LTC is a large category that includes, but is not limited to, nursing home care. Nursing home care is not covered by Medicare, either, except for short stints after hospitalization.

Is that true?  I had an aunt who lived in a nursing home after having a stroke and she had no money, only SS and Medicare.

Yes, it's true. Basically, you pay the nursing home until your money completely gone, then Medicaid (state-administered program for the poor) takes over and pays. Medicare (federal health insurance) plays no role.

If you have property (e.g., house) then it goes to the state in compensation. If you have a spouse still living, they get to stay in the house until death and keep one car, and a very small amount of money per month to live on (but basically no savings to speak of) so that the ill spouse can be cared for. After the longest live spouse dies, the house/estate goes to the state.

Sometimes spouses divorce to protect the remaining assets for the healthier spouse. My father and his separated wife did this or she'd also be paying down all of her savings pay for his 18K/month living expenses.

When my father is out of money and has sold all the property he owns except his house lot, then he will be forced to go into a nursing home on Medicaid and the state will take the proceeds of the sale of whatever is left of his estate.

Edited for clarity.

[charis]

^
This is an example of what I was thinking about.  I once asked my mother about LTC insurance, and she dismissed it out of hand - "no one can afford that" (she had one parent with early alzheimers and one with dementia).  Is LTC care the same as "the nursing home"? It sounds like it isn't.  But I'm not seeing any folks these days dying peacefully at home of old age.

LTC is a large category that includes, but is not limited to, nursing home care. Nursing home care is not covered by Medicare, either, except for short stints after hospitalization.

Is that true?  I had an aunt who lived in a nursing home after having a stroke and she had no money, only SS and Medicare.

Yes, it's true. Basically, you pay the nursing home until your money completely gone, then Medicaid (state-administered program for the poor) takes over and pays. Medicare (federal health insurance) plays no role.

If you have property (e.g., house) then it goes to the state in compensation. If you have a spouse still living, they get to stay in the house until death and keep one car, and a very small amount of money per month to live on (but basically no savings to speak of) so that the ill spouse can be cared for. After the longest live spouse dies, the house/estate goes to the state.

Sometimes spouses divorce to protect the remaining assets for the healthier spouse. My father and his separated wife did this or she'd also be paying down all of her savings pay for his 18K/month care.

When my father is out of money and has sold all the property he owns except his house lot, then he will be forced to go into a nursing home on Medicaid and the state will take the proceeds of the sale of whatever is left of his estate.

Oh sorry, I did know that but confused Medicare for Medicaid.

[wenchsenior]

More nitty gritty details being discussed in this thread, if you want to alarm yourself LOL.

https://forum.mrmoneymustache.com/welcome-to-the-forum/do-retirement-facilities-take-all-of-someone's-money-to-enter/

[patchyfacialhair]

I would be extremely hesitant to make any assumptions about inheritance unless you know a lot of detail about the estate and it's very close to the end of life.

For example, if you'd asked me 10 years ago to lay bets on whether I'd inherit substantial $ from my father, I would have likely bet on that. His estate was worth about 2.5 million and he was super frugal in terms of bills. And he has worked his entire life to accumulate a lovely large piece of lakefront property as his legacy so he could pass it on to us kids.

But a huge amount changed in 10 years. First, he started to struggle with alcohol use disorder and did several stints in expensive rehab. Then he split from his wife. He also did not have LTC insurance (though his wife did). Then he burned up some additional amount of cash buying back property from his wife that they had initially split as part of the separation (b/c he viewed the property as his legacy, see above).

Then he relapsed and drank himself into complete dementia, and shortly required 24 hour professional care. But his body is still ok, so he could live for a number more years (side note: absolutely incredible, but true).

The 24 hour care started less than a year ago, but with care costing >15K per MONTH (which btw is pretty standard rate) + his regular, if modest, bills... his burn rate of cash is >18K per month and will be totally out of cash savings in about 8 or 9 months from now, despite still having an estate worth >1 million.

ETA: Whenever end of life planning comes up on this board, it always astonishes me how many people do not realize that long term care/end of life care is not covered by Medicare. And it absolutely must be planned for (esp if you are married b/c one partner can be left utterly destitute except for house and car if the other partner requires care).

So we were forced to just list some of his legacy property (which he would be absolutely devastated if he found out) b/c otherwise he'll be unable to pay for care in another few months...

