Author Topic: Deferred inheritance & parents not understanding the time-value of money  (Read 11041 times)

jg6277

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So about 9 years ago, my grandparents passed away and left $40,000 to me. I'm absolutely grateful for it and consider myself very lucky - I know a lot of people never receive such a gift.

The problem is that my parents have been holding it for me ever since telling me that they will give it to me "when I buy a house"...something which I haven't wanted to do.
They have always stated they don't plan to give me the money unless it's for a house, so that they can be sure it won't be wasted on anything trivial. Never mind that I am ultra-frugal Mustachian (saving 75% of my pay) and would obviously invest it into my retirement savings anyway.
The thing is, my parents aren't particularly financially savvy and don't seem to understand the time-value of money. I want to point out that the $40,000 today is worth much less than it did 9 years ago, due to inflation.

The thought of bringing this up with them feels a little awkward, though. I know they are aware of the concept of inflation, but I don't think they've really connected the dots. I think they see the interest they've been earning (and continuing to earn) on it as just "free money" and the $40,000 principle simply never changes in value. I don't want to create a fuss about it though, and come off as "greedy" or a "bean-counting penny-pincher" or something.

Any suggestions on how to broach the subject? Should I bother at all?

oldtoyota

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #1 on: September 10, 2013, 08:02:22 AM »
If the money was left to you, then how come your parents have it?

If you think they would be open to a conversation, I would share with them your thoughts about inflation, how the money would not be "wasted," and your reasons for not wanting to purchase a home.

No offense to your parents, but their logic doesn't seem logical to me. Behavioral economists have talked about the idea of people thinking certain dollars are for certain things. In the big picture, it doesn't make sense. They could give you $40K for a house and you could fritter away a different $40K and what would be the difference??

Either you are a person who fritters money away or you are not. If you are not, you could show your parents that and perhaps they would come around and follow your grandparent's intent.


Another Reader

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #2 on: September 10, 2013, 08:07:17 AM »
If the money was left to you, why do your parents still have it?  Was it really willed to you, or did they just decide that was the intended use of some of the money they inherited?  If it's their inheritance, they can do with it as they please.  If it's your inheritance that they held for you until you became an adult, you may want to sit them down and nicely ask for it.

jg6277

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #3 on: September 10, 2013, 08:19:49 AM »
To clarify - whilst the grandparents were still alive, a larger some of money was given to my parents, and it was agreed that $40,000 of that would be for me. I guess it was a kind of joint decision made between my parents and their parents.

So perhaps "left to me" is not the technically correct choice of words. Mum and dad always intended to give me $40,000 of the money - and I believe the grandparents wanted this too.
« Last Edit: September 10, 2013, 08:22:21 AM by jg6277 »

hybrid

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #4 on: September 10, 2013, 08:55:21 AM »
To clarify - whilst the grandparents were still alive, a larger some of money was given to my parents, and it was agreed that $40,000 of that would be for me. I guess it was a kind of joint decision made between my parents and their parents.

So perhaps "left to me" is not the technically correct choice of words. Mum and dad always intended to give me $40,000 of the money - and I believe the grandparents wanted this too.

Not even close to technically correct.  You personally haven't been left one thin dime, your parents and their parents have an understanding which gets you zip, zero, nada in the eyes of the law if it isn't in writing somewhere.  So it truly may be their call in regards to your age, financial position, and their comfort level with your ability to manage a large sum of money (which may have been your grandparents intent all along).  Not suggesting you aren't there, but am suggesting your hand is a lot weaker than you originally put forward.

Suggest you have a frank conversation with your parents.  If they aren't willing to release the money to you yet, at least get it invested well until that day comes.

plantingourpennies

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #5 on: September 10, 2013, 08:56:22 AM »
To clarify - whilst the grandparents were still alive, a larger some of money was given to my parents, and it was agreed that $40,000 of that would be for me. I guess it was a kind of joint decision made between my parents and their parents.

So perhaps "left to me" is not the technically correct choice of words. Mum and dad always intended to give me $40,000 of the money - and I believe the grandparents wanted this too.

Then it is not your money. It belongs to your parents, and unless there was a will or contract that we don't know about, you have no claim on it.

Best,
Mr. PoP

Mr.Macinstache

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #6 on: September 10, 2013, 09:09:08 AM »
To clarify - whilst the grandparents were still alive, a larger some of money was given to my parents, and it was agreed that $40,000 of that would be for me. I guess it was a kind of joint decision made between my parents and their parents.

