Tuesday, January 26, 2010

Don't count on inheritance

Editor's note: Every week, we post a question and answer from a reader. This week's question deals with inheritance. If you have a question, please e-mail it to the blog administrator, Robyn Davis Sekula, at robynsekula@sbcglobal.net, or post it in the comments section.

QUESTION FROM A READER: My father recently expressed that he wants his savings to go to my children for their college education. But he’s in a nursing home, and has no long-term care insurance. Since he’s suffering from dementia and my mother will likely survive him and need their money, I’ve chosen not to really talk about this with him but just nod and agree. I have been saving for years on my own for my kids’ college, and I think we will be able to afford it anyway. Do you think that anyone the next generation down should ever count on getting an inheritance to pay for necessary things, such as college or retirement? That seems foolhardy to me.

ANSWER FROM DAN DANFORD: There used to be a saying about "counting on chickens before they hatch." It's always dangerous to assume things before they happen. There are just a lot of variables that are beyond our control and almost anything can happen. One of the ironies of life today is that people are often elderly themselves when they inherit money. In an earlier age, heirs might expect to inherit their fortune during middle age. Now, with people living long into their 90s (with hundreds of thousands over 100!), the "kids" might be 75 before they lose their parents and inherit money. That's not much help for college, or travel, or retirement.

My suggestion is to help the grandkids along the way, when they really need it and when you can watch them enjoy it. Everyone wins, and it's a good thing to do anyway.

Last, the notion of an inheritance is another form of entitlement for many people. Fact is, we're only "entitled" to the fruit of our own efforts. It's nice to land a windfall occasionally, but if we didn't earn it, we shouldn't count on it.

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