The truly depressing part is how little objective 'value' that property sale is buying in terms of quality of life. Property that he obsessed on for decades, and struggled to keep together, is being sold now and will still only buy him about a year of additional care at the most. Every time I think of it I feel sick, and also hope to god he never realizes that it's happening (though if he lives longer than another year, he will b/c then we'll have to sell the lots RIGHT next to his house, and he will know when people start building). Christ, I hope he dies before then, for his own sake.

OP should read this and realize that it's definitely NOT foolish to ignore inheritances completely. Everyone seems to agree not to count your chickens.

If my parents die today, my brother and I stand to split a million dollar estate. But, longevity runs on both sides of the family, so a ton can happen in 30 plus years. I assume I'll get zero, and will be pleasantly surprised if I get more than that. Simple as that.

[wenchsenior]

I would be extremely hesitant to make any assumptions about inheritance unless you know a lot of detail about the estate and it's very close to the end of life.

For example, if you'd asked me 10 years ago to lay bets on whether I'd inherit substantial $ from my father, I would have likely bet on that. His estate was worth about 2.5 million and he was super frugal in terms of bills. And he has worked his entire life to accumulate a lovely large piece of lakefront property as his legacy so he could pass it on to us kids.

But a huge amount changed in 10 years. First, he started to struggle with alcohol use disorder and did several stints in expensive rehab. Then he split from his wife. He also did not have LTC insurance (though his wife did). Then he burned up some additional amount of cash buying back property from his wife that they had initially split as part of the separation (b/c he viewed the property as his legacy, see above).

Then he relapsed and drank himself into complete dementia, and shortly required 24 hour professional care. But his body is still ok, so he could live for a number more years (side note: absolutely incredible, but true).

The 24 hour care started less than a year ago, but with care costing >15K per MONTH (which btw is pretty standard rate) + his regular, if modest, bills... his burn rate of cash is >18K per month and will be totally out of cash savings in about 8 or 9 months from now, despite still having an estate worth >1 million.

ETA: Whenever end of life planning comes up on this board, it always astonishes me how many people do not realize that long term care/end of life care is not covered by Medicare. And it absolutely must be planned for (esp if you are married b/c one partner can be left utterly destitute except for house and car if the other partner requires care).

So we were forced to just list some of his legacy property (which he would be absolutely devastated if he found out) b/c otherwise he'll be unable to pay for care in another few months...

The truly depressing part is how little objective 'value' that property sale is buying in terms of quality of life. Property that he obsessed on for decades, and struggled to keep together, is being sold now and will still only buy him about a year of additional care at the most. Every time I think of it I feel sick, and also hope to god he never realizes that it's happening (though if he lives longer than another year, he will b/c then we'll have to sell the lots RIGHT next to his house, and he will know when people start building). Christ, I hope he dies before then, for his own sake.

OP should read this and realize that it's definitely NOT foolish to ignore inheritances completely. Everyone seems to agree not to count your chickens.

If my parents die today, my brother and I stand to split a million dollar estate. But, longevity runs on both sides of the family, so a ton can happen in 30 plus years. I assume I'll get zero, and will be pleasantly surprised if I get more than that. Simple as that.

I agree, and I also recommend (if possible) to learn as much info about how the estate is structured and what it's worth a few years BEFORE the older relatives are going to need care, so that you are not getting unpleasant surprises after the situation is already critical.

At least my dad's estate was organized and we all knew what the status of things was/how much cash and where, or this past year would have been even more stressful.

[Dicey]

We have one in the works. It's big. We don't need it. It feels weird.

[lhamo]

We didn't count on getting anything from my mom -- as her health declined we were prepared that costs of care might eat most of her assets up, but in the end her assisted living costs were modest (around 2k/month for about 9 months) and she only needed more intensive care for the last four weeks of her life (I think between facility charges for additional services + the 24/7 caregivers we hired to help us through the last week it added up to 5-6k).  Once everything settled out I ended up getting about 200k from her estate.  I have that invested fairly conservatively at the moment, as it is a cash slush fund I can draw on if I need to before I can easily tap retirement accounts in another 5-6 years (yes, I could start a 72t but trying to avoid that and hoping NOT to use Roth funds at all so that they can continue to compound).  But once I get to the point where I have more flexibility with using the retirement funds, I hope to turn the money my mom gave me into my giving pot.  I will use it to make gifts to the kids at strategic points in their lives, and for my charitable giving for the rest of my life.  I have already used a bit of the money for those kinds of things -- around $500-1000/year.  If I see a cause or a person I think my mom would smile on me helping, I take a bit of money out of that pot.  I know money is all fungible, but I like having it separated in my mind.