So perhaps "left to me" is not the technically correct choice of words. Mum and dad always intended to give me $40,000 of the money - and I believe the grandparents wanted this too.

It was still a verbal agreement that you would get that money. That's as good as a contract within family. It sounds like your parents do not want to either part with the money are they are being overbearing with it. I would feel annoyed by it and would bring it up to them. I wouldn't bother trying to explain the concept of inflation... little change they'll get it.

Unless your grandparents said you must buy a house with that money, then it was their wish you had and it should be yours to do what you like with it.

DoubleDown

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #7 on: September 10, 2013, 09:10:10 AM »
The replies seem a bit harsh to me so far. I can sympathize with the OP's frustration here, and it sounds to me like it was absolutely the grandparent's intention to have the money given to the OP -- just that it was left to the parents to make it happen, which is unfortunate. These kinds of informal arrangements are fraught with problems, as the OP is now experiencing.

Yes, it is true the OP has no claim to the money from a legal standpoint, but hopefully the case can be made to the parents nonetheless that it was the grandparent's intention that $40,000 be passed on to the OP. I agree with the advice to have a talk with your parents, explain your desire to take possession of that money and what you would like to do with it. If you think the notion of investing the money in stocks or whatever would fall flat with your parents, then I would really be inclined to go find a house to buy with a $40,000 down payment. Owning a home may not be in your preferred interests right now, but you could always move in temporarily, then rent it out or sell it in a little while and still come out far ahead (considering the alternative apparently is that you get nothing).

The classic "rent vs. buy" decision does not really apply here, because we are talking about the difference between getting $40,000 and nothing.

unpolloloco

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #8 on: September 10, 2013, 09:10:49 AM »
What about using it for an investment property (*if your local market supports such a proposition*)?  Either a fixer-upper or a cashflow-producing rental?

Mr.Macinstache

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #9 on: September 10, 2013, 09:16:05 AM »
There you go... buy a house for 90k-130k and get a great deal. Flip it and make more than the 40k. :)

Cromacster

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #10 on: September 10, 2013, 09:17:15 AM »
This is my take on the situation.

Sounds like you need to stand up to your parents.  Tell them how you feel about the situation and why you don't want to buy a house with it.  Maybe even go so far as to show them your bank statements are at least a spreadsheet of your earn vs spend.  Go in with a plan to prove to them you are not going to be frivolous with the money.

My second thought.  Are you sure they haven't spent the money? (dark thought I know).

Nothlit

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #11 on: September 10, 2013, 09:39:07 AM »
According to some online inflation calculators, it would take nearly $50,000 in today's money to equal $40,000 nine years ago (at least in the U.S.). Random people on the internet cannot know how your parents might react to you telling them this, but assuming the agreement between your grandparents and your parents was not predicated on you using the money for any particular purpose (such as buying a house) then I do not think they are in the right by continuing to withhold the money from you. Only you can decide how much of a fuss you want to raise within your family over this, but I know that I would sit down with my parents and show them exactly how I intend to use the money so they would see it is not going to be spent frivolously. If you do not think it is financially wise to buy a house at this stage of your life, explain that to them as well. They may be seeing a house purchase as a rite of passage and thinking about it more emotionally than financially.

Out of curiosity, how old are you? Are you still living with your parents or do you live on your own? Those could be factors in their decision.

MrMoneyPinch

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« Reply #12 on: September 10, 2013, 10:23:24 AM »
I will play devil's advocate here and ask you this question: how much is that money worth to you right now?   Is it worth getting into an argument?   Family is family and family feuds are hard to stop(sometimes need a dead person to stop).
 If you need it, try to convince them.  If not, wait until you do. Anyway, it will still be there later. And 40g will still represent more than a year of expenses for some time to come.  Consider it as a bond which return 0%+peace.  A real T-bond returns 0.25% anyway ;-)

hybrid

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #13 on: September 10, 2013, 10:42:27 AM »
The replies seem a bit harsh to me so far.

I wasn't trying to be harsh in my reply, but there is a world of difference between "money was left to me" and "money was left to my parents for me with an understanding".  OP got off on the wrong foot.

