You Can’t Take it With You
Without a doubt, the majority of clients who work with us are primarily focused on retirement income. However, once retirement needs have been satisfied clients usually want to discuss how to best transition their money to their heirs. But when I read What will you do with your inheritance? I realized that clients need to place greater emphasis on what will happen to that inheritance once it passes to the next generation.
In a survey sponsored by interest.com and conducted August 1st – 4st by Princeton Research Associates International, nearly 2/3 of responders who were at least 60 years of age indicated that they intend to leave an inheritance. Of the respondents age 18 – 59 who expect to receive an inheritance, here is how they said they intended to use the largest share of it:
- 3% : Buy something special like jewelry or a luxury car
- 3% : Vacation travel
- 9% : Upgrade housing
- 12% : Pay for education
- 18% : Pay off debt
- 42% : Invest
- 5% : Other
- 8% : Don't know
The good news is that it seems most expectant inheritance recipients have good intentions, but Texas Tech personal finance Associate Professor Russell James is quoted in the article "Whenever you talk to people about what they're going to do with money in the future, it's always responsible choices, but then it's a little different when they actually get it."
We have worked with many clients who have received inheritances and helped them adjust their financial plan accordingly. Yet there have been many times when, during a routine review, clients have told us about an inheritance that had already passed through their hands. Professor James points out "At least half the people are going to blow it, and by blow it, I mean 12 months later it will be gone."
This insight is going to influence how we follow up with clients and their plans to leave an inheritance. The lesson to be learned from this is to encourage the beneficiaries to incorporate an anticipated inheritance into their financial plan long before it actually happens. It will be interesting to see how clients respond to this. Will they be reluctant to share their financial information with children with concerns about creating expectations or encouraging early requests for help? Hopefully, the same individuals who have been diligent and responsible with their own money will see the opportunity to encourage their children to continue down the same path.