We do include the value of my inlaws apartment in China in our net worth, because it is in the SO's name (we gave the money for them to buy it and they just went ahead and put SO's name on the title).  But I know that we may never see the cash from that -- SO may keep it for when he goes back to visit family, or we may decide to give it to one of his sisters who has struggled financially.    At this point we have a large enough asset base that we don't really need to worry what the net worth number is -- highly unlikely that we will outlive our assets.

[Dicey]

I joke that Mr. Dicey was raised by well-traveled wolves. His parents never spoke to their children about religion At All. Seriously, I had to explain to him and BK what Easter was about. DH had never been to live theater, and he had no experience with any kind of organized charity. Though he's naturally giving guy and helps people in need, mostly by fixing things, giving money away was completely foreign to him.

I grew up in a family that gave time and money on a consistent basis. I went to Catholic school. Giving was just part of our everyday life. When my parents died, I received about $30k, which was awesome. I put half of it in our joint account and started a DAF with the rest. It got DH used to the idea of charitable giving that wasn't coming out of our checking account. Having a degree of removal from the monthly outgo was a huge help. Now he is much more comfortable with the process and doesn't mind when I dump more $$$ into the DAF. Baby steps.

The inheritance that's actively in the works is sig-nif-i-cant-ly larger, and from his side of the family, which is why it feels weird.

[seattlecyclone]

I make no assumptions. My wife and I will likely get something, quite probably in the six-figure range from each set of parents, but with any luck that will be decades from now. My grandfather recently passed at the age of 96, so my mother is finally getting an inheritance just before her 70th birthday. His mother lived to 104. Needless to say I'm not expecting to get my piece of that particular pie anytime soon, nor do I want to!

Speaking of my grandfather, I was surprised at the level of wealth he was able to accumulate when I heard how much my mom would expect to receive (her 20% share is roughly enough to double my parents' liquid assets). His career was in manual labor (including heavy equipment operation and maintenance), and my grandmother worked for the federal veteran's administration. That's not a combination that would lead to much money today, especially not with five kids to raise. The mid-20th century was a different time though, especially for white men who belonged to labor unions. He was a proud union member who also bought into Fox News propaganda in his later years. Not quite sure what to make of all that. He also grew up in the Great Depression so he was perhaps wired a bit toward taking frugality to unnecessary extremes. He resisted moving to an assisted living facility to the bitter end even though he had plenty of money to pay for one, and it would have been so much better for my mom and her siblings if he had done so earlier. His house has a bunch of deferred maintenance even though he could have easily paid to keep things in good shape.

In conversations with some of my relatives after the funeral we agreed my grandparents should have spent more of their money during their lives instead of building such a big nest egg to pass on. I hope my parents take that message to heart. My dad retired several years ago and as far as I know their spending is roughly equal to their social security and pension payments; not really drawing down their savings at all. What I want is for them to enjoy the time they have left without worrying so much about money. They have enough to do just that, but I think they don't quite believe it. To that end if I receive a very minimal inheritance from them I will probably be happier than if their frugality drops a big pile of money in my lap when they pass on.

[secondcor521]

Aside from the many ways a potential inheritance can disappear, there is another risk:  emotional/relational risk.

If you start to pencil in a potential inheritance, after a while you may start to think of their money as your money, even though it isn't.  This may then develop into jealousy, envy, anger, and frustration if they spend their/your money in ways that you disagree with.  Or if they live longer than you expect them to.  Or if they are sicker than you mentally expected them to be and therefore spent more on medical than you allocated.  Or if they're more generous or more susceptible to scams or decide to marry the 30-year-old housekeeper or pool cleaner.

And all that could damage your relationship with them while they're alive, and possibly your memory of them after they're gone.

Which could all lead to a lot of regret.

[Wolfpack Mustachian]

I'll go against the grain a bit here, with caveats. We don't really factor it in from an amount of withdrawal, but in our situation, it's pretty likely that we'll get an inheritance for a variety of factors.