If the OP wants good advice, then we need an accurate presentation of the facts.  And the facts are, as far as we know, that money was left with an intent to be used in a particular fashion.  We have no idea how that conversation went down between the parents and grandparents.  The grandparents may have been adamant about that money being used to purchase a home.  We just don't know.

OP, step up and help clear some of the air for us.

Mega

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #14 on: September 10, 2013, 11:10:53 AM »
OP, I can sympathize with your situation. My parents have told me that they are writing in their will that my and my sister's inheritance be put in trust and doled out blah blah blah. As stated, this is because my parents are concerned my sister will blow the money (I would tend to agree with them).

However, all that is likely to happen is my sister will likely sell the inheritance as a lump sum to one of those greasy "its my money and I want it now" annuity / settlement purchasers. I won't tell them this because it won't change their mind.

Another story: my cousin is an alchoholic. Her husband died. Our family gave her a $200 gift card "because we didn't want her spending the money on booze". I tried to point out that the gift card will displace spending, still resulting in her buying an extra $200 of booze, or worse, selling the card for $150 cash... Which would then be spent on booze.

Why am I writing this? In your parent's minds you did not inherit $40,000. You inherited fractional ownership of a house of your choosing. You will not be able to change their minds.

Actually, depending on house prices, you may now be able to use the money for a larger fraction of a house compared to 2004. (Just a guess)

Frankies Girl

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #15 on: September 10, 2013, 11:48:39 AM »
This situation happened to my husband. He's the only child of an only child, and his grandfather (who was a lawyer and should have known better) decided to make things nice and neat on his will and left everything to his son (husband's father), and was told that certain things should go to my husband (supposedly the one heir thing was to avoid taxes? It's silly, but that was the story he was told). This never happened, as mother-in-law had been coveting said item (among other things) for her entire married life, and told my husband, that she was keeping everything as husband was going to get everything eventually anyway. (seriously, the woman is a giant bag of crazy - carried photos around in her purse of things like rugs and chairs and showed them off like you would pictures of your children with a creepy gloating voice saying "And it's all MINE!" - and we're not talking valuable antiques either) She's mostly cut off and out of our lives, so no telling what will actually end up happening now.

That being said, unless it was spelled out in a will somewhere, then OP, you're SOL. If you parents have had excuses for why they won't give you something that you were informally promised, there's absolutely nothing you can do other than cause a fight if you've already brought it up and been rebuffed before. You could try talking to them again and just flat out ask them "Can I have the $40,000 grandmother and grandfather wanted me to have?" but if they still say no, I don't think there's much else other than tell them that you are very disappointed in them, and that your grandmother would probably feel the same... and that it has damaged your relationship with them (hey, go for the guilt card if you haven't already!)

StarryC

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #16 on: September 10, 2013, 11:56:28 AM »
With the house plan, I thought there might be problems with the gift of a down payment close to the purchase?  I don't know all the rules, but I thought that usually, in the US, the money from a gift had to be in your account for a certain amount of time before the sale. Also, gift taxes? 

rockstache

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #17 on: September 10, 2013, 11:59:07 AM »

My second thought.  Are you sure they haven't spent the money? (dark thought I know).

That was my first thought....

dragoncar

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #18 on: September 10, 2013, 12:21:03 PM »
There you go... buy a house for 90k-130k and get a great deal. Flip it and make more than the 40k. :)

I'm on board with this plan. 

OP how old are you?

CommonCents

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #19 on: September 10, 2013, 02:17:50 PM »
Understanding you are legally entitled to nothing and this may start a big fight, here's my best suggestion for handling this:  Ask your parents if they recall the circumstances of the intended gift.  Ask them to describe it to you.  Ask them if they still intend to abide by this agreement.  Then, state you'd like it now (assuming their recollection was that it wasn't limited to a house purchase - if that's the case, you have to come up with reasons to go against the donor's intent) and why now (explain you'd like to invest it, over the past X years your investments have done X, and that inflation shows that it's actually now worth $49,680.89 and it's losing ground sitting in a savings bank).  Be very logical.  If they say "we don't trust you!" get them to explain why that is the case, and be prepared to "prove" you are trustworthy and haven't blown money before.  Ask them what if you never buy a house and always rent, or marry someone with a paid off house.  If they won't agree at all, ask them if they will agree to give it to you in inflation-adjusted dollars when you do buy (and if so, get that in writing at least).