So, we factor it in like we factor in social security or the ability of dw to get good paying part time work. It's not a part of our 4% rule, but it gives me more confidence in using a 4% rule and not something more conservative.

[yachi]

I would be extremely hesitant to make any assumptions about inheritance unless you know a lot of detail about the estate and it's very close to the end of life.

For example, if you'd asked me 10 years ago to lay bets on whether I'd inherit substantial $ from my father, I would have likely bet on that. His estate was worth about 2.5 million and he was super frugal in terms of bills. And he has worked his entire life to accumulate a lovely large piece of lakefront property as his legacy so he could pass it on to us kids.

But a huge amount changed in 10 years. First, he started to struggle with alcohol use disorder and did several stints in expensive rehab. Then he split from his wife. He also did not have LTC insurance (though his wife did). Then he burned up some additional amount of cash buying back property from his wife that they had initially split as part of the separation (b/c he viewed the property as his legacy, see above).

Then he relapsed and drank himself into complete dementia, and shortly required 24 hour professional care. But his body is still ok, so he could live for a number more years (side note: absolutely incredible, but true).

The 24 hour care started less than a year ago, but with care costing >15K per MONTH (which btw is pretty standard rate) + his regular, if modest, bills... his burn rate of cash is >18K per month and will be totally out of cash savings in about 8 or 9 months from now, despite still having an estate worth >1 million.

ETA: Whenever end of life planning comes up on this board, it always astonishes me how many people do not realize that long term care/end of life care is not covered by Medicare. And it absolutely must be planned for (esp if you are married b/c one partner can be left utterly destitute except for house and car if the other partner requires care).

So we were forced to just list some of his legacy property (which he would be absolutely devastated if he found out) b/c otherwise he'll be unable to pay for care in another few months...

The truly depressing part is how little objective 'value' that property sale is buying in terms of quality of life. Property that he obsessed on for decades, and struggled to keep together, is being sold now and will still only buy him about a year of additional care at the most. Every time I think of it I feel sick, and also hope to god he never realizes that it's happening (though if he lives longer than another year, he will b/c then we'll have to sell the lots RIGHT next to his house, and he will know when people start building). Christ, I hope he dies before then, for his own sake.

OP should read this and realize that it's definitely NOT foolish to ignore inheritances completely. Everyone seems to agree not to count your chickens.

If my parents die today, my brother and I stand to split a million dollar estate. But, longevity runs on both sides of the family, so a ton can happen in 30 plus years. I assume I'll get zero, and will be pleasantly surprised if I get more than that. Simple as that.

This happened to the richest person in my extended family.  Her husband preceded her in death.  I remember she gifted my parents her old dryer because she replaced her washer and bought a dryer to match it.  She was giving her children monthly money, held the mortgage on one of their houses, all while living in an elder care facility.  She named my dad executor of her estate because her kids would fight and didn't get along.  It sounded like good news to my dad because he'd get a share of her estate.  She and her husband had used a local lawyer for a long time, and he ended up moving their investments into his care.  It turns out the lawyer was running a sort of scam, stealing the money and not really investing it.  It all came to light when the lawyer committed suicide.  My dad stepped in to salvage what he could of her money coming in just to pay her bills, qualify her for Medicaid and keep her in some sort of nursing care.  Money was gone, payments to the kids stopped, my dad got nothing but headaches, but the family member got to stay in a nursing home compliments of Medicaid.

[Villanelle]

Whenever this comes up, the consensus seems to be "don't factor it in".  I semi-disagree.  It's not like I add a specific dollar amount to our stashe when doing the math.  But I have every reason to believe I will receive a very sizable inheritance.  My parents, both i their late 70s and thankfully quite healthy (so hopefully many years left) still have positive cash flow most month, thanks in part to 2 sizable pensions.  They also have a lot of money saved.  It would be difficult for them to spend it all, on top of their continuing income, even if there is a long-term illness or care needed.  But yes, I'll readily admit that anything could happen.

Mostly, what I do is add it to a list of failsafes that make me feel more secure about our plan.  Without those, I might feel the need to save more.   

Beyond that, it's a thing that is in the back of my mind.  Maybe we could live in that super spendy place we dream of, instead of a slightly lower COL place, which is probably the biggest compromise in our plans.  Maybe we will be able to travel more or donate more.  If it doesn't happen, all of those things are optional, and the latter 2 are easily switch off or on, depending. 

So I don't count my chickens, but I'm definitely aware they are out there in the coop and I know that there's a good chance I'll get some number of eggs eventually.  I'll be fine without the eggs--they aren't the center of my meal plans--but maybe I've clipped a few egg recipes just in case (to strain the metaphor). 

Also, it certainly doesn't change my relationship with my parents.  My sister and I both generally try to get them to spend more (when it seems like that will actually bring them additional happiness), and we frequently tell them that we'd rather they buy the [thing they want but they won't buy because it's not on sale] than that we inherit an additional $40.  I don't consider that money mine in any way. 

[Runrooster]

I’m dealing with a similar situation. I moved in with my parents 13 years ago to be my moms full time caregiver. Paid, but less than my career. For many of those years Dad promised to will me the house, worth maybe $600k. They said they went to the bank to see about putting my name on the deed but were advised to will it to me for tax reasons. My Mom has outlived all expectations, and we moved to getting her a weekday caregiver to let me return to work. It took a few years for me to find comparable job in my career to what I left, 12 years behind in salary.

Anyway, 2 years ago my family had a meeting to see if 3 siblings and spouses were okay with the plan, still dividing other assets equally. My Dad was having heart surgery during the pandemic, so we were getting his affairs in order in case of the worst.  Everyone agreed at least openly. My wealthiest sister has long promised me her quarter of the remainder. But, and this is my point, when we all looked at the will nothing had been changed. Most recently, when I finally got back to my 2008 salary, my Dad stopped gifting me the usual generous Xmas gift. He has a nice federal pension which he says he spends all of. I’m not sure on what, but its his money. I think he will blow through a lot in long term care when his health starts to fade, so Medicaid may take the house anyway.

Even more recently, my sister, who earns a million or more per year but lives pretty frugally, was telling me that she will take care of me in old age, so I can splurge “buy shrimp if you want shrimp”. Like, yeah I’m frugal but not that frugal on raw ingredients. If I bought shrimp every week for a year I’d only increase my spending by $300.

The point is, so much can change. She’s 11 years older than me, healthy but with a history of heart problem. She’s very likely to have passed by the time I run out of money, even age 85 for me is 96 for her. Her husband, kids, are not going to make the same promises. If she wanted to give me money, she could give it now, put it in a trust whatever. More than just her age and health, we don’t agree on things. I’m happier with my job now, but while I was working minimum wage and had a 4% WR saved up, I wanted to retire. She’ll give me money but only if I work until I’m 80. I wanted to move out of my parents house, get my life back. She’s not on board with that. I recently stopped talking to my other sister, this sister hates that. Far from being grateful that I gave up my career and freedom, she thinks I got lucky getting “free rent” and that I didn’t do enough for Mom. How many more conflicts will come up in 30 years?  Right now she has 3 kids, 6 grandkids, what if the next one is special needs?  And ultimately what’s her idea of “if I need it”?  She’ll make sure I don’t live on the streets?  I think SSI will cover that.

Ultimately, I made the sacrifice of my salary and well being to take care of Mom. No one owes me. I wish they would step up and take over the responsibilities but I doubt it. I don’t expect to get anything “back” from any of my wealthy siblings and I almost resent the empty promises. I don’t argue about it though, I just go on, being mustachian, spending less than I earn, saving for retirement and old age. I assume I’m my own safety net.

[Dave1442397]

My parents have never had savings, but my father's pension plus whatever old-age pension they get (not in the US) keeps them ticking along. They joke that the house is our inheritance. They bought it in the early '70s for around $12k, and it's worth around $800k now. That would eventually be split four ways. I'm certainly not counting on it, and we won't need it, but it's fun to add that number to the projected net worth ten years from now.

The laws about using assets to pay for medical care are different there. I believe the government can claim up to 20% of a home's value, but they don't take it until the home is sold as part of the estate.

As for my mother-in-law, we manage her finances for the most part. She has spent at least $100k at the casino since 2016, and has roughly $70k left at this point. She's 93, so we think she'll run out of time before she runs out of money :) Her monthly spending report tells the tale. She wanted to give her condo to our daughter, so she had us hire a lawyer to draw up her will and put the condo in a trust for our daughter's education. Again, with the five-year lookback rule, it would be October 2025 before that's safe from forfeiture.