As PP suggested, you may also want to confirm they still have it and haven't spent it.  Delicate question.

tomsang

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #20 on: September 10, 2013, 02:22:26 PM »
A round about solution may be where you talk about the investments that you have been making and the stock market returns over the past decade.  You can segue into asking them how your $40,000 has been invested and what have the returns been over the past 9 years. If done properly, your parents can see that you are investing vs. spending, you are up to date on investments, you understand that there should be a large increase in the $40,000 over the past 9 years, and that you are maturing.  It will also provide you an opportunity to determine what you will be receiving.  Whether it be $40,000 at sometime in the future, $50k+ if it was invested, or if you are going to get nothing for whatever reason. 

If the answer is you are going to get $0 or less than $40,000, then you are mentally prepared for this vs. devastated when you learn in the future that it was an amount in hope vs. reality.  Remember family is family

Good luck.

TLV

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #21 on: September 10, 2013, 02:38:06 PM »
I have a somewhat similar situation - when my mom passed away a few years ago, my dad told me and my brothers that he was setting aside $20k from the life insurance for each of us, to be used for education or a house down payment. My brothers are both going to community college and chipping away at it - I had just graduated (no loans) and moved to an area where it doesn't make sense to buy a house, even if it comes with a free $20k.

It hasn't been brought up recently; I don't need the money (I make 6 figures and save ~70% of net); and due to events since then (dad got remarried to a big spender) I'm not at all sure that it's still there. When I eventually do buy a house it will be a nice bonus if he offers it again, but I don't intend to ever mention it. Thanks in part to MMM, $20k just isn't that much money to worry about.

jg6277

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #22 on: September 10, 2013, 05:39:55 PM »
Sorry about the confusion in the first post, I definitely didn't mean to mislead about the degree of entitlement. It has not been willed to me. Mum and dad often refer to it as being "left to you", so really I'm just using their words :)

To the suggestion that I could just use it to buy a house as an investment - unfortunately house prices are very inflated here in my view...one of the reasons I don't want to buy one.

I'm on really good terms with mum and dad - we're really close family, and I don't think they've spent the money. I think they'll likely give it to me some day even if I don't use it for a house - but my concern is that by the time they do, it will be worth so much less than what they originally intended to give.

KulshanGirl

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #23 on: September 10, 2013, 05:51:34 PM »
but my concern is that by the time they do, it will be worth so much less than what they originally intended to give.

Maybe just touch base with them on the money, say that whatever they choose to do is totally fine by you, but your concern is that by the time they do, it will be worth so much less than what they originally intended to give.  You said it best yourself, in a way that is totally understandable and won't sound like you're just asking for it. 

CommonCents

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #24 on: September 10, 2013, 05:52:42 PM »
I think they'll likely give it to me some day even if I don't use it for a house - but my concern is that by the time they do, it will be worth so much less than what they originally intended to give.

So if you are close, just ask them then whether they intend to give you the $40K, or the $40K+inflation, which by the way is $50k now.

DocCyane

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #25 on: September 10, 2013, 06:28:57 PM »
Money has a lot of meanings: love, freedom, power... The OP can be all kinds of responsible, but if the parents want to retain some degree of authority over him or if they fear a loss of connection with him, they may keep this money terminally out of reach.

If I were the OP, I'd write it off and never ask about it again to neutralize the issue.

jrs

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #26 on: September 10, 2013, 06:33:58 PM »
Hope things work out.
I've seen "strings attached" inheritances completely destroy families.  Very ugly stuff.

minimalist

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #27 on: September 10, 2013, 09:14:22 PM »
my concern is that by the time they do, it will be worth so much less than what they originally intended to give.

You could ask them to invest the money in funds of choice until you buy a house (there would be tax implications though).

theSchmett

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #28 on: September 10, 2013, 09:44:34 PM »
Try presenting an alternate plan that leads up to buying a house. put it on paper, with projections, charts, easily digestible backup info.

DO NOT make them feel like they don't understand money, just show them how you DO understand. Show them that your idea is in the spirit of their idea.

Mr.Macinstache

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Re: Deferred inheritance & parents not understanding the time-value of money
« Reply #29 on: September 11, 2013, 08:40:40 AM »
I for one, would not be complaining about the loss of something you never earned to begin with.

It was a gift from your grandparents, be grateful for that, instead of seeing all the money you are losing by not having possession of it.

Keep the family close, its not worth letting it come between you.