[Wolfpack Mustachian]

Whenever this comes up, the consensus seems to be "don't factor it in".  I semi-disagree.  It's not like I add a specific dollar amount to our stashe when doing the math.  But I have every reason to believe I will receive a very sizable inheritance.  My parents, both i their late 70s and thankfully quite healthy (so hopefully many years left) still have positive cash flow most month, thanks in part to 2 sizable pensions.  They also have a lot of money saved.  It would be difficult for them to spend it all, on top of their continuing income, even if there is a long-term illness or care needed.  But yes, I'll readily admit that anything could happen.

Mostly, what I do is add it to a list of failsafes that make me feel more secure about our plan.  Without those, I might feel the need to save more.

This is a great articulation of things imo.

While I understand the perspective of don't count on it at all, (and might agree with it in some situations) I feel like either extreme is silly. It's silly and a bit dangerous both from a financial safety standpoint as well as a relationship standpoint to count on inheritance and to think, "well, I'll have $1,000,000 inheritance, so I can increase my spend by 40k" or save a million less or even 500k less or whatever.

On the other hand, to discount it completely is pretty silly too if it's very likely to happen. Knowing you have a very good chance of getting multiple hundreds of thousands some years down the road probably should inform your decision to omy or not or to take a chance on coast fire sooner or any of a number of possibilities. I see discounting it is as along the same lines, although not as extreme, as some of the other overly conservative extremes that are talked about often when people are stressed and hold off on retirement.

[ender]

There is a huge difference between considering it as possible/likely and planning as if it's guaranteed.

I absolutely consider possible inheritances when thinking about our next 20-30 years. I equally absolutely don't have any plans requiring or even planning on them being the case.

[charis]

I think this discussion is rather vague - there a lot of personal factors to consider when deciding the likelihood of an inheritance.

I don't think it's extreme to discount a possible inheritance if you've seen multiple families members burn through most of their money on end of life care.  My grandfather was well off with a pension and healthy savings in to his healthy 80s, until he wasn't in his late 80s.  What should have been a sizable estate upon his passing was not much split among three children.  I think my parents did a couple of home renovations with the money.

My parents have two pensions, healthy savings/investments, and had no health issues/conditions into their early 70s.  However, they have three children, one of whom still lives at home and is a considerable mooch, and in the last 6 months, my mother starting having hip pain that will require replacement surgery in two months.

Things can change very quickly for people approaching and into their 80s.

[Wolfpack Mustachian]

It's certainly very situational. If you have a possible inheritance coming through one side only, and on that side there are four kids, even if the inheritance would be a million bucks, counting on 250k
in any concrete method is a real stretch. There are too many possible complications. On the other hand, if you have a million potentially coming in on two sides where on one or both, you're the only child and both sides give no indication of being spendy, it's a totally different story.

The confusing thing for me is the general rule to discount it, but maybe no one is really saying that and I'm misreading. Financial planning is, at some point, educated guess work. I have medium aged kids right now. My expenses will likely go up a little, up more, and then down significantly. Exact numbers are hard to figure. That's why contingencies are crucial to me for early retirement. Potential PT work is important to me because of this.

I guess, in summary, it's all at least in part working in gray areas. That's why I use the 4% rule for projected expenses and try to work out the rest as best as I can project. I view possible inheritances through the same lens of projecting and estimating risk as I do many other things I can only try to predict.

[Log]

I'll fall in with the "factor it in a little bit" camp. Yeah sure, anything can happen, but you can certainly assign some probabilities and say, "I'm incredibly likely to get at like $X within Y years, what freedom does that buy me now?" What purpose will all that money serve in 20 years when you already have more than enough?

If you allow the awareness of that inheritance to buy you more freedom now, that's invaluable. I don't mean in a binary sense of completely retiring early when you don't have the money yet, but having the freedom to take a sabbatical, or pursue lower-paying work that's more flexible or more rewarding.

In other words, a hypothetical inheritance certainly doesn't make you FI, but it does belong in your mental bank of FU money. You will get compounding returns on the life decisions that money allows you to make when you're 50. If you wait to even think about it until your 65 and you already have more money than you know what to do with and your budget is getting freed up even further by Medicare and Social Security, what the hell is it buying you at that point?

What's the worst-case scenario if you start to enjoy your freedom a little sooner, and then, for whatever reason, the inheritance never comes? Would it be so disastrous to enjoy a sabbatical or a more down-shifted career now, and then find later that you live on a little less in retirement, or work for a few extra years? And keep in mind that's the worst-case scenario where this $1M somehow dries up to a big fat $0.

You're done with the race. Maybe it's not time to hit the brakes yet, but your foot certainly doesn't not need to be on the gas. You can and should be making decisions based almost entirely on how your work makes you feel, rather than how much it pays.

[yachi]

The laws about using assets to pay for medical care are different there. I believe the government can claim up to 20% of a home's value, but they don't take it until the home is sold as part of the estate.

It looks like you're in New Jersey.  This website makes it sound like their laws are quite similar to Pennsylvania: https://www.medicaidplanningassistance.org/medicaid-eligibility-new-jersey/ .

The issue is Medicare does not pay for long term nursing home care.  So you pay out of pocket until it exhausts your income, then you have to qualify for Medicaid.  Medicaid has an asset test, and included in assets is "real estate in which one does not reside".  Once it's been decided that you aren't just doing physical therapy to go back home, you go into long term nursing home care and become a resident of the nursing home.  At this point, your home becomes "real estate in which one does not reside".  Because the asset limit is only in the 4 figures, the house must be sold.  There is an exemption if your spouse is still living in the house and is not also trying to qualify for Medicaid.

[Villanelle]

It's certainly very situational. If you have a possible inheritance coming through one side only, and on that side there are four kids, even if the inheritance would be a million bucks, counting on 250k
in any concrete method is a real stretch. There are too many possible complications. On the other hand, if you have a million potentially coming in on two sides where on one or both, you're the only child and both sides give no indication of being spendy, it's a totally different story.

The confusing thing for me is the general rule to discount it, but maybe no one is really saying that and I'm misreading. Financial planning is, at some point, educated guess work. I have medium aged kids right now. My expenses will likely go up a little, up more, and then down significantly. Exact numbers are hard to figure. That's why contingencies are crucial to me for early retirement. Potential PT work is important to me because of this.

I guess, in summary, it's all at least in part working in gray areas. That's why I use the 4% rule for projected expenses and try to work out the rest as best as I can project. I view possible inheritances through the same lens of projecting and estimating risk as I do many other things I can only try to predict.

Yes.  It's a bit like the addadge that you should never lend money to (or borrow from) family. I agree that it's usually a bad idea.  But I also have a mortgage from my parents that has never been even a tiny issue, and that clearly I felt comfortable arranging and taking***.  I think you have to be thoughtful and consider the circumstances, and also be very self-aware and brutally honest about the parties involved.

Are other parties spendthrifts?  How many siblings (or other beneficiaries) will be splitting the assets?  Is there any reasonable chance the person will change their will?  What other income or assets do they have that help you feel secure that their money will at least mostly last?  Have the explicitly told you what is in the will?  Have they told you their net worth or are you guessing? 

***We didn't bring it up in any way.  It was offered when we decided to purchase my grandmother's home after she passed away.  Dad offered that he'd just take it as his share and then sell it to me and hold the loan.  We paid a FMV interest rate and purchase price, and everything was official, with a set payment schedule and even a lien.  We weren't doing it to buy a house we otherwise couldn't afford, and it seems beneficial for everyone as we didn't pay most loan fees and dad got a reliable return on that portion of his investment.  Everyone was very upfront about expectations.  DH's job was insanely secure so there was little worry about him losing it, and we could easily afford the payments with plenty leftover.  My parents had enough assets and income that there was no real chance they would suddenly need to liquidate for cash.  All of this contributed to use feeling good about it.  In most circumstances, I agree it's a bad idea.  In ours, after considering all options and looking at the people involved, it seems like a very safe bet.  And 20 years later, we still have that loan (we kept it when we sold that house, transferring the lien) and sure enough, not a single issue.  Rules of thumb are great, but situations vary.  As long as you've been honest with each other and with evaluating the many factors and you aren't just pulling the trigger and hoping for the best, sometimes it makes sense to give the finger to the rule of thumb.

[pdxvandal]

This post 100%. I'm very confident I'll receive a sizable inheritance, but if it doesn't arrive, I'm good enough with my own  'stache to adjust spending and lifestyle. I live in a HCOL with a stupid-high mortgage ... I could easily move 20 miles away into  smaller house and reduce my monthly spend by a huge amount. Or find a low-stress, flexible PT job. I definitely factor in an inheritance to some extent and it gives me confidence to pull the trigger a year or two earlier than I would've otherwise. If finances get really dire (very unlikely), I'd be open to moving to Panama or Mexico or Portugal for several years, or even a van down by the river.

I'll fall in with the "factor it in a little bit" camp. Yeah sure, anything can happen, but you can certainly assign some probabilities and say, "I'm incredibly likely to get at like $X within Y years, what freedom does that buy me now?" What purpose will all that money serve in 20 years when you already have more than enough?

If you allow the awareness of that inheritance to buy you more freedom now, that's invaluable. I don't mean in a binary sense of completely retiring early when you don't have the money yet, but having the freedom to take a sabbatical, or pursue lower-paying work that's more flexible or more rewarding.

In other words, a hypothetical inheritance certainly doesn't make you FI, but it does belong in your mental bank of FU money. You will get compounding returns on the life decisions that money allows you to make when you're 50. If you wait to even think about it until your 65 and you already have more money than you know what to do with and your budget is getting freed up even further by Medicare and Social Security, what the hell is it buying you at that point?

What's the worst-case scenario if you start to enjoy your freedom a little sooner, and then, for whatever reason, the inheritance never comes? Would it be so disastrous to enjoy a sabbatical or a more down-shifted career now, and then find later that you live on a little less in retirement, or work for a few extra years? And keep in mind that's the worst-case scenario where this $1M somehow dries up to a big fat $0.

You're done with the race. Maybe it's not time to hit the brakes yet, but your foot certainly doesn't not need to be on the gas. You can and should be making decisions based almost entirely on how your work makes you feel, rather than how much it pays.

[Ladychips]

If finances get really dire (very unlikely), I'd be open to moving to Panama or Mexico or Portugal for several years, or even a van down by the river.

Dammit @spartana  you've got the whole forum wanting to live in a van by the river!  Ok. Ok.  What river and when are we meeting?

[nereo]

I'll go against the grain a bit here, with caveats. We don't really factor it in from an amount of withdrawal, but in our situation, it's pretty likely that we'll get an inheritance for a variety of factors.

So, we factor it in like we factor in social security or the ability of dw to get good paying part time work. It's not a part of our 4% rule, but it gives me more confidence in using a 4% rule and not something more conservative.

We have a similar line of thinking, and we also treat it much as we do with SS.  For the record I expect to receive a six-figure inheritance and also at least 70% of my so-called "guaranteed benefits" from SS.  However, do to our ages and the timeframe between when we might receive said funds (hopefully 20+ years for both) and when we will be FI/RE it doesn't change our target FI number much at all. Which ironically makes the planning portion much easier. If either comes to fruition it will be a sizable layer of safety in our plans, and one that will likely get passed through to charities and the next generation.

If I were in my mid 50s or early 60s it would certainly impact my planning more. 

[Paper Chaser]

I think there's a time factor at play here too. If you're 30 years old, and your parents are 60 years old then just understanding that an inheritance may be possible, but not counting on any of it probably makes sense. Time will change lots of details between now and when the inheritance likely arrives.

If you're 50, and your parents are 80, then you likely have a much better handle on the size, scope and likelihood of an inheritance, so I can understand being able to pencil in some more reliable figures at that point. I still wouldn't make my plans contingent on any of it, but having a vague idea of what you might do with a lump sum or windfall seems fine to me.

Since FIRE plans are often laid in younger years, I don't plan for any inheritance. I rely only on my own savings, and anything else is considered bonus that will be used to make my kid's life better. I'm fine working a bit longer for that level of security and to increase the odds of helping my offspring more.

[FLBiker]

Thanks all, I've enjoyed reading the various POVs in this thread.  In seeing it articulated by others, I now see that I'm in the "factor it in as a failsafe" camp -- similar to how I treat (by ignoring) social security.  I can see now that this is basically what I've been doing all along, but I hadn't really thought of it that way.

[deborah]

I will never get an inheritance. I have insisted on being written out of any. It will make life easier, as no one will ever be able to be upset that I got more than they think I should have. There have been too many inheritance dramas in my family in the past, with various people never speaking to their siblings again. It’s easier to inherit nothing. I have enough, so why would I need any more?